Labor laws in China are very protective toward the employees. Compulsory social insurance will cover a large part of costs resulting from work-related injury but company will remain financially exposed in some specific cases. It is therefore important to understand well what is covered by compulsory social insurance and what is not, and protect your company liability properly with an employer’s liability insurance.
Legal environment
Social insurance has to be paid for all employees in China and it includes a premium for work-related insurance. The regulation is promulgated by Social Security Administrative Department of State Consul and premium is paid by employers based on type of industry. It covers as well incidents that may happen outside of work premises, during business trips or during transportation to and from office under public or company organised transportation.
Why private insurance on top of social security is needed?
The social security managed by local government has its limitation and companies will still bear a good part of indemnity payable to employees in the event of a work related injury.
The below table indicates what is covered by Chinese social security and what is not:
Usually, a standard employer’s liability insurance policy in Mainland China will include the following features:
- 36 months salary in case of death
- 48 months salary in case of disability
- Salary coverage up to 52 weeks
- Accident Medical expenses
- Legal liability
Each insurer will set maximum coverage amount under each benefits but they can be adjusted based on client’s needs. It is important to set the right limits to cover the part that remains to be paid by the employer in the event of a work related injury,
Another important point to know is that the law requires that companies continue to pay original wage and benefits during medical leave up to a period of 12 months, or more in case of severe medical conditions.
How settlement will be done?
There are two ways of settling an Employer’s liability claim: Insurer will suggest an indemnity based on contract in place and if employee is fine with this figure, then settlement will be proceeded accordingly. If an employee disagrees with indemnity figure suggested, he could sue the company and settle the case in legal court or arbitration. Legal fees are covered by insurance policy and insurers will pay according to the settlement agreed in court within the limits of the contract.
With so many risks facing business owners in China, it is important to protect your business properly. Employer’s liability insurance is clearly a key policy for all businesses in China
To know more, please contact our team in China.
Comments are closed.