Monthly Wages Under Employees' Compensation Act, 1923

It is a known fact that a company's success depends on its employees. Each employee expects a secure job and gets adequately compensated; on time and in case of injury. The Employees Compensation Act, 1923 safeguards the employees and stipulates employers to compensate the employee. Employee compensation insurance can help employers to fulfill this requirement.

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Monthly Wages under Employees Compensation

One of the main components for determining the amount of compensation payable to an employee is monthly wages. Section 5 of the Employees Compensation Act defines monthly wages as an amount of wages considered to be payable for a month's service. In 2020, The Central Government revised the amount of the monthly wages, which are considered for compensation, from Rs. 8,000 to Rs. 15,000.

Calculation of Compensation

As per the Act, an employer has to pay compensation for injury or death caused to an employee due to an accident during the course of employment. The basis on which the calculation of compensation is made is the monthly wage system.

Section 4 of the Act guides the computation of compensation for the employees.

  1. In case of death, the employer is liable to pay the deceased employee's dependents:

    50% percent of the deceased employee’s monthly wages multiplied by “the relevant factor”


    Rs. 1,20,000, whichever is higher.

  2. In case of injury that results in permanent total disablement, the employer is liable to pay:

    60 percent of the injured employee’s monthly wages multiplied by “the relevant factor”


    Rs. 1,40,000, whichever is higher.

  3. In case of Injury resulting in total or partial temporary disablement, the employer is liable to pay a half-monthly payment of the sum equivalent to 25% of monthly wages.

    *The relevant factor for computation is stated in Schedule IV of the Act

    As per the Government’s new notification, compensation is now calculated at Rs. 15,000 (considered as wage amount)

Employee Compensation Insurance

With Employee Compensation Insurance, an employer can financially cover its employees and their dependents against accidents and mishaps. This insurance policy is one of the primary tools by which an employer can establish the ability to satisfy the legal obligations under the Employees Compensation Act, 1923. A comprehensive Employee Compensation Insurance policy usually covers:

  • Accidental injury
  • Disability cover (partial and permanent disability)
  • Death or temporary disability
  • Injury getting worse due to employment conditions
  • Occupational disease or illness
  • Legal costs with the company's consent
  • Medical cover

Why buy Employee Compensation Insurance?

Let us look at some of the advantages of this insurance policy.

  • It protects your employees in case of any illness or disability
  • It helps reduces financial loss to the company
  • It helps protect you against legal liability
  • It helps safeguard your business from lawsuits arising from work-related injuries
  • After the claim is settled, the affected employee/worker cannot file for nor seek additional compensation.

Final Word

Employee rights and benefits have seen an upswing in today's global work environment. Employee compensation can help protect organizations financially from the threat of substantial compensation pay-outs, expensive lawsuits and help employees during difficult situations.

Written By: PolicyBazaar - Updated: 06 March 2024

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