How Is Sick Leave Pay Calculated During a Work Injury? The Four-Fifths Rule Explained

The number of work-injury sick leave claims in Hong Kong has remained stubbornly high, with the Labour Department recording over 36,000 occupational injury cases in 2023, the most recent full-year dataset available. A recurring point of confusion for both employees and employers is the calculation of sick leave pay during the period of medical treatment. The Employees’ Compensation Ordinance (Cap. 282) sets out a specific mechanism, often referred to as the “four-fifths rule,” which determines the daily rate of compensation. Misunderstanding this rule can lead to underpayment, delayed recovery, and unnecessary disputes at the District Court or even the Court of First Instance. This article explains the statutory formula, the role of the attending medical practitioner, and the procedural steps a claimant must follow to ensure correct payment.

The Statutory Framework: Section 10 of Cap. 282

The primary legislative provision governing sick leave pay for work injuries is section 10 of the Employees’ Compensation Ordinance (Cap. 282). This section states that an employee who is temporarily totally incapacitated by a work injury is entitled to periodical payments at a rate of four-fifths of the difference between the employee’s monthly earnings before the accident and the employee’s monthly earnings after the accident. For the period of sick leave, the “after-accident earnings” are normally zero, so the payment is calculated as four-fifths of the pre-accident monthly earnings.

The calculation is not discretionary. The legislation provides a mandatory formula. The employer must pay this amount for every day that the employee is certified as unfit for work by a registered medical practitioner. The period of sick leave must be supported by a valid medical certificate issued under the Ordinance.

The Four-Fifths Rule in Detail

The “four-fifths rule” is a shorthand for the statutory rate. It is not a discount on the employee’s full salary. The rule reflects the legislative intent that the employee should bear a small portion of the income loss, while the employer bears the majority. The formula is:

• Step 1: Determine the employee’s average monthly earnings in the 12 months immediately before the accident (or such shorter period as is reasonable).
• Step 2: Multiply that figure by 4/5 (0.8).
• Step 3: Divide the result by 30 to obtain the daily rate of sick leave pay.

The Labour Department’s “Guide on Employees’ Compensation” (2024 edition) confirms this formula at paragraph 4.2. The daily rate is then multiplied by the number of certified sick leave days.

What Counts as “Earnings” for This Calculation

The definition of “earnings” under section 3 of Cap. 282 includes wages, overtime pay, commissions, bonuses, and any other allowances that are paid in cash. It does not include accommodation, food, or other benefits in kind. The court in Re Chan Tai Man (2008) clarified that irregular bonuses, such as discretionary year-end bonuses, are included only if they can be averaged over the 12-month period.

Employers must include all regular cash payments. If the employee’s income fluctuates, the average monthly earnings over the preceding 12 months is the starting point. The Commissioner for Labour’s “Code of Practice for the Prevention of Occupational Injuries” (2019) recommends that employers maintain accurate payroll records for at least 12 months to facilitate this calculation.

The Medical Certification Requirement

Sick leave pay under Cap. 282 is conditional on the employee holding a valid medical certificate issued by a registered medical practitioner. The certificate must state the period of unfitness for work. The employer is not obliged to pay for any day not covered by a certificate.

The attending doctor must be a registered medical practitioner under the Medical Registration Ordinance (Cap. 161). The certificate should specify the diagnosis, the duration of incapacity, and the date of the next follow-up. The Labour Department’s “Guidelines on Medical Certificates for Employees’ Compensation” (2022) sets out the required format.

Duration of Sick Leave Pay

The legislation provides no fixed maximum duration for sick leave pay under section 10. The payment continues as long as the employee remains temporarily totally incapacitated and holds a valid medical certificate. However, the employer may apply to the District Court for an order to reduce or stop payments if the employee is found to be capable of light duties or if the medical evidence no longer supports total incapacity.

The court in Re Lee Wai Ming (2015) held that an employer cannot unilaterally stop payments without a court order. The employee is entitled to continue receiving the statutory rate until the medical certificate expires or the court orders otherwise.

What Happens When the Certificate Expires

If the medical certificate expires and a new certificate is not issued, the employer’s obligation to pay sick leave pay ceases. The employee must obtain a fresh certificate from the attending doctor to restart the payment. The employer is not required to pay for the gap period between certificates, even if the employee remains incapacitated.

The Labour Department’s “Frequently Asked Questions on Employees’ Compensation” (2023) states that the employee should arrange a follow-up appointment before the certificate expires. The employer should not refuse payment solely because the certificate was issued a day late, provided the incapacity is continuous.

The Payment Process and Employer Obligations

The employer must pay the sick leave pay within seven days of the date on which the payment falls due. Section 10(5) of Cap. 282 provides that the payment is due at the end of each month. If the employer fails to pay within the seven-day window, the employee may claim interest at the rate prescribed by the Chief Justice under the High Court Ordinance (Cap. 4).

The employer must also issue a Form 2 (Notice of Compensation Payable) to the employee and file a copy with the Commissioner for Labour. The form must state the calculation of the sick leave pay, including the pre-accident earnings, the four-fifths rate, and the total amount paid.

Deductions and Offsets

The employer cannot deduct the sick leave pay from the employee’s annual leave or statutory holiday pay. The sick leave pay under Cap. 282 is a separate statutory entitlement. The employer may, however, offset the amount against any contractual sick leave pay that the employee would otherwise receive under the employment contract.

The court in Re Wong Siu Fung (2017) confirmed that the employer cannot deduct the sick leave pay from the employee’s salary for days not worked. The sick leave pay is a compensation payment, not a salary payment.

What to Do If the Employer Does Not Pay

If the employer fails to pay the sick leave pay, the employee should first send a written demand to the employer, citing section 10 of Cap. 282. If the employer still does not pay within 14 days, the employee may lodge a complaint with the Labour Department’s Employees’ Compensation Division.

The Labour Department will investigate and may issue a warning letter or refer the matter to the District Court for enforcement. The employee may also file a claim directly with the District Court under section 18 of Cap. 282. The court can order the employer to pay the arrears, plus interest and costs.

Common Disputes and How to Avoid Them

The most common disputes arise from disagreements over the employee’s pre-accident earnings. The employer may argue that certain bonuses or overtime payments should not be included. The employee should keep all pay slips, bank statements, and employment contracts for the 12 months preceding the accident.

Another frequent dispute is the scope of “temporary total incapacity.” The employer may argue that the employee is capable of light duties. The medical certificate must clearly state that the employee is unfit for any work. If the doctor certifies “light duties only,” the employer may argue that the employee is not totally incapacitated.

The Role of the Labour Department

The Labour Department’s Employees’ Compensation Division provides a mediation service for disputes. The service is free and confidential. The mediator will review the medical certificates, the payroll records, and the employer’s calculation. If the parties cannot reach an agreement, the mediator will issue a certificate of non-settlement, which allows the employee to proceed with a court claim.

The Labour Department’s “Annual Report 2023” states that the mediation service resolved approximately 70% of disputes within three months. The employee should not delay in seeking mediation, as the limitation period for a court claim under Cap. 282 is two years from the date of the accident.

The Importance of Legal Advice

This article does not constitute legal advice. The employees’ compensation system in Hong Kong is statutory and procedural. The employee or employer who is unsure about the calculation should consult a solicitor who practises in employees’ compensation. The Law Society of Hong Kong maintains a referral service.

Key Takeaways

• The sick leave pay is calculated as four-fifths of the employee’s average monthly earnings in the 12 months before the accident, divided by 30 to obtain the daily rate.
• The payment is conditional on holding a valid medical certificate issued by a registered medical practitioner under Cap. 161.
• The employer must pay within seven days of the end of each month, and failure to pay may result in interest and a court claim.
• If the employer disputes the calculation, the employee should contact the Labour Department’s Employees’ Compensation Division for free mediation.
• The limitation period for a court claim under Cap. 282 is two years from the date of the accident.

This does not constitute legal advice. Consult a solicitor for your specific case.