Review Occupational Safety and Health and the Employee Compensations System

Speech of the Hon K P Chan, JP at the Legislative Council on 19 May 2010 Motion Debate On Reviewing Occupational Safety and Healthand Employee Compensations System

MR PRESIDENT: Although substantial efforts have been spent on industrial safety in recent years, casualties at work are still recurring in Hong Kong. I feel sorry whenever there is a serious industrial accident and hope that mishaps would not repeat.

In his Motion today, the Hon Ip Wai-ming makes several recommendations on occupational safety. In my view most of them deserve support, particularly the call for enactment of laws governing safety of workplace high above ground because it would effectively redress the repeated occurrence of construction workers falling from height. So are calls for comprehensive review of policy of occupational safety and for escalation of site inspections, etc. However, I have reservations in the propose establishment of a central employees’ compensation fund.

Actually, as my learned friends in the labour sector may recall, the Government studied the central employee compensation insurance system back in 2004 but subsequently adopted proposition of the insurance industry to jointly underwrite occupations of the high risk groups under the Employees’ Compensation Insurance Residual Scheme instead of establishing a central employees’ compensation system to replace the private insurance market. In fact, the Government eventually did not choose the central employees’ compensation system because of its drawbacks. Not only would prevailing problems remain unresolved, instead both employers and employees would also suffer.

Comparing with other countries or territories, employee compensation insurance in Hong Kong is relatively low in premium but protection and welfare are among the most comprehensive in the world.

According to statistics of the 2004 study mentioned earlier, the premium paid was merely 1 percent of the payroll on average but rights of claims for damages under Common Law was unrestricted. Actually, the local premium payable was then even lower than Queensland of Australia and British Columbia of Canada where there are central employee compensation systems and rights of claims under Common Law are either restrictive or withheld. The premium rates of these two systems were 1.55 percent and 1.92 percent respectively. In other words, the current practice in Hong Kong is more effective than the proposed central system.

The practice in Hong Kong has another advantage of containing the increase in premium through market competitions. In fact the local insurance market is so competitive that it is rather hard to raise premium. In recent years, employee compensation insurance has been operating at a loss owing partly to fraudulent practices. The underwriting loss was HK$160 million in 2007 and widened to HK$490 million in 2008. The insurance industry has been containing pressure on premium increase partly by cross-subsidy from other profit-making insurances and partly by seeking better returns on investments. In contrast, the proposed central employee compensation system would have no other choice than substantially increasing the premium to make up the loss, thereby shifting the pressure to both employers and employees.

There is also a misconception that a central compensation system would achieve saving in administrative expenses. In practice, however, its operation would be much costly. Public bodies are known to be inflexible and inefficiency. They are often too large in establishment and too high in salaries in comparison to the private sector. Therefore, a central compensation system would not reduce premium intrinsically but would become another bureaucracy instead to the disadvantage of both employers and employees.

The original Motion intends to establish a central employee compensation fund for integrating the management of injuries arising from work. I fully subscribe to its spirit. Yet, the key to centralized and integrated injury management is resource, not whether the scheme is publicly or privately run. Private schemes or joint schemes of the insurance industry and public medical sector are capable of providing an integrated service of diagnosis, treatment, compensation and rehabilitation of better quality than a separate system. There is no practical need to establish and fund a costly central system merely for the purpose. Actually, the imminent challenge to services integration is funding. The preferable option is still public funding. If it is not forthcoming, then the insurance industry and the Labour Department will have to find an alternative together.

The proposed Amendment of the Hon Lee Cheuk-yan suggests substantially increasing the duty of employers in this respect. However, I must say that both the employer and the employee have mutual responsibilities in occupational safety. The employee should be equally alert and never neglect safety measures. Frankly, nobody would disagree with paying more attention to occupational safety but increasing statutory compensation across the board is another matter.

So are substantially raising the monthly income ceiling for determining compensation and extending coverage under the law to injuries of workers and self-employed on their way to work or back home. These proposals need further studies and extensive debates. In particular, they would lead to substantial increase in labour insurance premium and affordability of employers would be a cause for concern. Full consultations with employer bodies are essential.

I always believe that employees are the most important partners of employers. They are interdependent rather than confrontational. I trust that as long there are mutual trust and mutual reconciliation, they would always find better ways to resolve their differences.

Mr President, with these observations I conclude my remarks.

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