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Following is a question by the Hon Leung Yiu-chung and a reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, in the Legislative Council today (December 19):
Question:
Recently, quite a number of employees from the catering and construction industries, etc as well as drivers of green minibuses have relayed to me that their employers have not taken out employees' compensation insurance policies (commonly known as "labour insurance policies") for them on the pretext that the insurance premiums are high or insurance companies have declined to underwrite such policies, and their employers have even forced them to become self-employed persons. In this connection, will the Government inform this Council:
(a) of the number of employers prosecuted for not having taken out labour insurance policies for their employees, and the number of those convicted as well as details of the penalties imposed on them, in the past two years;
(b) whether the Government at present monitors the situation of high insurance premiums for labour insurance policies and insurance companies declining to underwrite such policies; if it does, of the details; if not, the reasons for that; and
(c) whether the Government will consider afresh setting up a central employees' compensation fund to replace the current arrangement of employers having to take out labour insurance policies with insurance companies; if it will, of the details; if not, the reasons for that?
Reply:
President,
The Employees' Compensation Ordinance (ECO) aims to protect employees who die or sustain injury from accident arising out of and in the course of employment, or suffer from prescribed occupational diseases. According to section 40 of the ECO, all employers are required to take out employees' compensation insurance (EC insurance) to cover their liabilities both under the ECO and at common law. Otherwise, they shall not employ any person in any employment.
An employer cannot evade his liabilities under labour legislation by labelling his employees as "self-employed persons" unilaterally. Whether there exists an employer-employee relationship depends on the actual circumstances of the case. Should an employer make a "sub-contractor contract" with his employee in an attempt to change the latter's identity to be a "self-employed person", if in fact there exists an employer-employee relationship, the court can still confirm the employer-employee relationship and the employer is still required to fulfil his responsibility under the ECO, which includes taking out EC insurance and paying compensation to an employee who sustains injury or dies from accidents arising out of and in the course of employment.
My reply to the three parts of the question raised by Hon Leung Yiu-chung is set out below:
(a) Labour Inspectors of the Labour Department actively conduct inspections to workplaces of various industries and carry out targeted enforcement actions to ensure that employers comply with the requirement of taking out EC insurance under the ECO. If and when there are suspected offences, evidence is proactively collected to institute prosecutions against law-defying employers. In 2010 and 2011, there were 1 988 convicted summonses involving offences against the requirement of taking out EC insurance under the ECO. Among the sentences imposed by the court, the maximum penalty was community service order of 120 hours with a fine of $2,000, whereas the maximum fine imposed was $20,000.
(b) Insurance is a risk assessment industry. Insurance companies will underwrite and determine premium levels and policy terms and conditions according to the risks being underwritten, such as accident rate, quantum of claims paid and past accident records, etc.
Insurance policy is a contract between the insurance company and the policyholder. It is a commercial decision of insurance companies to determine premium levels and policy wording having regard to market conditions. Through free market, open competition and enhanced risk management, premiums and underwriting capacity will be appropriately adjusted and improved. Pursuant to section 26(3A) of the Insurance Companies Ordinance, the Administration is debarred from intervening into premium levels and policy wording.
We fully understand the impact of premium increase or difficulties in procuring insurance on the part of employers. With the Administration's encouragement, the Hong Kong Federation of Insurers has since 2007 set up the Employees' Compensation Insurance Residual Scheme (ECIRS) to provide last-resort covers to employers who have encountered difficulties in taking out EC insurance. Any employers who have difficulties in procuring EC insurance may contact the ECIRS Bureau for assistance.
(c) Currently, Hong Kong's employees' compensation system is based mainly on the ECO which adopts the system that individual employers are responsible for their own employees. An employer must, in accordance with the requirements of the relevant legislative provisions, take out EC insurance with an authorised insurance company. This is to ensure the employer's ability to pay employees who are injured at work the compensation as stipulated under the ECO as well as the compensation awarded by court under common law. The existing system also encourages employers to adopt proactive measures to prevent work accidents, as the premium payable is directly related to their occupational safety and health performance and the measures adopted to reduce risks at work.
In fact, the ECIRS launched by the insurance industry in 2007 has acted as a market of last resort to ensure employers in various industries (particularly high-risk industries) are able to acquire EC insurance. The ECIRS has been operating smoothly since its establishment. As at November 30, 2012, the ECIRS Bureau has received 388 applications. Of these, 134 were offered EC insurance by insurance companies under the ECIRS during circulation of the applications among ECIRS members; 164 were provided EC insurance by the ECIRS; two were withdrawn by the employers; two were refused as the covers sought did not fall under the category of EC insurance; and the remaining 86 applications are being vetted.
As regards the establishment of a central employees' compensation fund, the Legislative Council has detailed discussions on the subject on many occasions. The Administration has also reiterated that as the cost effectiveness of a central employees' compensation fund is yet to be known and given that the current private industry mode of operation is functioning well, the relevant system can better suit Hong Kong's current situation. Hence, no drastic changes should be made. We will continue to maintain close contact with the relevant stakeholders and institutions to keep in view if and how the current system can be improved.
Ends/Wednesday, December 19, 2012
Issued at HKT 15:47
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