Speech at 2nd Reading of the Workmen’s Compensation (Amendment) Bill

Mr Gan Kim Yong, Minister of State (Education and Manpower)

Purpose Of Workmen's Compensation

Under the common law, the injured worker has to initiate legal actions to claim damages from his employer. To succeed, the claimant has to prove that the employer had been negligent and therefore held liable. He will need to gather sufficient evidence to prove his case.

2.   The Workmen's Compensation Act or WCA provides a simpler and quicker way to settle compensation claims by avoiding protracted legal proceedings. An employee claiming under the Act is not required to prove that his employer is at fault. He only needs to show that his injury was sustained in the course of work. There is also a fixed formula in the Act on the amount of compensation to be awarded, and capped so that the financial liability on the employer is limited. The no-fault claims and prescribed amounts of compensation serve to facilitate and expedite claims under the WCA. However, employees can still choose not to claim under the WCA, but instead to pursue damages through the civil courts under the common law.

3.   The workmen's compensation system has been effective and efficient. Many employees have benefited under the system. In 2007, about 17,000 claims were filed with MOM and more than $71 million in compensation payouts were awarded to the claimants.

4.   However, the employment landscape has changed since the WCA was enacted over 30 years ago. We need to review and refresh the system to ensure that it continues to be relevant and effective.

5.   Hence, over the past year, MOM has conducted extensive consultation with the public, the unions and the businesses on the need to amend the Workmen's Compensation Act. More than 200 comments have been received. I would like to take this opportunity to thank all who have contributed, in particular the Singapore National Employers Federation, the National Trades Union Congress, the General Insurance Association of Singapore and many other industry associations.

6.   This Bill proposes changes to the WCA in three key areas. First, the coverage of the Act has been expanded. Second, compensation norms are updated to keep pace with wage increases and changing circumstances. Third, changes are made to streamline the process. In proposing the changes, MOM has been mindful of the need to maintain a balanced approach so that the amended Act would remain acceptable to both employees and employers.

7.   Sir, let me elaborate.

Coverage

8.   First, the coverage under the Act will be extended. Currently, all manual workers, and non-manual workers earning $1,600 or less per month, are eligible for compensation under the Act. We will now include non-manual workers earning more than $1,600 a month so that they too, can be compensated under the Act rather than have to go through the legal process under common law. We are not the only country to have done this. In other jurisdictions such as Australia, Canada, Hong Kong and the United Kingdom, the compensation framework does not make a distinction between manual and non-manual work. We will therefore amend sections 1 and 2 of the Act to include all employees, except those specified in the Fourth Schedule. This will increase the coverage of the Act by more than 850,000 employees, or 70%, to 2.1 million employees. Consequently, we will remove the term workmen and amend the short title to the Work Injury Compensation Act.

9.   The Fourth Schedule lists two groups of employees who will be excluded from the Act.

a. Police officers are currently excluded. Under the amended Act, members of the Singapore Police Force as well as members of the Singapore Civil Defence Force, Central Narcotics Bureau, the Singapore Prisons Service and Singapore Armed Forces, will be excluded due to the unique nature of their work environment. These personnel can face inherent risks in the normal course of their duties at work. They would already have specific work injury compensation provisions in the relevant legislation, comparable to what the Act provides.

b. The second group are domestic workers who were and remain excluded as they are employed by households and typically work and live in the same premises. As a result, it will be difficult to determine whether any injury sustained in the premises was due to work-related activities or otherwise. While excluded, foreign domestic workers are still protected under the personal accident insurance which their employers must purchase. The personal accident insurance in effect has a wider scope than the WCA and provides compensation to the foreign domestic workers in the event of permanent disablement or death, regardless of whether or not the accident was work-related. In tandem with the updating of the compensation limits under the Act, MOM will increase the insurance coverage requirement, from $10,000 to $40,000. This will apply to all new applications for foreign domestic workers submitted from 1 July 2008 onwards. For existing foreign domestic workers, the new requirement will apply to work permits that expire on or after 1 July 2008.

10.   The current Act requires employers to purchase insurance for all workers covered by the Act, unless otherwise exempted. However, for the non-manual employees earning above $1,600 a month who are previously not covered under the Act, we will not require compulsory insurance coverage. Our data shows that generally, non-manual employees face lower workplace risks and incur fewer injuries. Hence, we can leave it to employers to decide whether to buy insurance for them. This will help businesses manage their costs. Nevertheless, the employer is still liable to pay compensation to the employee in the event of a work injury. MOM would also review our data periodically and may require specific sectors to purchase insurance if the risks warrant added protection.

Compensation Norms

11.   Second, this Bill updates compensation norms. This is laid out in the Third Schedule of the Act. As before, the compensation takes into account the employee's loss of future earnings due to his injury which are determined by the worker's monthly wage and his age. As the younger worker would have had more potential years to earn, the compensation is a higher multiple of his wages.

12.   And as before, the computed amount of compensation is subject to maximum and minimum limits specified in the Third Schedule. This is to ensure that eligible workers will receive a minimum amount of compensation while the maximum limit caps the liability of employers. At present, the minimum limits are $37,000 and $49,000 respectively for death and total permanent incapacity, while the maximum limits are $111,000 and $147,000 respectively.

13.   These limits will be adjusted to take into account the increase in wages since the limits were set in 1995. With this change, the minimum compensation for death and total permanent incapacity will be increased to $47,000 and $60,000 respectively. The maximum compensation will also be raised to $140,000 and $180,000 respectively.

14.   With the amendments to compensation norms, the family of a deceased 25-year old who earned $1,500 a month would receive $140,000, an increase of $29,000 or 26% more than current. If the worker were 55 years old, his family would be compensated $129,000, an increase of $18,000, or 16% more than today.

15.   Next, existing compensation rules allow for an additional 25% compensation to employees who suffer total and permanent incapacity, in order to reflect the higher cost of care. However, it requires the employee to prove that he would need the constant care of another person for the essential actions of life. About half the employees who were totally and permanently incapacitated in the last few years did not qualify for the additional award as the injured employee may find it difficult to prove that he fulfils the condition. Under the new Act, this additional condition will be removed, while the additional 25% compensation is retained for all employees who suffer total and permanent incapacity.

16.   We have also amended section 18 to allow the employers to seek indemnity in the civil courts against a third party who was responsible for causing the injury, even if the employer was partially at fault. Currently, the employers can only do so if they were completely not at fault for the injury. The distinction between no and partial fault may be too fine to determine and the removal of this pre-condition will not affect the payment of compensation to the injured employees who choose to claim under the WCA.

17.   Next, medical expenses. Under the current Act, only medical expenses that are incurred in Singapore are compensable. As more employees are required to travel outside Singapore for work, the amended section 14 allows medical expenses incurred outside Singapore to be compensated if the accident happened when the employee was working overseas and immediate medical treatment was needed.

18.   In addition, an employer's liability for hospital expenses is subject to numerous sub-limits for different expense items such as ward charges, operation fees, and physiotherapy fees, etc.

19.   We will simplify how medical expenses are compensated. The Bill removes the existing sub-limits for hospital charges and instead introduces an overall cap on an employer's total liability for medical expenses. The proposed cap of $25,000 per accident per employee will fully cover the medical expenses incurred in more than 95% of claims where hospitalisation was required. This cap will be revised regularly, to keep pace with changes in healthcare costs.

20.   We recognise that there may be that remaining 5% where hospitalisation expenses are very high. As the WCA is predicated on no-fault, limited liability as an acceptable alternative to both employers and employees, we will have to set a limit to compensation for medical expenses. Affected employees who wish to recover the full medical expenses can exercise their option to do so under common law.

21.   Finally, section 8(2) of the Act, which deals with situations where the injured employee holds more than one job, will be amended. At present, an employee with multiple jobs can claim compensation for his multiple earnings only for jobs in the same occupation. In comparison, if a claim was brought in the civil courts, his total loss of earnings would be claimable. The number of workers with such a scenario is small. In the last five years, there are only a handful of cases in which the injured employee is employed by multiple employers. Nevertheless, it would be more equitable to amend the Act such that an employee will be compensated for his total earnings with different employers, except for earnings that are from contracts of service that the employer does not know about. This exclusion is necessary and fair so that employers are made aware of their potential financial liability under the Act and can insure themselves accordingly.

22.   Overall, these changes ensure that the workmen's compensation system continues to be relevant and serve as a sensible alternative to the common law process.

Efficiency and Effectiveness

23.   Thirdly, we will improve the efficiency and effectiveness of the compensation process.

Preferred route of compensation

24.   Under the present Act, workers can only claim for injuries from the common law or the workmen's compensation system. They cannot do so from both. This makes sense because the WCA was indeed created to serve as an alternate and more expeditious route to avoid protracted legal proceedings. However, some claimants abuse the system by filing claims for both but withdrawing the WCA claims at the last minute to switch to a civil suit. This imposes significant commitment of resources, as time and effort would have been invested to investigate and prepare the case. Involved parties such as witnesses would also have committed their time to the adjudication process. Employers will have to repeat part of the process in the courts. Processing time for each case becomes unnecessarily prolonged and as a result, compensation is delayed. We will streamline the process, so that claimants through the WCA can have speedy compensation. Nevertheless, even after our amendments, we still allow adequate time for claimants to decide on either route to claim damages or compensation for their injuries.

25.   At present, an injured employee has up to one year from the date of the accident to decide whether he wishes to file a claim under the Act. The one-year period to claim under the WCA remains unchanged and if he decides to seek compensation under the Act, his claim will be processed, and the Commissioner will notify him of the assessment of his compensation amount.

26.   Upon receiving the notification, the amended section 33 allows him up to 28 days to decide if he wishes to pursue his claim under the Act, or withdraw his claim. If he decides to pursue his claim under the Act, he will generally no longer be able to withdraw his claim and institute fresh proceedings in the civil courts.

Flexibility in paying and distributing compensation

27.   Next, the existing Act also contains restrictive rules that require compensation in death and total permanent incapacity to be paid to the Commissioner, rather than directly to the employee, or his dependants. This can delay the payment of compensation to the employee.

28.   Hence, section 9(1A) of the Act will be amended, to allow for all work injury compensation to be paid in three different ways: to any employee who is 18 years or older, to the employee's estate or his dependants, or to a committee and estate of the employee appointed under the Mental Disorders and Treatment Act.

29.   These amendments will enable us to keep the workmen's compensation process efficient.

Enhancing penalties and offences

30.   We are also enhancing the penalties and offences under the Act so that the system will continue to work effectively. The penalties in the Act were last revised in 1990. A new section 35 will be introduced to increase the penalties for selected offences. For example, an employer who illegally deducts his employee's salary to defray the cost of work injury compensation insurance may be fined up to $5,000 instead of $2,000, while the maximum jail term has been kept at 6 months. The new section 35 also makes it an offence if any person fails to comply with an order to pay compensation. A new section 40 allows the Commissioner to apply to the court to order the convicted person to pay up the amount owed to the employee, over and above the penalty for the offence. This amendment will provide the employee an additional option for recourse. Currently, if an employer does not pay compensation after being ordered to do so by the Commissioner, the employee's only recourse is to enforce the order on his own in the civil courts. This may not be practical as the injured worker may not have the means to do so. With this amendment, MOM would be able to enforce the payment of compensation on the worker's behalf.

31.   As we tighten the rules against errant employers, we also need to ensure that workers do not abuse the workmen's compensation system. There have been instances of abuse and fraudulent claims. The existing Act contains limited remedies against such behaviour as it is currently not an offence under the Act to make a fraudulent claim for compensation. MOM can only proceed against them on a lesser offence of providing false answers. In 2007, nine workers were convicted for fraud on this basis.

32.   With the increase in compensation quantum as proposed in this Amendment Bill, we must also ensure that the Act can effectively deter fraudulent claims by a small number of workers.

33.   Hence, the new section 35 makes it an offence for any person to knowingly make a fraudulent claim under the Act for compensation. The maximum penalty is a fine of $15,000 and a jail term of 12 months.

Streamlining accident reporting requirements

34.   Finally, we have streamlined the accident reporting requirements under the Act with those under the Workplace Safety and Health Act. This will simplify the reporting requirement for employers, thus reducing overall compliance costs. Instead of having to report all accidents, including minor ones, section 12 and related regulations will be amended such that an employer is required to report an accident only if it results in a death, or it results in the injured employee being unfit for work for more than 3 consecutive days or being hospitalised for at least 24 hours, or if the employee contracts an occupational disease. For minor injuries, the current statutory reporting requirement will be removed, but the obligation to compensate the employee remains. This will benefit the employees, as the employers can directly compensate their employees. However, in cases where employees face difficulty in obtaining compensation, they can still report to MOM, which will enforce the employer's obligation.

Reaching out to employees

35.   MOM will continue to reach out to employees on their rights under the Act through its publications and mandatory safety training courses. Nevertheless, to further increase worker awareness of the available avenues for compensation, all stakeholders – the community, union leaders, employers - have a pro-active role to play. MOM will work with them to create greater awareness among our employers and workers.

Closing

36.   Sir, in conclusion, the extension of coverage of the Act will make available basic work injury compensation to over 2 million employees and bring our compensation framework in line with international practices. Updating the compensation norms and enhancing the efficiency and effectiveness of the system will encourage employees to use the system. This also benefits employers as their liabilities will be capped. With these changes, MOM, together with the industry-led Workplace Safety and Health Council, and the cooperation of employers and workers, will be well-placed to achieve the goals spelt out in its safety and health vision for 2015.

37.   Sir, I beg to move.