Employee Compensation Insurance Exclusions in Hong Kong
- Adit Bhatnagar
- Feb 21, 2025
- 5 min read
Employees play a crucial role in every business and the city of Hong Kong. They are vital to the economy and contribute to the growth and innovation of companies and the city. Various duties, ranging from office tasks to construction work.
Employees face safety risks in their duties, and potential injuries or illnesses can lead to costly medical outcomes. In Hong Kong, employers are liable for these risks and must cover medical expenses, salaries, and compensation for their employees.
Employee compensation insurance is an essential policy that helps employers cover their liability and costs associated with work-related injuries and illnesses. However, like any insurance policy, it comes with specific exclusions.
Every employer must understand the coverage and exclusions of employee compensation insurance. This knowledge can save time and help avoid potential conflicts. Therefore, this article will focus on the employee compensation insurance exclusions relevant to businesses in Hong Kong.
What Is Employee Compensation Insurance?
Employee compensation insurance covers the employer’s liability if an employee is injured, contracts a disease, or dies while on the job or commuting for work. This insurance covers various expenses, including medical costs, 80% of the employee’s salary, and compensation for any resulting disability.
According to the Employees’ Compensation Ordinance (ECO), Chapter 282 of the Laws of Hong Kong, employers who hire at least one employee must have employee compensation insurance to safeguard their employees.
Companies that do not obey the labour law may be fined a maximum of HK$100,000 and possibly imprisoned.
Employee Compensation Insurance Exclusions
Non-Work-Related Injuries or Diseases
Sometimes, employees and employers are confused about what injuries are considered work injuries and illnesses. Employers may believe every injury is covered, even if work was not the leading cause. This is not true.
An employee compensation insurance exclusion is claims of non-work-related injuries. These are any injuries where the duty or work premises are not the clear cause of the injury. Examples include injuries outside work hours, injuries or illnesses while performing an unauthorised duty, or even injuries or illnesses outside Hong Kong.
Even if an employee sustains a non-work-related injury or disease that deteriorates while at work, it may not be covered. For example, a back injury that occurs due to sports but gets worse from sitting in an office chair for hours.
The labour department and insurance providers will carry out a thorough investigation to understand the incident and whether the work duties were the sole cause of the injury or illness.
Fraud Claims
In most cases, work injuries are genuine and are taken seriously by employers and insurance companies. Unfortunately, in some cases, employees maliciously report injuries or illnesses to gain insurance monetary benefits.
There is always a chance employees will fake their injuries, illnesses, or recovery to get a break from work while still getting paid. Another employee compensation insurance exclusion is fraud claims. Fraud claims could involve employees faking or exaggerating their condition, or even employees and employers working together on the fraud claim.
For example, an employee might exaggerate a minor injury using fake certificates while simultaneously working another job. This would allow the employee to receive a double salary without actually working two jobs.
The Hong Kong labour department and most businesses take these cases very seriously, which can lead to contract termination, legal issues and void claims. If the company is involved, it may also result in fines and legal trouble. Even if the initial injury or illness was real, it will not be covered due to the fraud.
Specific Injuries
Some jobs involve a significantly high risk of injury or illness due to where they work or what they are working with. These roles typically include working with nuclear or toxic material or construction.
Some injuries or diseases are common employee compensation insurance exclusions. These include radiation illness, pneumoconiosis, and noise-induced deafness. Fortunately, these injuries or illnesses should not occur if employers provide suitable gear.
Insurance providers have specific reasons for not covering such injuries or illnesses, such as the fact that they are mainly caused by safety negligence or that the compensation cannot be measured.
Not An “Employee”
The term ‘Employee’ is a general term that refers to anyone who technically works for the company. However, depending on their roles, contracts, and other commitments, employees may have different levels of commitment to the company.
Interns or volunteers may not be considered employees when it comes to insurance. An employee compensation insurance exclusion is a role that is not defined as either a full-time or long-term part-time employee. Employee compensation insurance is typically a long-term policy, and it can be complicated to accurately cover a staff member who only works for a company for a few months or even a day.
Employers are still liable for work injuries to interns and volunteers, so they need another insurance policy. Personal accident insurance is ideal for short-term employment and covers medical expenses and compensation costs. Ensuring all employees are protected is vital for an employer in Hong Kong.
Intoxication Or Intentional Act
An employer cannot supervise every employee and their state, especially in an office or a crowded construction site. There are many instances where employees do not obey rules or regulations at the workplace.
Unfortunately, there is always the risk that an employee will come to work intoxicated or intentionally fail to follow safety protocols. Standard employee compensation insurance exclusions in policies are injuries that result from intoxication (alcohol and drugs) and an intentional lack of safety.
An employee may actually be injured, but when the cause is due to intoxication and negligence, the claim will be void. The labour department will ensure proper tests and investigations are conducted to ensure the injury was purely due to the work and that no factors influenced the injury or illness.
The employer will have to terminate the employee, and the employee may need to cover their own medical expenses.
Why is Employee Compensation Insurance Mandatory?
Employee compensation (EC) insurance is crucial for both employers and employees in Hong Kong. It enables employees to recover without financial stress, allowing employers to provide essential support without threatening financial stability.
Hong Kong Employers will benefit from purchasing high-quality EC insurance that provides a wide range of coverage and an assisted claim process. Companies with suitable EC insurance can stress less when injuries occur.
However, employers must understand the employee compensation insurance exclusions and exceptions specific to their policy. This can help companies ensure employees take their safety seriously and follow all regulations.
Understanding employer compensation insurance exclusions and coverage allows companies to utilise insurance effectively before problems arise and when accidents occur.
To learn more about employee compensation insurance and get the best coverage for your employees in Hong Kong and Asia, contact Red Asia Insurance.
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