Employers Purchasing Employees’ Compensation Insurance (Labour Insurance Policies)

Following is a question by the Hon Chan Kin-por and a written reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, in the Legislative Council today (March 17):

Question:

According to the statistics of the Employees Compensation Assistance Fund Board (the Board), a total of 176 applications were made to the Board between 2005 and 2009 by employees injured at work applying for payments from the Employees Compensation Assistance Fund for their entitlement to compensation, and the amount involved exceeded $95 million. The employers of these employees had failed to make such compensation because they had not taken out valid insurance policies on employees’ compensation (“labour insurance policies”). There are views that as such compensation payments at present are paid out of the Employees’ Compensation Insurance Levies, which are contributed by employers when they take out labour insurance policies, it has resulted in employers who have taken out labour insurance policies subsidising those who have not, which is unfair to dutiful employers. Moreover, the number of employers who have been found not having taken out labour insurance policies should be much smaller than the actual number of those who have not done so at present. In this connection, will the Government inform this Council:

(a) of the number of employers who were prosecuted in each of the past five years for not having taken out labour insurance policies for their employees as required by the law, as well as the maximum and minimum punishment imposed on the convicted employers;

(b) whether the authorities have, when investigating cases involving employers not having taken out labour insurance policies, looked into the reasons for the employers involved not having done so, and whether they had, in the past three years, assessed if the penalty on such employers under the existing legislation has sufficient deterrent effect; and

(c) whether it will consider amending the legislation or taking measures to ensure that employers comply with the law and take out valid labour insurance policies for their employees; if it will, of the details; if not, the reasons for that?

Reply:

President,

According to section 40 of the Employees’ Compensation Ordinance (the Ordinance), all employers are required to take out insurance policies to cover their liabilities both under the Ordinance and at common law for injuries at work in respect of all their employees, irrespective of the length of employment contracts or working hours, full-time or part-time, permanent or temporary employment. The Government is concerned about employers’ compliance with the requirement. To this end, the Labour Department (LD) has taken a proactive approach on both the enforcement and publicity fronts to ensure that employers abide by the law.

Our reply to the question is as follows:

(a) In the past five years (2005 to 2009), the number of employers who were prosecuted for breaching section 40 of the Ordinance and the highest and lowest sentences imposed by the court on the convicted employers are provided at the Annex.

(b) According to information collected by LD in investigating suspected offences, employers had alleged that reasons for the non-compliance included failure to take out employee compensation insurance cover for temporary helpers and failure to make timely renewal of the policy upon its expiry. There were also employers claiming ignorance of the law.

Under existing legislation, any employer who fails to comply with the compulsory insurance requirement is liable on conviction to a maximum fine of HK$100,000 and imprisonment for two years. We are of the view that the existing maximum penalty level is sufficient to create a deterrent effect.

(c) LD has adopted a proactive approach on both the enforcement and publicity fronts to ensure employers’ compliance with the compulsory insurance requirement. On the enforcement front, labour inspectors of LD conduct proactive workplace inspections to check employers’ compliance. Besides, we have also set up a complaint hotline (2815 2200) to facilitate employees to report suspected cases of non-compliance. Prompt investigation will be conducted into the reported cases upon receipt. In 2009, the number of workplace inspections conducted to enforce the compulsory insurance requirement reached 84,639, representing an increase of 24% as compared to 2008. If there is sufficient evidence, LD will institute prosecution against the offending employers. Apart from facing criminal prosecution, employers who defy the law are also liable to pay a surcharge to the Employees Compensation Assistance Fund Board (the Board). The amount of surcharge payable shall be three times the levy payable to the Board on the premium paid in respect of the policy of insurance which the employer concerned has subsequently taken out as required by the Ordinance. For employers who commit a second contravention within 24 months, the amount of surcharge payable would be doubled (i.e. six times the levy payable).

On the publicity front, we have made use of different channels to remind employers to fulfil their statutory obligation. We have newly produced announcements of public interests (APIs) to remind employers that taking out employees compensation insurance protects both employees and employers. The APIs are now being broadcast on television and radio. Other publicity efforts include placing advertisements on public transport, introducing major provisions of the Ordinance in major newspapers and on the website of LD, and organising seminars etc.

We will continue to rigorously enforce the law and launch intensive publicity to ensure that employers take out valid employees compensation insurance cover for their employees.

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