According to section 40(1) of the Employees’ Compensation Ordinance (Cap. 282) (“ECO”), all employers are required to take out employees’ compensation insurance policies to cover their liabilities under the Ordinance and at common law for injuries at work in respect of all their employees or else they shall not employ any employee in any employment. An employer who fails to comply with this commits an offence and is liable on conviction to a maximum fine of $100,000 and imprisonment for two years. In addition, the employer is also liable to pay a surcharge to the Employees Compensation Assistance Fund Board (“the Board”) under section 36A of the Employees Compensation Assistance Ordinance (Cap. 365) (“ECAO”). Where a surcharge is payable by an employer, the Board will serve a written notice (“Demand Notice”) on the employer, advising the amount of the surcharge, the grounds therefor and the period within which the employer shall pay the surcharge.
Amount of Surcharge
The amount of surcharge payable by an employer is three times the levy payable under the Employees’ Compensation Insurance Levies Ordinance (Cap. 411) on the insurance premium paid.
Surcharge upon Repeated Contravention of Compulsory Insurance Provisions
Where an employer has contravened section 40(1) of the ECO and has, within 24 months from the service of the Demand Notice by the Board for the first contravention, again contravened section 40(1) (“second contravention”), the amount of surcharge payable by the employer in respect of the second contravention shall be two times of the surcharge calculated as if it were the first contravention (i.e., the levy payable x 3 times x 2 times).
Surcharge Prescribed in Schedule 4 of the ECAO under Special Circumstances
The Board may by a written notice require an employer to furnish within a specified period information which enables the Board to determine the amount of surcharge payable by the employer. If the employer fails to comply with the requirement and the Board is otherwise unable to obtain the necessary information, the employer is liable to pay to the Board a surcharge at the fixed amount of $10,000 in accordance with section 36A(3)(a) of the ECAO.
Where an employer, who has contravened section 40(1) of the ECO in failing to take out employees’ compensation insurance policy, is due to special reasons eventually not required to comply with section 40(1) by taking out an insurance policy to cause the cessation of the contravention (e.g. cessation of operation, no longer have the need to employ any employee in any employment, etc), the amount of surcharge payable by the employer is the fixed amount of $5,000 in accordance with section 36A(3)(b) of the ECAO.
Reviews and Appeals
An employer may by written notice request the Board to review the amount of the surcharge or the grounds for imposing the surcharge within the period specified in the Demand Notice. The Board will carry out the review as requested and issue a written notice to the employer advising the result of the review. An employer who is not satisfied with the determination of the Board on the review may appeal to the District Court. The Board is not empowered to waive any payment of surcharge or reduce its amount. Unless the convicted employer is able to convince the court to overturn the conviction, he is statutorily liable to pay the Board the surcharge in accordance with section 36A of the ECAO.