Compensation Scheme for employees in Hong Kong
“What about the employee’s Compensation?”
Commonly, this is the question asked by many work-seekers during the interview process with the prospective employer. Some might think that it is rude to ask this question when they haven’t even started working, but it is actually a reasonable question. Employees must know how serious the employer would be when faced with a situation where they must pay them compensation.
But what is employee’s compensation?
Employee compensation refers to the benefits (cash, vacation, etc.) that an employee receives in exchange for the service they provide to their employer. Employee compensation is generally one of the largest costs or expenses for any organization.
There are many different types of compensation paid to employees. The following are a few examples of the compensation paid to employees:
- Cash compensation consisting of wages or salaries
- Retirement plans (employer contributions)
- Employer-paid health insurance
- Life insurance
- Paid leave for vacation and sick days
- Disability insurance
In Hong Kong, employees’ compensation fell under the jurisdiction of the Hong Kong Labour Department and the Employees’ Compensation Ordinance Chapter 282.
Employees’ Compensation Ordinance Chapter 282
The Ordinance applies to all employees, be it full-time or part-time, who are employed under contracts of service or apprenticeship. The Ordinance also applies to employees employed in Hong Kong by local employers injured while working outside Hong Kong. Even if the employer is a person carrying on business outside Hong Kong, the Ordinance still applies if the employer submits to the jurisdiction of the Courts of Hong Kong and the employees have been recruited or engaged in Hong Kong
The Ordinance also applies to crew members of a Hong Kong ship, and any person employed in any capacity on board of a Hong Kong ship. If the employee is a crew member of a foreign ship and has been recruited or engaged in Hong Kong, even if the accident causing the personal injury occurred outside Hong Kong, the Ordinance still applies if the employer submits to the jurisdiction of the Courts of Hong Kong.
The Ordinance does not apply to:
- Casual employees (but still applies to part-time domestic helpers, employees employed either for the purposes of the employer’s trade or business, even for the purposes of any game or recreation and are engaged or paid through a club); or
- Outworkers; or
- Members of the employer’s family who live with him (but still applies if an employees’ compensation insurance policy under this Ordinance is in force in respect of such family members).
What’s the responsibility of the employers?
As mentioned by the Hong Kong Labour Department section 15 of the ordinance (2021), an employer must notify the Commissioner for Labour of any accident or prescribed occupational disease in the following manners, irrespective of whether the accident or the occupational disease gives rise to any liability to pay compensation:
For the employees’ compensation claim, it can be done through:
- Direct payment by the employer
- Determination of Compensation by Agreement according to the Ordinance
- “Certificate of Compensation Assessment” issued by the Commissioner for Labour
To avoid any complications, it is recommended that employers give direct payment of the compensation to their employees.
If an employee dies as a result of an accident arising out of and in the course of employment (or a prescribed occupational disease), the employer shall be liable to pay compensation for death to his surviving members of the family. The amount of compensation payable is calculated with reference to the age and monthly earnings of the deceased employee as below
The compensation shall be apportioned among the eligible members of the family of the deceased employee in accordance with the apportionment schedule stipulated in the Ordinance. The Commissioner for Labour or the Court may determine the amount of the compensation for death. The employer is also liable to reimburse funeral and medical attendance expenses, up to a maximum of $92,67, to the person who has paid such expenses.
If it’s permanent incapacity, the conditions are different. Compensation payable for permanent total incapacity resulting from a work injury is calculated with reference to the age and monthly earnings of the injured employee at the time of accident as below
For Internship and part time employees:
It is important to note that the compensation scheme for student interns and part-timers are a little bit more complicated as it is also partly related with the Statutory Minimum Wage (SMW).
It is specified in “A Concise Guide to the Employees’ Compensation Ordinance” provided by the Hong Kong Department of Labor:
“The “monthly earnings” is to be taken as the earnings for the month immediately preceding the date of the accident, or the average monthly earnings for the previous 12 months of employment (or any lesser period if the employee has not been so long employed), whichever calculation is more favourable to the employee. According to the Minimum Wage Ordinance, if the wages payable to an employee in respect of any wage period are less than the minimum wage, he is entitled to be paid the difference (i.e. additional remuneration). The employer is required to include the amount of additional remuneration (if any) in calculating the monthly earnings for the purpose of employees’ compensation.”
As stated in our other blog about Hong Kong’s internship regulation, The statutory minimum wage (SMW) comes into force on 1 May 2011. The Minimum Wage Ordinance does not apply to persons to whom the Employment Ordinance does not apply, live-in domestic workers (irrespective of their sex, race or nationality), specified student interns as well as work experience students during a period of exempt student employment. As such, it is best for student interns or part-timers to first discuss the term with their respective employees or consult with the labor department.
To know how much you must pay for an internship employee, you can visit our blog about compensation guide.
To read other blogs, click here
Find prospective interns by visiting our website
Reference: Cap 282 Employees Compensation Ordinance: https://www.elegislation.gov.hk/hk/cap282