Guide To Hong Kong Employee Compensation Insurance

Workplace accidents can occur in any industry and often bring legal, financial, and operational consequences for employers. In Hong Kong, employee compensation is not a discretionary benefit or internal policy choice. It is a statutory obligation governed by the Employees’ Compensation Ordinance (Cap. 282), which requires employers to compensate employees for work-related injuries or occupational diseases, regardless of fault. Failure to comply can expose businesses to regulatory penalties, uninsured liabilities, and operational disruption. For employers, understanding how employee compensation works is therefore a core part of HR and payroll compliance. This guide explains the key aspects of Hong Kong’s employee compensation framework, including insurance requirements, employee eligibility, compensation coverage, reporting procedures, and practical compliance considerations.

Legal Framework: Employees’ Compensation Ordinance 

The Employees’ Compensation Ordinance (ECO), Cap. 282 of the Laws of Hong Kong, is the primary legislation governing work-related injuries and occupational diseases. Its purpose is to ensure that employees receive timely and statutory compensation when accidents arise out of and in the course of employment. The ECO applies broadly to both full-time and part-time employees engaged under contracts of employment or apprenticeship. This includes domestic helpers, agricultural workers, and crew members working on Hong Kong-registered ships. In certain circumstances, the Ordinance also extends to employees injured outside Hong Kong when employed by local employers, provided the courts of Hong Kong have jurisdiction.

A key feature of the ECO is its no-fault compensation principle. Employers are legally required to compensate injured employees regardless of who caused the accident, including cases where the employee’s own carelessness contributed to the injury. This approach prioritises employee protection and simplifies the compensation process, as employees do not need to prove employer negligence to make a valid claim. As a result, employers must focus on compliance and risk management rather than fault assessment.

Statutory compensation under the Employees’ Compensation Ordinance (Cap. 282) operates alongside, but separately from, common law liability. While the Ordinance provides mandatory statutory compensation (including medical expenses, periodical payments for temporary incapacity, permanent incapacity compensation, and death compensation), employees may still pursue common law claims in certain circumstances. Employees’ Compensation Insurance (ECI) is mandatory under the Ordinance and must cover liabilities under the Ordinance and at common law. The minimum limit of indemnity per event is HK$100 million for employers with 200 or fewer employees, and HK$200 million for employers with more than 200 employees. Employers must ensure proper insurance coverage is in place, maintain accurate employment and payroll records, and establish internal procedures for reporting workplace accidents and handling compensation payments. Integrating ECO obligations into HR policies and payroll processes helps reduce legal risk, ensures timely payments, and supports overall regulatory compliance in Hong Kong.

What Is Employee Compensation In Hong Kong?

In Hong Kong, employee compensation has a specific legal meaning under the Employees’ Compensation Ordinance (Cap. 282). It refers to the statutory compensation that an employer must pay when an employee suffers a work-related injury or contracts a prescribed occupational disease arising out of and in the course of employment. This obligation applies to full-time and part-time employees engaged under contracts of employment or apprenticeship, and in certain cases, employees working outside Hong Kong for a local employer. Compensation is payable regardless of fault, meaning the employer’s liability exists even if the accident was caused by the employee’s carelessness.

Hong Kong’s definition of employee compensation differs significantly from common interpretations elsewhere. It is not the same as salary, wages, or employee benefits processed through payroll, nor does it have the broader meaning often associated with “workers’ compensation” overseas. Instead, employee compensation in Hong Kong is a narrowly defined statutory mechanism designed to protect both employees and employers. It typically covers:

• Medical and hospital expenses
• Rehabilitation and recovery-related costs
• Loss of earnings during temporary incapacity
• Statutory compensation in fatal cases

What Is Employees’ Compensation Insurance (ECI)?

Employees’ Compensation Insurance (ECI) is a compulsory insurance policy that protects employers against their legal liabilities arising from work-related injuries or occupational diseases suffered by employees. Under the Employees’ Compensation Ordinance (Cap. 282), every employer in Hong Kong must take out and maintain a valid ECI policy with an authorised insurer. This requirement applies regardless of business size, industry, or the nature of employment, including full-time, part-time, and certain overseas assignments linked to Hong Kong employers.

The primary purpose of ECI is to ensure that statutory compensation can be paid promptly when an employee is injured at work, while shielding the employer from potentially significant financial exposure. Without proper insurance in place, employers remain personally liable for compensation payments and may face criminal penalties for non-compliance.

Statutory ECO Benefits vs Common Law Liability Coverage

An Employees’ Compensation Insurance policy typically provides two layers of protection:

Statutory benefits under the Employees’ Compensation Ordinance, which cover:

• Medical and hospital expenses
• Periodical payments for loss of earnings during temporary incapacity
• Compensation for permanent disablement
• Death benefits and related expenses in fatal cases

Common law liability coverage, which usually:

• Applies when an employee pursues a civil claim alleging employer negligence
• Provides an additional layer of financial protection beyond statutory compensation
• Is commonly subject to a policy limit, often up to HK$100 million per event

Understanding this distinction is critical, as statutory ECO compensation and common law claims are separate legal exposures that employers must manage.

Why ECI Is Essential for All Employers

Employees’ Compensation Insurance is not merely a compliance exercise. It is a core risk management tool for employers across all sectors. Workplace accidents can occur in offices, retail settings, construction sites, and remote work arrangements alike. ECI helps employers:

• Meet statutory obligations under Hong Kong employment law
• Manage financial and legal risks arising from employee injuries
• Support business continuity by avoiding unexpected compensation liabilities
• Demonstrate responsible employment and governance practices

Learn more: A Concise Guide to the Employees’ Compensation Ordinance (pdf file)

Who Is Protected Under The Employees’ Compensation Ordinance?

The Employees’ Compensation Ordinance (Cap. 282) provides broad statutory protection to employees in Hong Kong who suffer work-related injuries or occupational diseases. Coverage is determined by the existence of an employment relationship, not by job title, seniority, or working hours. For employers, understanding who is protected is essential to avoid under-insurance, compliance gaps, and unexpected liabilities.

Applicability to Employees in Hong Kong

The Ordinance applies to employees who are engaged under a contract of employment or apprenticeship, including both full-time and part-time arrangements. As long as an individual is employed to perform work for an employer’s business, they are generally protected under the ECO.

This means coverage typically includes:

• Full-time employees
• Part-time employees
• Employees engaged under written or oral contracts of employment
• Apprentices working under recognised apprenticeship arrangements

Working hours, length of service, and salary level do not affect eligibility for statutory employees’ compensation.

Coverage of Specific Worker Categories

The ECO expressly extends protection to certain worker categories that employers may overlook in practice. These include:

This wide scope means employers remain responsible even when employees are injured outside Hong Kong, provided the employment relationship falls within the Ordinance.

Importance of Correct Employee Classification

Correctly classifying workers is critical for employees’ compensation compliance. Misclassifying employees as contractors, casual workers, or non-covered persons can result in uninsured exposure and regulatory risk. In practice, employers should:

• Review contractual arrangements carefully to confirm employment status
  
• Assess whether individuals perform employee-like duties, regardless of payment structure
  
• Ensure Employees’ Compensation Insurance covers all eligible workers

Accurate employee classification supports proper insurance coverage, lawful HR and payroll management, and effective workplace risk control under Hong Kong employment regulations.

Employees Working Outside Hong Kong

As cross-border assignments and overseas postings become more common, many employers are unsure whether employees injured outside Hong Kong remain protected under local labour laws. Under the Employees’ Compensation Ordinance (ECO), coverage is not limited to injuries that occur within Hong Kong.

ECO Coverage for Employees Injured Overseas

The ECO applies to employees who are employed by Hong Kong employers and suffer work-related injuries or occupational diseases while working outside Hong Kong. The key factor is the employment relationship, not the physical location of the accident.

In practice, employees may still be entitled to statutory compensation when:

• They are employed under a Hong Kong contract of employment or apprenticeship
• The injury arises out of and in the course of employment
• The employer is subject to the Employees’ Compensation Ordinance

This ensures continuity of employee protection even when duties are performed overseas.

Applicability to Hong Kong Employers Operating Cross-Border

Hong Kong employers with regional or international operations should be aware that ECO obligations can extend beyond Hong Kong’s borders. This includes:

• Employees on overseas business trips
• Staff seconded to overseas subsidiaries or project sites
• Crew members working on vessels or assignments outside Hong Kong

From a compliance perspective, employers must ensure that Employees’ Compensation Insurance adequately covers overseas work arrangements to avoid uninsured exposure.

Jurisdiction Considerations and Hong Kong Courts

The ECO may still apply even if:

• The employer carries on business outside Hong Kong, or
• The employee works on foreign vessels or overseas sites

Coverage can apply where the employer submits to the jurisdiction of the Hong Kong courts. This jurisdictional link is particularly relevant for multinational employers with Hong Kong entities acting as the employing company.

Implications for International and Mobile Workforces

For employers managing mobile or international workforces, overseas ECO coverage has practical implications for HR and payroll planning:

Failing to account for overseas exposure may lead to gaps in insurance coverage and unexpected statutory liabilities. Employers should review cross-border work arrangements carefully to ensure continued compliance with the Employees’ Compensation Ordinance.

When Are Employers Liable for Work-Related Injuries?

Under the Employees’ Compensation Ordinance (ECO), employers in Hong Kong have a statutory duty to compensate employees who suffer work-related injuries or specified occupational diseases. Liability is determined based on whether the incident arises out of and in the course of employment, rather than on fault or negligence.

Meaning of “Arising Out of and in the Course of Employment”

This legal phrase is interpreted broadly under the ECO to protect employees.

• Arising out of employment means there is a clear connection between the employee’s work duties and the injury or illness.
  
• In the course of employment refers to the time, place, and circumstances of the incident, including activities reasonably related to work.

In practice, this may include incidents that occur:

• At the workplace
• While performing assigned duties
• During work-related travel or off-site assignments
• While carrying out activities incidental to employment

Employer Liability for Workplace Accidents

Employers are generally liable when an employee is injured due to an accident linked to their employment, including:

• Slips, falls, or equipment-related accidents at the workplace
  
• Injuries sustained while operating machinery or tools
  
• Accidents occurring during business trips or client visits
  
• Injuries suffered while following employer instructions

The ECO applies regardless of whether the accident was foreseeable or preventable.

Employer Liability for Occupational Diseases

In addition to accidents, employers are also liable for occupational diseases specified under the ECO. These typically arise from prolonged exposure or repetitive work conditions, such as:

• Diseases caused by continuous physical strain
  
• Illnesses resulting from exposure to hazardous substances
  
• Conditions associated with specific industries or job roles

Once a listed occupational disease is medically confirmed and linked to employment, compensation obligations arise under the ECO.

Compensation Payable Regardless of Employee Fault

Hong Kong’s employees’ compensation regime operates on a no-fault basis. This means:

• Employers must pay statutory compensation even if the injury was caused by the employee’s carelessness
  
• Employees do not need to prove employer negligence
  
• Liability is excluded only in limited situations, such as deliberate self-injury or wilful misconduct involving alcohol or drugs

This framework ensures employees receive timely financial support while providing clarity and certainty for employers.

Summary of Employer Liability Under the ECO

Given the strict scope of liability under the ECO, maintaining valid Employees’ Compensation Insurance is essential. It helps employers manage financial exposure while fulfilling their legal obligations under Hong Kong employment law.

Learn more: Points to Note for Employees Injured at Work 

What Does Employee Compensation Cover?

Under the Employees’ Compensation Ordinance (ECO), employee compensation in Hong Kong is designed to provide financial protection to employees who suffer work-related injuries or specified occupational diseases. These statutory benefits are intended to support medical recovery, replace lost income, and provide financial security in severe or fatal cases.

Here is a breakdown of what employee compensation typically covers.

Medical Treatment and Hospital Expenses

Employers are required to cover reasonable and necessary medical expenses arising from a work-related injury or occupational disease.

This generally includes:

• Medical consultations and follow-up treatment
• Hospitalisation and in-patient care
• Prescribed medication
• Diagnostic tests and examinations

Medical expenses must be reimbursed within the statutory timeframe once valid receipts are submitted.

Rehabilitation and Recovery Costs

Employee compensation also supports the employee’s recovery and return to work. Covered rehabilitation-related costs may include:

• Physiotherapy and occupational therapy
• Rehabilitation programmes approved by medical practitioners
• Follow-up assessments required by the Labour Department

These measures aim to restore the employee’s earning capacity where possible and reduce long-term incapacity.

Compensation for Temporary Incapacity and Loss of Earnings

If an employee is temporarily unable to work due to a work injury, the employer must make periodical payments during the sick leave period.

Key points include:

• Compensation is calculated as four-fifths of the difference between the employee’s pre-injury earnings and earnings during temporary incapacity
• Payments are made throughout the certified sick leave period
• This applies even if the incapacity lasts only a few days

This ensures income continuity while the employee is recovering.

Permanent Total and Partial Incapacity Compensation

When a work injury results in permanent incapacity, compensation is assessed based on medical evaluation and statutory formulas.

• Permanent total incapacity: Compensation is calculated using the employee’s age and monthly earnings, subject to statutory minimum amounts
  
• Permanent partial incapacity: Compensation is paid as a percentage of the amount payable for permanent total incapacity, reflecting the degree of loss of earning capacity

The Labour Department issues a Certificate of Compensation Assessment to confirm the payable amount.

Death Benefits Payable to Dependants

In fatal work accident cases, employee compensation provides financial support to the deceased employee’s dependents.

This includes:

• A lump-sum death compensation based on the employee’s age and earnings
• Reimbursement of funeral and medical attendance expenses, subject to statutory caps

These payments are intended to provide immediate financial relief to surviving family members.

Injuries and Situations Not Eligible for Compensation

While the Employees’ Compensation Ordinance (ECO) provides broad protection for work-related injuries, not every incident qualifies for compensation. Understanding these exclusions helps employers manage expectations, prevent abuse, and handle claims in a compliant manner.

Below are the main situations where employee compensation is generally not payable under Hong Kong law

Injuries Without Loss of Earning Capacity

Compensation is intended to cover actual loss arising from a work injury. If an injury does not affect the employee’s ability to earn full wages, compensation may not be granted.

Examples include:

• Minor injuries that do not require sick leave
• Incidents where the employee can continue working without income reduction

In such cases, medical expenses may still be reviewed, but loss-of-earnings compensation is usually not applicable.

Deliberate Self-Inflicted Injuries

The ECO does not protect employees who intentionally cause harm to themselves. This includes:

• Self-inflicted injuries
• Acts intended to obtain compensation dishonestly

Such cases are excluded to safeguard the integrity of the employee compensation system.

Incidents Involving Drugs, Alcohol, or Wilful Misconduct

Injuries resulting from serious misconduct may be excluded from compensation coverage. Common examples include:

• Accidents caused by intoxication from drugs or alcohol
• Wilful disregard of safety rules or procedures
• Reckless behaviour unrelated to job duties

These exclusions emphasise the importance of maintaining workplace discipline and safety compliance.

False Declarations or Misrepresentation

Employees are required to provide accurate and truthful information when making a compensation claim.

Compensation may be denied if:

• Medical conditions are exaggerated or fabricated
• Employment details are misrepresented
• False statements are made regarding the cause or severity of the injury

Employers may request medical examinations and supporting documents to verify claims.

Importance of Clear Internal Policies

To minimise disputes and ensure fair handling of claims, employers should establish clear internal policies on employee compensation.

Best practices include:

• Defining reporting procedures for workplace injuries
• Communicating claim eligibility and exclusions clearly to employees
• Keeping accurate attendance, payroll, and medical records
• Coordinating closely with insurers and the Labour Department

Well-documented policies not only support compliance with the ECO but also help protect businesses from unnecessary financial and legal risks.

Mandatory Employee Compensation Insurance Coverage

Employee Compensation Insurance (ECI) is a legal requirement in Hong Kong and a critical risk management tool for employers. It protects both employees and businesses against the financial impact of work-related injuries, occupational diseases, and fatal accidents. Below is a clear breakdown of what mandatory coverage involves and why accuracy matters.

Statutory Insurance Requirements Under Hong Kong Law

Every employer in Hong Kong must take out employee compensation insurance with an authorised insurer.

Key statutory points include:

• Coverage applies to all employees, whether full-time or part-time
• Employment includes contracts of service and apprenticeship
• Liability applies regardless of employee negligence or fault
• Insurance must be in force before employment begins

Failure to maintain valid insurance is a criminal offence and may result in:

• Fines of up to HK$100,000
• Imprisonment for up to two years
• Personal liability for compensation payments

This obligation exists alongside other payroll and HR compliance duties, such as MPF contributions, employment contracts, and statutory filings.

Common Law Liability Coverage and Typical Policy Limits

In addition to statutory ECO benefits, most Employee Compensation Insurance policies also include common law liability coverage.

This protects employers against claims where employees allege negligence beyond statutory compensation.

Typical policy features include:

• Coverage for legal costs and damages
• Protection against civil claims brought under common law
• Common policy limit of HK$100 million per event, which aligns with market practice

Coverage for Overseas Employees and Repatriation Expenses

Employee compensation obligations are not limited to work performed in Hong Kong.

ECI may also apply where:

• Employees are sent overseas by a Hong Kong employer
• Employees are injured while working outside Hong Kong
• Employers submit to the jurisdiction of Hong Kong courts

Many policies can be extended to cover overseas employees, including:

• Medical treatment abroad
• Emergency evacuation
• Repatriation expenses following injury, illness, or death

This is particularly important for businesses with cross-border operations, travelling staff, or foreign employees.

Risks of Under-Insurance and Incorrect Declarations

Under-insurance or inaccurate policy declarations can expose employers to serious risks.

Common issues include:

• Under-declaring employee headcount or payroll
• Misclassifying job roles or risk levels
• Failing to include directors or employee-like contractors
• Omitting overseas duties or secondments

Potential consequences:

• Policy avoidance or reduced claim payouts
• Employer bearing compensation shortfalls personally
• Regulatory penalties and legal disputes

To reduce risk, employers should:

• Review policies annually
• Ensure payroll figures and job duties are accurately declared
• Assess whether directors or consultants require coverage
• Inform insurers promptly of workforce or operational changes

Responsibilities of An Employer When a Work Accident Occurs

When a work accident happens, employers in Hong Kong have clear statutory duties under the Employees’ Compensation Ordinance (ECO). Prompt action not only protects the injured employee but also helps employers stay compliant and minimise legal and financial risks.

Below are the key responsibilities employers must fulfil immediately after a workplace accident.

1. Immediate Medical and Safety Response

Ensuring Injured Employees Receive Prompt Medical Care

Employee safety must always be the first priority. Once an accident occurs, employers should take immediate steps to ensure the injured employee receives appropriate medical attention.

Key responsibilities include:

• Arranging prompt medical examination or treatment
  
• Allowing the employee to seek medical care without delay
  
• Ensuring the employee clearly explains the cause and circumstances of the injury to medical staff

Employers should also remind employees to retain all medical documents, including:

• Medical reports and diagnoses
  
• Sick leave certificates
  
• Receipts for medical expenses

These records are essential for employees’ compensation claims and insurance processing.

Accident Reporting Regardless of Severity

All work-related injuries must be taken seriously, even if they appear minor at first.

Employers should:

• Require employees to report accidents as soon as possible
  
• Record the incident internally, regardless of severity
  
• Avoid delaying action while assessing whether compensation is payable

Minor injuries can later develop into more serious conditions, and failure to act promptly may result in compliance issues.

2. Reporting to the Labour Department

Statutory Reporting Timelines

Under the ECO, employers are legally required to notify the Labour Department within specific timeframes.

These timelines apply regardless of whether liability or compensation has been confirmed.

Required Notification Forms

Employers must submit the prescribed forms based on the nature of the incident:

• Form 2 – Notice of death or accident resulting in death or incapacity lasting more than three days
  
• Form 2B – Notice of accident resulting in incapacity
  
• Form 2A – Notice of death or incapacity due to occupational disease

The correct form must be submitted accurately and on time to avoid penalties.

Obligation to Report Even If Compensation Is Not Yet Confirmed

It is important to note that reporting obligations apply even when:

• The extent of injury is unclear
• There is a dispute over liability
• Compensation has not yet been assessed or agreed

The requirement to notify the Labour Department is independent of the compensation outcome. Employers should also inform their Employee Compensation Insurance provider promptly to facilitate follow-up actions and claims handling.

How Employee Compensation Is Calculated

Employee compensation in Hong Kong is calculated strictly in accordance with the Employees’ Compensation Ordinance (ECO). The amount payable depends on the nature and severity of the injury, the employee’s earnings at the time of the accident, and the degree of incapacity assessed by medical professionals. Employers must understand these calculations clearly to ensure accurate payroll handling and statutory compliance.

Below is a breakdown of how compensation is determined under different scenarios.

1. Temporary Incapacity and Sick Leave Cases

Temporary incapacity refers to situations where an employee is unable to work for a limited period due to a work-related injury but is expected to recover fully.

Medical Expense Reimbursement

Employers are required to reimburse reasonable medical expenses incurred as a result of the work injury, provided that supporting receipts are submitted.

Key points include:

• Reimbursement covers consultation, treatment, and follow-up related to the injury
• Medical expenses must be paid within 21 days after receipt submission
• Caps may apply depending on the type of treatment and statutory limits

These reimbursements are separate from salary payments and should not be processed as taxable wages.

Periodical Payments During Temporary Incapacity

During the sick leave period caused by a work injury, employers must make periodical payments instead of normal salary.

The statutory formula is:

• Four-fifths of the difference between:
  • The employee’s monthly earnings at the time of the accident, and
  • The employee’s actual earnings during the period of temporary incapacity

This applies even if the employee’s income during incapacity is zero.

Payroll Implications During Sick Leave

From a payroll perspective:

• Periodical payments are statutory compensation, not discretionary sick pay
• These payments should be tracked separately from normal wages
• Accurate earnings records are essential to avoid underpayment or disputes

Employers should ensure payroll systems clearly distinguish employee compensation payments from regular salary components.

2. Permanent Total Incapacity

Permanent total incapacity occurs when an employee permanently loses the ability to earn wages due to a work-related injury.

Compensation Calculations by Age Group

Compensation is calculated based on the employee’s age at the time of injury, using a multiple of monthly earnings.

Minimum Statutory Compensation Thresholds

For injuries or occupational diseases occurring on or after 17 April 2025:

• Minimum permanent total incapacity compensation: HK$584,220
• Monthly earnings cap for compensation calculation: HK$38,670

Employers must pay the higher of:
(1) the amount calculated under the statutory formula, or
(2) the applicable statutory minimum.

Importance of Accurate Earnings Records

Accurate payroll and employment records play a critical role in permanent incapacity cases.

Employers should maintain:

• Clear monthly earnings data
• Attendance and payment records
• Employment contracts and payroll summaries

Incomplete records may delay assessments or result in disputes with employees or insurers.

3. Permanent Partial Incapacity

Permanent partial incapacity applies when an employee sustains a lasting injury that reduces, but does not eliminate, their earning capacity.

Percentage-Based Compensation Approach

Compensation is calculated as a percentage of the amount payable for permanent total incapacity.

This percentage reflects:

• The assessed degree of permanent incapacity
• The extent to which the injury affects the employee’s ability to earn

For example, a 30 percent loss of earning capacity results in 30 percent of the permanent total incapacity compensation amount.

Assessment of Loss of Earning Capacity

The loss of earning capacity is determined through medical assessment arranged by the Labour Department.

Key considerations include:

• Medical findings on physical or functional limitations
• Impact of the injury on the employee’s work abilities
• The official Certificate of Compensation Assessment issued by the Labour Department

Once the assessment is finalised, employers must pay the specified compensation within the statutory timeframe.

Read: Employer Obligations for Severance Payment in HK

Fatal Workplace Accidents: Employer Obligations

Fatal workplace accidents are among the most serious employment incidents under Hong Kong law. When an employee dies as a result of an accident arising out of and in the course of employment, employers have clear statutory obligations under the Employees’ Compensation Ordinance (ECO). These obligations cover compensation payments, expense reimbursements, and strict procedural compliance. Understanding these requirements helps employers manage risk, fulfil legal duties, and avoid regulatory breaches.

Compensation Calculations Based on Employee Age

Compensation for fatal work accidents is calculated using a multiple of the employee’s monthly earnings at the time of the accident. The applicable multiplier depends on the employee’s age.

Monthly earnings typically include wages, allowances, and other regular payments forming part of the employment contract.

Minimum Statutory Compensation for Death

For fatal work accidents occurring on or after 17 April 2025:

• Minimum death compensation: HK$514,510
• Funeral and medical attendance reimbursement cap: HK$98,950

Employers must pay the higher of the statutory minimum or the amount calculated based on the employee’s age and monthly earnings.

Funeral and Medical Expense Reimbursement Limits

In addition to death compensation, employers must reimburse certain expenses incurred as a result of the fatal accident.

Key reimbursement rules:

• Funeral and medical attendance expenses may be claimed by the person who paid them
• Reimbursement is capped at HK$98,950
• Supporting receipts and documentation must be provided

These payments are separate from the main death compensation amount.

Procedural and Compliance Considerations

Fatal workplace accidents trigger immediate reporting and administrative responsibilities. Failure to comply may result in penalties and insurance complications.

Employers must:

• Notify the Labour Department within 7 days of the fatal accident using the prescribed form
• Ensure accurate and complete documentation of employment and earnings records
• Cooperate with medical assessments and Labour Department investigations
• Pay compensation and reimbursable expenses within statutory timeframes

From a payroll and HR perspective, it is critical to:

• Maintain up-to-date payroll records to support compensation calculations
• Coordinate promptly with the Employees’ Compensation insurer
• Separate statutory compensation payments from regular payroll processing

Serious Injuries and Labour Department Assessment

Serious workplace injuries require closer medical review and formal assessment by the Labour Department (LD). These cases go beyond routine sick leave handling and involve statutory medical evaluation, official compensation assessment, and strict employer payment deadlines under the Employees’ Compensation Ordinance (ECO).

Clear understanding of this process helps employers manage compliance, insurance coordination, and payroll accuracy.

Referral to the Occupational Medicine Unit

When an injury is considered serious or may result in permanent incapacity, the Labour Department will intervene directly.

Typical situations triggering referral include:

• Prolonged incapacity for work
• Suspected permanent total or partial incapacity
• Complex medical conditions or disputed cases

The LD will issue a notification requiring the injured employee to attend a specified Occupational Medicine Unit (OMU) for examination. Attendance is mandatory and forms part of the statutory claims process.

Key employer responsibilities:

• Inform the employee of the referral details
• Coordinate with the Employees’ Compensation insurer
• Ensure employment and payroll records are ready for review

Medical Assessment and Follow-Up Procedures

At the Occupational Medicine Unit, medical practitioners assess:

• The nature and severity of the injury
• Whether the injury is work-related under the ECO
• The likelihood and degree of permanent incapacity

Follow-up procedures may include:

• Additional medical examinations
• Specialist referrals
• Further observation periods before final determination

If permanent incapacity is suspected, the LD may arrange a second-stage medical assessment to determine the extent of loss of earning capacity.

From an HR and payroll perspective, accurate documentation is critical, including:

• Monthly earnings at the time of the accident
• Attendance and sick leave records
• Employment contract details

Certificate of Compensation Assessment (Form 5)

Once medical assessments are completed, the Labour Department will issue a Certificate of Compensation Assessment (Form 5) to both the employer and the employee.

Form 5 specifies:

• The type of incapacity (temporary, permanent total, or permanent partial)
• The assessed percentage of loss of earning capacity, if applicable
• The exact amount of compensation payable under the ECO

This certificate forms the legal basis for compensation payment. Employers should review it carefully and confirm alignment with payroll and insurance records before processing payment.

Employer Payment Deadlines

Strict statutory deadlines apply once Form 5 is issued. Failure to meet these timelines may expose employers to penalties and disputes.

Best practices for employers include:

• Coordinating closely with the Employees’ Compensation insurer
• Separating statutory compensation from regular payroll payments
• Maintaining internal guidelines for handling serious injury cases

Effective handling of serious injuries ensures compliance with the ECO while supporting injured employees through a structured and legally sound compensation process.

Managing Disputed or Complex Compensation Cases

Disputed or complex employee compensation cases usually arise when there is disagreement over whether an injury is work-related, the severity of incapacity, or the amount of compensation payable under the Employees’ Compensation Ordinance (ECO). Common causes include insufficient medical evidence, inconsistent accident descriptions, disputes over employment status, or allegations of misconduct. These cases often require more time, documentation, and coordination with insurers, increasing both administrative burden and financial risk for employers.

In such situations, the Employees’ Compensation Division (ECD) of the Labour Department plays a facilitative role. Employers may refer the case to the ECD for procedural guidance, medical clarification, or mediation support. However, the ECD does not have authority to make binding decisions. If no settlement can be reached, the dispute will escalate to the Labour Tribunal or higher courts, where outcomes depend on medical reports, payroll records, and factual evidence.

Common Causes of Compensation Disputes

• Disagreement on whether the injury arose “in the course of employment”
  
• Conflicting medical opinions on permanent incapacity
  
• Incomplete or delayed accident reporting
  
• Disputes over employee earnings used for compensation calculation
  
• Allegations of wilful misconduct or false representation

When Cases Escalate to Court

Court proceedings are typically a last resort due to:

• Extended timelines, with additional medical reports often taking two months or more
  
• Legal and professional costs not always recoverable
  
• Operational disruption and reputational risk

Practical Employer Considerations

Best practice for employers includes:

• Maintaining clear internal procedures for accident handling
  
• Preserving complete payroll and employment documentation
  
• Engaging insurers early in disputed cases
  
• Seeking professional guidance before disputes escalate

A structured and proactive approach helps employers manage disputes effectively while limiting financial and compliance exposure.

Risks of Non-Compliance With ECO and ECI Requirements

Failing to comply with the Employees’ Compensation Ordinance (ECO) and mandatory Employees’ Compensation Insurance (ECI) obligations exposes employers in Hong Kong to serious legal, financial, and operational risks. These risks go beyond penalties and can have long-term consequences for payroll compliance and business stability.

Criminal Liability, Fines, and Imprisonment

Under the ECO, maintaining valid Employees’ Compensation Insurance with an authorised insurer is a statutory obligation, not an option. Employers who fail to arrange proper coverage commit a criminal offence.

Key legal consequences include:

• Fines of up to HK$100,000
  
• Imprisonment for up to two years
  
• Prosecution regardless of whether an accident has occurred

Importantly, liability arises even if the employee’s injury was caused by their own carelessness. Lack of insurance does not reduce or remove the employer’s responsibility under the law.

Exposure to Unlimited Compensation Claims

Without valid ECI coverage, employers must personally bear the full cost of employee compensation claims. These costs can be substantial, particularly in cases involving permanent incapacity or death.

Potential financial exposure may include:

• Medical and rehabilitation expenses
  
• Periodical payments for loss of earnings
  
• Lump-sum compensation for permanent incapacity or fatal cases
  
• Common law claims, which are not capped if uninsured

The financial impact of a single serious work injury can significantly exceed a company’s annual profit, creating severe cash flow pressure.

Business Continuity and Reputational Risks

Non-compliance with ECO and ECI requirements can disrupt daily operations and damage employer credibility.

Common business risks include:

• Operational disruption due to investigations or court proceedings
  
• Difficulty retaining and attracting talent due to poor compliance reputation
  
• Loss of trust from clients, partners, and insurers
  
• Increased scrutiny from the Labour Department
  

For small and medium-sized enterprises, these risks can threaten long-term business continuity.

Insurance and Payroll Audit Risks

Failure to comply with ECI obligations often reveals wider payroll and HR compliance weaknesses during audits or claims investigations.

Areas commonly reviewed include:

Insurance providers may also:

• Decline claims
• Increase premiums
• Refuse policy renewal if compliance failures are identified

How Employee Compensation Interacts With HR and Payroll Management

Employee compensation under the Employees’ Compensation Ordinance is closely linked to daily HR and payroll operations. Payroll data such as basic salary, variable pay, attendance records, and employment dates form the basis for compensation calculations and Employees’ Compensation Insurance coverage. These figures must align with employment contracts, defined job scopes, and MPF records to ensure that compensation payments and insurance declarations are accurate and defensible in the event of a claim.

Misalignment between HR records and payroll data creates material compliance risks. Common issues include worker misclassification, incorrect earnings reporting, and outdated job descriptions, all of which may lead to underinsured risks or disputes with insurers and the Labour Department. For this reason, HR, payroll, and compliance functions must work together to maintain consistent records, review employee status regularly, and ensure that employee compensation obligations are fully supported by accurate data across all systems.

Learn more: Handling of Employees’ Compensation Case – Points to Note for Employees

Best Practices For Employers to Stay Compliant

Staying compliant with the Employees’ Compensation Ordinance requires more than purchasing an Employees’ Compensation Insurance policy. Employers should adopt structured HR and payroll practices that support accurate reporting, timely incident handling, and ongoing compliance with statutory obligations.

Regular review of insurance coverage

Employers should review their Employees’ Compensation Insurance annually or whenever there are material changes to the business. This includes changes in headcount, job nature, remuneration structure, or overseas work arrangements. Regular reviews help ensure coverage limits remain adequate and aligned with actual risk exposure under the ECO.

Accurate payroll, headcount, and earnings records

Payroll accuracy directly affects compensation calculations and insurance declarations. Employers should maintain consistent and up-to-date records covering:

• Employee headcount and employment status
• Monthly earnings, including allowances and variable pay
• Employment start and end dates
• Job titles and work locations

Errors in payroll data may result in underinsurance, claim disputes, or regulatory scrutiny.

Clear workplace accident reporting procedures

A documented and well-communicated reporting process helps employers meet statutory notification deadlines and manage claims efficiently. Best practices include:

• Written internal procedures for reporting work injuries
• Clear timelines for notifying HR and management
• Standard templates for accident reports and medical documentation
• Designated personnel responsible for Labour Department notifications

Proactive HR training and documentation management

HR teams should receive regular training on employee compensation obligations, claim handling, and record retention requirements. Proper documentation management ensures that employment contracts, job descriptions, medical records, and accident reports are readily available if required by insurers or authorities.

Learn more: FAQs on the ECO

Conclusion

The Employees’ Compensation Ordinance (Cap. 282) places clear and non-negotiable obligations on employers in Hong Kong to protect employees against work-related injuries and occupational diseases. From maintaining mandatory employee compensation insurance to reporting accidents on time, verifying medical evidence, and making statutory payments, compliance under Cap. 282 requires structured processes and accurate documentation. Employers that take a proactive approach by integrating HR administration, payroll accuracy, and statutory compliance not only reduce legal and financial risks, but also build a safer and more resilient workplace. Over the long term, a well-managed HR and payroll framework supports operational stability, employee trust, and sustainable business growth in Hong Kong’s highly regulated employment environment.

How FastLane Group Can Help

FastLane Group supports employers with practical solutions that align with the Employees’ Compensation Ordinance and related employment regulations. Employers gain a reliable partner to help manage statutory obligations. Contact our team for a consultation!