Do SMEs absolutely need to purchase workers' compensation insurance? Employers should know the responsibilities and benefits of workers' compensation insurance
In Hong Kong, it's common for many people to have critical illness, life, or accident insurance. However, once you start your own business, especially SMEs or startups, you often overlook the insurance needs of your company and employees. Some even mistakenly believe that because they have few employees and shareholders have personal insurance, the company doesn't need to purchase additional insurance. This is a big misconception! The law mandates that all employers purchase employee compensation insurance for their employees. In addition, savvy employers will consider arranging other insurance coverage for their businesses, such as tax-deductible VIP insurance, thereby reducing operational risks. This article will answer common insurance questions from SME owners and help you build a comprehensive insurance safety net
What is workers' compensation insurance?
The official name for workers' compensation insurance is "Employees' Compensation Insurance". This coverage aims to help employers pay reasonable compensation to injured employees or their families in accordance with the law when employees suffer work-related accidents that result in injury or death or contract a legally defined occupational disease
Do employers have to buy it?
Section 40 of the Employees Compensation Ordinance stipulates that all employees, regardless of company size, contract term, length of working hours, whether full-time or part-time, long-term or temporary, must purchase workers' insurance. If an employer fails to purchase insurance as required by law, they will face a maximum fine of HK$100,000 and imprisonment for up to two years
In addition, employers must promptly provide insurance companies with information on newly hired employees and update the list to ensure uninterrupted insurance coverage
Scope and amount of workers' compensation insurance
Employment insurance covers a wide range of items, including:
Compensation for fatal cases/permanent loss of working ability;
Death and medical expenses in fatal cases;
Medical expenses
According to the Employees Compensation Ordinance, the minimum amount covered depends on the number of employees the company has:
For companies with no more than 200 employees, the minimum coverage is HK$100 million per incident
For companies with more than 200 employees, the minimum penalty is HK$200 million per incident
It is worth noting that the statutory maximum expenditure for medical expenses during the working period is HK$300 per employee per day (hospitalization or non-hospitalization) or HK$370 per employee per day (hospitalization and non-hospitalization treatment on the same day). However, this is only the statutory minimum standard. If the employer fails to provide additional benefits, the workers' insurance will not cover the high actual costs of private hospitals
extremeweather, analysis of labor insurance coverage
According to the Employees Compensation Ordinance, employees are covered if they suffer an accident during extreme weather events, including but not limited to Typhoon No. 8 or above, Red Rainstorm Warning or Black Rainstorm Warning, and under the following circumstances:
Within 4 hours before the start of work, while traveling directly from their residence to their workplace via a direct route;
Within 4 hours after the end of working hours, travel directly from their workplace to their residence via a direct route
However, there are also gaps in the protection of the Employees Compensation Ordinance. The labor law only stipulates that the "direct route" is protected. If one has to take a detour (including walking, taking a vehicle or driving) for any reason such as slippery roads due to rain or excessive congestion, there will be a gray area in the protection
Are there any secrets to premium reductions?
Insurance premiums are determined based on a number of risk factors, primarily considering the employer's past claims history, the nature of the employment, and industry risks. For example:
Insurance premiums are higher for workers in the construction and food industries due to the higher risks involved
Retail and office jobs have lower risks and therefore lower insurance premiums
If employers actively provide a safe workplace environment, such as by adding safety equipment and arranging occupational safety and health training, thereby reducing workplace risks, insurance companies may consider offering premium discounts based on the improvement in occupational safety and health performance
Recommended insurance besides employee compensation insurance
In addition to the legally mandated employee compensation insurance, many companies also consider other types of insurance to comprehensively protect their employees and the business:
Group medical insurance,
as the name suggests, provides medical coverage for employees. Large companies typically purchase this type of insurance for their employees, who can use their medical cards to seek treatment at designated clinics or hospitals without paying fees or at low cost, and even enjoy benefits such as physical examinations. For startups or SMEs, there are also many insurance products on the market that offer medical insurance plans with different coverage and amounts, allowing various types of companies to freely combine them according to their different needs.comprehensive commercial insurance
should not only protect the safety of employees but also provide protection for the company itself. The main purpose of this type of insurance is to protect the company's assets and operations from unforeseen events such as fire, theft, or legal proceedings, and to prevent the company from suffering significant losses due to accidents.Employees protection insurance (tax deductible)
is a policy purchased by employers for key employees who are critical to the company's operations. If the employee is unable to work due to illness, accidental injury, or death, the policy will pay compensation to the employer as working capital to support the company's continued operation. It is worth noting that the premiums for employees protection insurance are deductible from profits tax because the compensation is considered as compensation for lost operating profits.
Summary
Purchasing insurance for employees is not only a legal obligation, but also a crucial strategy to protect company assets and ensure the continued operation of the business. Business owners should carefully select insurance plans suitable for both the company and its employees to avoid losing more than they gain, and to ensure stable operations and employee well-being
If you're looking for a professional and reliable workers' compensation plan, AWM offers a diverse and flexible range of protection plans, specifically tailored to the needs of SMEs, helping you easily meet compliance requirements and operate worry-free. In addition, AWM also provides customized employer insurance plans, combining mandatory workers' compensation with group medical insurance and other corporate protections to flexibly address different sizes and risks. Whether you're a startup or a mature SME, AWM's professional team will strive to create the most suitable protection plan for you. Want to know more? Contact us now
