Press Release



LCQ8: Financial situation of employees compensation fund


Following is a question by the Hon James Tien Pei-chun and a written reply by the Secretary for Education and Manpower, Mrs Fanny Law, in the Legislative Council today (February 7):


As it has been reported that the accumulated surplus of the Employees Compensation Assistance Fund will be exhausted soon, will the Government inform this Council:

(1) of the amount of compensation determined by the court over the past three years in respect of each claim made against the Fund;

(2) whether it will consider amending the Employees Compensation Assistance Ordinance (Cap 365) to set an upper limit for the amount of compensation payable to each employee under the Fund; if not, of the reasons for that; and

(3) of the measures to improve the financial situation of the Fund?


Madam President,

In respect of the three questions raised by the Hon. James Tien on the Employees Compensation Assistance Fund, I set out my reply as follows:

(1) According to statistics of the Employees Compensation Assistance Fund Board (the Board), the amounts of compensation awarded to 51 applicants by the Board during 1998 to 2000 were determined by the Court. The amounts of assistance for these cases ranged from $20,000 to $4.56 million.

(2) The Employees Compensation Assistance Scheme (the Scheme) was set up in 1991 to provide assistance to injured employees who could not obtain their entitlement to compensation due to default of employers or their insurers. The Scheme is financed by a levy imposed at a rate of one per cent on the employees' compensation insurance premium. From 1996/97 for two years in a row, the Scheme had to pay one claim which exceeded $10 million each. As a result, the Scheme experienced annual deficits that depleted its reserves. The Education and Manpower Bureau commissioned a consultancy study in 1999 to review the Scheme and to propose ways of resolving the problems identified.

After consulting all relevant parties and having examined their views, the Administration considered that in order to restore the financially viability of the Scheme, it is necessary to re-define its scope of protection by imposing a payment limit to each application for assistance from the Fund. We are consulting the Labour Advisory Board with a view to determining the payment limit in respect of each application. Our aim is to strike a balance between providing reasonable compensation for injured employees without insurance cover and reducing the financial volatility of the Scheme.

(3) To improve the financial position of the Scheme, we are actively considering various measures that can help increase its income and better manage the expenditure. These measures include:

Imposing a Payment Limit on Application for Assistance


The Administration is considering to impose a payment limit in respect of each application for assistance. Through this measure, the financial stability of the Scheme will be greatly enhanced. The Scheme would not be exposed to financial difficulties when it is unexpectedly required to make payment of a large sum as awarded by the Court.

Strengthening the role of the Board in legal proceedings


The Employees Compensation Assistance Ordinance does not explicitly empower the Board to defend claims in legal proceedings. As a result, the Board has been placed in a passive position and hence not able to supply relevant information to the Court or negotiate with an applicant for an early settlement of a claim. To protect the interests of the Board, the Administration proposed to strengthen the role of the Board in legal proceedings.

Empowering the Board to Collect a Surcharge from Employers who Fail to take out Insurance Cover


At present, an employer who takes out an employees' compensation insurance is required to pay a levy to the Board. Those employers who fail to take out insurance cover will at the same time default payment of the levy to the Board, even though the Board may have to take up the liability to make payments to the employees of such employers. The Administration proposed that these employers who fail to take out employees' compensation insurance in accordance with the law should be held liable to pay a surcharge to the Board.

Increasing the Levy Rate


Since the inception of the Scheme, the levy rate has remained at one per cent. Even if all the above measures to better manage the expenditure of the Scheme are implemented, they will not be sufficient for the Board to balance its income and expenditure. Therefore, the Administration considers that it would be necessary to suitably increase the levy rate so as to enable the Scheme to continue operating in a financially viable way. In setting the rate of increase, we will adopt a pragmatic approach and fully consult the relevant parties.

End/Wednesday, February 7, 2001