Direct Answer: How EC Insurance Premiums Are Calculated

In Hong Kong, Employees’ Compensation Insurance (ECI) premiums are generally calculated as a percentage of the total annual payroll, using a rate that reflects your industry risk and claims history and is subject to statutory minimum coverage limits (HK$100 million or HK$200 million). Because rates are not standardized by law, comparing quotations from multiple insurers or brokers is essential to manage significant premium increases that many employers have experienced in recent years.[1]

I. Introduction

The Legal Mandate

Under Section 40 of the Employees’ Compensation Ordinance (Cap. 282), every employer in Hong Kong must maintain an insurance policy with an authorized insurer to cover their liabilities for employees’ compensation, and must display a valid insurance notice at each place of business. This requirement applies to all employees regardless of contract length, working hours or place of work, including full-time, part-time, casual, seasonal and home-based staff, where they fall within the statutory definition of “employee.” Failure to comply is a criminal offence and may result in a maximum fine of HK$100,000 and imprisonment for up to two years, as well as potential civil liability if an employee is injured without proper cover.

The Current Market Climate

In recent years, the Hong Kong ECI market has tightened due to higher claim frequency and severity, evolving judicial interpretations of work-related injury, and rising medical and rehabilitation costs. Market commentary and brokerage reports have highlighted that many employers have faced material premium increases, though the exact percentage varies widely by sector, claims history and insurer. Employers in construction, F&B, logistics and other higher-risk sectors have been particularly affected by stricter underwriting and selective capacity.

II. Step-by-Step: How Your ECI Premium is Calculated

Step 1: Determine Your Risk Classification

Insurers group occupations and businesses into risk classes (for example, clerical office vs. construction site work), and apply different premium rates per HK$100 of wages to reflect the expected frequency and severity of workplace injuries. Higher-risk categories such as manual work at height, use of heavy machinery or site operations attract significantly higher rates than pure office-based or professional roles. The Labour Department’s publications explain employers’ obligations but do not fix premium rates, which remain a matter of commercial underwriting by insurers.[1]

Step 2: Calculate Gross Annual Payroll

The ECI premium is usually quoted as a rate per HK$100 of “earnings” for each risk class, multiplied by the estimated total annual payroll for that class. For ECI, “earnings” normally include basic salary, overtime, commissions, bonuses that are not discretionary, and various regular allowances; many policy wordings follow definitions similar to those in the Ordinance and related guidance.[1]

Basic formula commonly used in the market:

$$ \text{Premium} \approx \left( \frac{\text{Total Annual Wages}}{100} \right) \times \text{Rate per 100} $$

Insurers will conduct an adjustment (wage audit or declaration) after the policy period, and the premium may be increased or refunded depending on actual payroll.

Step 3: Apply Statutory Coverage Limits

The minimum limit of indemnity required under the Ordinance depends on the number of employees employed by the same employer in Hong Kong. The Labour Department’s Guide to Employees’ Compensation Insurance sets out that:

• For not more than 200 employees: minimum limit of indemnity of HK$100 million per event.
  
• For more than 200 employees: minimum limit of indemnity of HK$200 million per event.
  

Some insurers and larger employers elect higher limits than the statutory minimum, especially in high-risk industries or where contractual requirements (for example, from principal contractors or landlords) demand higher cover.

Step 4: Factor in Experience Rating & Claims History

Underwriters pay close attention to your past loss experience and may apply “loadings” for frequent or severe claims, or grant discounts for a strong safety record and effective risk management. Factors often considered include the number and cost of previous claims, trends over time, nature of injuries, and any demonstrable improvements in safety measures or claims management.

III. Why Comparing Insurers is Crucial in 2026

Non-Standardized Pricing

ECI premiums in Hong Kong are not set by statute or by a centralized tariff; each insurer applies its own underwriting approach and pricing depending on sector appetite, portfolio experience and capacity. As a result, two employers with similar payroll and risk may receive materially different quotations from different insurers or through different distribution channels.

Identifying "Niche" Insurers

Some insurers focus on SME packages and low-risk office-based businesses, often providing competitively priced bundled products, while others specialize in construction, logistics or other high-risk sectors with tailored underwriting. Premiums for low-risk clerical staff can be modest on a per-employee basis, while large construction or industrial accounts may see aggregate annual ECI premiums reaching into the high six or seven figures depending on project size and claims experience.

The Residual Scheme Alternative

Employers that are unable to obtain cover from the open market (for example, after being declined by several insurers) may apply under the Employees’ Compensation Insurance Residual Scheme (ECIRS), which is operated through designated insurers as a “market of last resort.” While ECIRS helps ensure employers can still meet their statutory obligations, premiums and underwriting conditions under residual schemes are often less flexible and may be higher than standard market terms.

IV. Strategies to Reduce Your ECI Costs

• Policy bundling and programme design
  Many insurers offer more attractive overall terms when ECI is placed together with Office Package, Public Liability, Property All Risks or Group Medical, although each case is individually underwritten. Smart programme design can also help avoid gaps between ECI, common law liability and other covers frequently required under Hong Kong contracts.

• Risk management & safety audits
  Strong occupational safety and health (OSH) practices, site supervision, training and clear incident reporting procedures can materially reduce both frequency and severity of ECI claims over time. Some insurers and brokers work with clients on safety audits, loss control surveys and targeted action plans, which can support more favourable terms at renewal when backed by credible evidence.

• Accuracy in wage declaration
  Under- or over-stating estimated wages can lead to additional premiums or refunds at adjustment and may also raise issues at claims time if the discrepancy suggests misrepresentation. Keeping accurate payroll records by category of work and updating insurers promptly when headcount or job nature changes can help avoid disputes and maintain trust with underwriters.

V. Frequently Asked Questions (FAQ)

Does EC insurance cover employees working from home (WFH)?
Employees’ Compensation in Hong Kong is based on whether the injury or disease “arose out of and in the course of employment,” so in principle, work-related injuries that occur while working from home may be covered, subject to the facts of each case and the policy terms. Employers should document remote-working arrangements and duties clearly to help assess work-connection if a WFH injury occurs.

What happens if I fail to secure insurance for my part-time or casual staff?
If persons fall within the definition of “employee” under the Ordinance, you must arrange ECI for them, even if they are part-time, casual or short-term. Failure to insure is a criminal offence and may result in a fine up to HK$100,000 and imprisonment up to two years, and you may be personally liable to pay compensation if an employee is injured.

How often should I review and re-quote my ECI policy?
Most employers review ECI annually at renewal, but more frequent reviews may be appropriate after major changes in headcount, operations, projects or claims. Regularly testing the market helps ensure premiums remain in line with current risk and competition, especially in a volatile environment where insurers’ appetites and pricing may change year to year.

VI. Conclusion

Balancing compliance, employee protection and cost control requires understanding how occupation mix, payroll, claims experience and safety culture feed into ECI pricing in Hong Kong. Employers that proactively manage risk, maintain accurate wage data and regularly compare insurer offerings are better positioned to secure sustainable pricing and suitable coverage limits over time.

Final Tip: Start your renewal process at least 60 days early to allow enough time for collecting updated claims information, preparing underwriting submissions, and negotiating with multiple insurers.

If your renewal is within the next three months, Contact Us Navigator Insurance Brokers for reviewing your current policy, loss history and renewal options as early as possible.

Resources

• Labour Department: Guide to Employees' Compensation Insurance (PDF)
  
• Labour Department: Employees’ Compensation Ordinance (Cap. 282)
  
• Marsh and other broker insights on EC cost and risk management in Hong Kong
  

🏁 Summary

✅ Legal Must: All employers in Hong Kong must maintain valid ECI with an authorized insurer covering all employees who fall within the statutory definition, including part-time, casual and home-based workers where applicable.

💰 Premium Formula:
(Total Annual Payroll ÷ 100) × Insurer’s Rate per HK$100 of wages, adjusted for industry risk, occupation mix, claims history and required limit of indemnity (at least HK$100M or HK$200M depending on headcount).

🔍 Compare Insurers:
– Premiums are not standardized by law; different insurers may quote very different rates for the same risk.
– Market conditions and appetite change frequently across sectors, especially for higher-risk industries.
– If you have not compared quotations recently, Contact Us Navigator Insurance Brokers for reviewing your current terms and alternative options.

📉 Cut Costs Smartly:
– Strengthen workplace safety and document risk-control measures.
– Ensure accurate wage declarations by category of work and keep records ready for audits.
– Consider whether bundling ECI with other covers could produce a more efficient programme.

📅 Renew Early:
– Review annually and reassess mid-term when there are significant operational changes.
– Begin renewal discussions at least 60 days before expiry so there is time for remarketing, negotiations and internal approvals.

ℹ️ Need Help Now?
If you want professional support in reviewing premiums, terms, or market alternatives, Contact Us Navigator Insurance Brokers for reviewing your Employees’ Compensation Insurance.