The Workmen’s Compensation Act 1923

The objective of Workmen Compensation Act 1923 is to provide financial compensation to workers/employees if they suffer accidental injuries at the workplace, develop occupational diseases, or die during their employment.

The Workmen Compensation Act covers financial protection for all employees working full-time, part-time, temporarily, or casually for the company. This act under the Indian labour law comes into effect if an employee gets injured, incapacitated, disfigured, or dies due to an accident at the workplace.

This act ensures that frontline workers who belong to the following industries are liable to receive compensation. As per the rules regarding Workmen Compensation Act 1923, any company operating under the following sectors and having more than 10 employees needs to stay compliant with the law:

• Individuals engaged in construction sites, mines, docks, factories, and other locations listed in Schedule II of the aforementioned Act.

• Drivers, mechanics, helpers, and others involved in vehicle operations.

• Non-permanent railway employees not affiliated with sub-divisional, district, or administrative offices.

• Workers employed abroad as specified in Schedule II of the Workmen's Compensation Act, 1923.

• Plots, captains, and crew members of aircraft.

The Employees Compensation Act 1923 notes the liability of employers to secure insurance for their employees’ compensation in case of injury or death during employment.

The scope of coverage receivable by employees depends on the workmen compensation policy. However, it ensures that workers receive financial protection for medical expenses, disability benefits, and compensation for death or injury sustained at the workplace, by provisions of the Act.

Let us explore a few basic aspects of compensation that a workmen compensation policy will cover:

• Injuries sustained during a work-related accident

• Temporary disablement

• Complete or partial permanent incapacity

• Death resulting from an accident at the workplace

• Injury, illness, or death due to poor working conditions

• All legal and other expenses arising from the above situations for an employee

You can get these basic compensation under the policy, whether you buy a workmen compensation policy online or offline.

Section 4 of the Workmen's Compensation Act 1923 establishes the framework for calculating compensation awarded to workers for work-related injuries or illnesses. The compensation amount varies depending on the nature of the disability.

Let us explore the important factors to consider for calculating the compensation of workers:

Temporary disabilities:
For temporary disabilities that prevent an employee from working, the Workmen's Compensation Act 1923 allows compensation of up to 25% of their monthly wages.

Permanent total disabilities:
In the unfortunate event of a permanent total disability, an employee is entitled to receive 60% of their monthly wages, or ₹1,20,000, whichever is higher.

Permanent partial disabilities:
The compensation for injuries resulting in a permanent partial disability (listed in Part II of Schedule I of the Act), is calculated as a percentage of the employee's wage loss due to the injury.

Death:
If a work-related accident results in an employee’s death, their dependents are eligible for compensation of 50% of the deceased's monthly wages, ₹1,20,000, whichever is higher.

Please Note: Employees covered under the Employees' State Insurance Scheme (ESIC) are not eligible for benefits under the Workmen Compensation Act 1923.

Since the enactment of the Workmen Compensation Act 1923, there have been only two major changes in this act. The changes are as follows:

• In 2010, the name ‘Workmen Compensation Act’ was changed to the Employee’s Compensation Act.
• On January 3, 2020, the Ministry of Labour and Employment increased the wage ceiling to calculate compensation under the Act. Previously, compensation was based on monthly wages up to ₹8,000. Now, it considers earnings up to ₹15,000.

In the Workmen Compensation Act 1923, employers are liable to provide financial compensation to their employees. However, compensation is given for financial losses due to work-related injuries or illnesses under the following conditions:

• Accident or Injury during Work Duties: If an employee suffers an accident or sustains an injury while performing their duty at the workplace, they are eligible for compensation.
• Work-Aggravated Medical Condition: If the employee submits proof that the accident or injury at the workplace has aggravated their medical condition.
• Disability or Death on Duty: In the unfortunate event of an employee becoming permanently disabled, or death of the employee while on duty, the Act provides financial support to their dependents.

As per the Workmen Compensation Act, there are certain circumstances, under which an employer is not liable to pay compensation to their employees.

• Employee Disregards Safety Norms: If an employee’s injury arises from neglecting the safety norms at work, the employer may not be liable to provide compensation.

• Minor Injuries (Less Than 3 Days): The Workmen Compensation Act does not apply to minor injuries that cause partial or full disabilities for less than 3 days.

• Influence of Alcohol or Drugs: If an employee sustains injuries under the influence of alcohol or other drugs, they do not qualify for receiving employee compensation.

The objective of Workmen Compensation Act 1923 is to protect employees and employers and ensure fair practices at the workplace. It aims to protect the interests of workers. The act ensures that employees receive financial compensation for work-related injuries, illnesses, or death during their employment.

It also outlines the structured approach to compensation and offers different levels of support based on the nature and severity of the incident. Employers need to comply with this Act, which covers employees in various sectors and industries.
A workmen compensation policy under SME insurance plays a vital role in providing financial assistance to workers or employees in case of accidental injuries, death, or occupational illness.

Also, while providing significant protection to employees, the Act exempts employers from compensation liability under certain circumstances.

Tata AIG offers affordable and customisable SME insurance plans.

Can an employer be held liable for compensation if an employee is injured while commuting to work?

Generally, injuries sustained during the commute to and from work are not covered under the Workmen's Compensation Act 1923, as they are considered outside the scope of employment.

How is compensation calculated as per the Employees Compensation Act?

The compensation is calculated based on the nature of the injury and the extent of disability. For temporary disability, the act provides a percentage of the monthly wages of the employee. And for permanent disability, the Act provides 60% of their monthly wages, or ₹1,20,000, whichever is higher.