The Workmen Compensation Act, 1923, also known as the Employees' Compensation Act mandates employers to fairly compensate workers who suffer injuries, disabilities, or death due to workplace accidents.This legislation provides a financial safety net for workers and their families while encouraging employers to maintain safer work environments.
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Key Provisions of the Workmen Compensation Act, 1923
The Workmen Compensation Act, 1923 mandates insurance coverage for the following situations, subject to the terms and conditions specified by the employer's insurance provider:
Bodily injuries or other damages sustained in an accident while on duty
Section 4 of the Workmen Compensation Act 1923 notes the compensation amounts workers are entitled to receive as follows:
Death: The compensation payable to the dependents of the deceased worker is 50% of the monthly wages of the deceased employee multiplied by the relevant factor from Schedule IV of the Act or Rs. 1,20,000, whichever is higher.
Permanent Total Disablement: The compensation is 60% of the monthly wages multiplied by the relevant factor from Schedule IV of the Act or Rs. 1,40,000, whichever is higher.
Permanent Partial Disablement:The compensation amount depends on the extent of the disability, expressed as a percentage of the loss of earnings. It is calculated using the following formula - (Percentage of loss of earning capacity from Schedule I) × (60% of monthly wages) × (Relevant factor from Schedule IV)
Temporary Disablement (Total or Partial): The employee is entitled to a payment of 25% of the monthly wages every fortnight for the period of disablement.
*Note: Those covered under the Employees' State Insurance Scheme of India (ESIC) are not eligible for benefits from this Act. For a more detailed read on exceptions, or further legal intricacies, you can refer to the official document available on the Ministry of Labour & Employment's website.
Scope and Applicability of Workmen Compensation Act
The Act applies to industries specified within its provisions.
It offers protection against injuries or fatalities resulting from workplace accidents.
The legislation is enforced across India, with the exception of Jammu and Kashmir.
The Act does not apply to areas covered by the Employees' State Insurance Act, 1948.
Updates and Amendments: Employee Compensation Act, 1923
Over the years, the Workmen Compensation Act has undergone several amendments to better reflect the changing socio-economic landscape. Some key updates include:
Wage Ceiling Adjustment (2020): The wage ceiling for calculating compensation was raised from Rs. 8,000 to Rs. 15,000, enhancing the financial protection available to workers.
Renaming of the Act (2010): The Act was officially renamed as the Employees' Compensation Act to better align with modern labour practices and terminologies.
History of Workmen Compensation Act
The Workmen Compensation Act was created after it was noticed that workers faced increased risks due to advanced machinery. Initially, the 1884 Compensation Act held employers responsible for compensating workers only for major or fatal road accidents. However, mining and factory inspectors found this law inadequate by 1885.
The government responded when a committee, including Legislative Assembly members, employer representatives, medical experts, workers, and insurance specialists, presented a report. This led to the Workmen Compensation Act of 1923. This new act provided relief to workers by simplifying the compensation process, which previously involved expensive court procedures. It ensured workers could seek compensation for injuries sustained during employment.
When is the Employer Not Eligible to Pay Compensation?
According to the Workmen Compensation Act, an employer has a legal obligation to pay compensation to its employee when he/she encounters some personal injury due to an accident that arose during an employee's employment. However, certain conditions may exempt employers from liability, including:
Negligence: If the injury resulted from the employee's willful disobedience of safety rules or removal of safety devices.
Intoxication: Accidents caused under the influence of alcohol or drugs, unless they lead to permanent disability or death, are not covered.
Minor Injuries: Injuries that do not result in disablement beyond three days are generally not compensable.
The Role of Insurance in Workmen Compensation
Employers often rely on insurance policies to manage the financial risks associated with potential compensation claims. A typical workmen compensation insurance policy covers the legal liability of the employer, including:
Medical Expenses: Costs of medical treatment for the injured employee.
Compensation Payments: Direct compensation to the injured employee or their dependents.
Legal Fees: Coverage for legal expenses incurred during compensation disputes.
Recent Trends: Emphasis on Workplace Safety
In recent years, there has been a growing emphasis on workplace safety as a preventive measure. Companies are increasingly investing in safety training, hazard assessments, and safety gear to reduce the incidence of workplace accidents. This proactive approach not only minimises the risk of accidents but also reduces the potential liability under the Workmen Compensation Act.
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Conclusion
The Employees' Compensation Act, 1923, plays a critical role in safeguarding the rights of workers by ensuring they receive adequate compensation for injuries or fatalities sustained during employment. As businesses evolve and face new challenges, employers must remain vigilant in complying with the provisions of the Act to protect their workforce and manage risks. Companies looking to navigate the complexities of employee compensation or seeking tailored insurance solutions may connect with an expert at Policybazaar for Business to discuss comprehensive protection for its employees.
Disclaimer: Above mentioned insurers are arranged in alphabetical order. Policybazaar.com does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.
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*All savings and online discounts are provided by insurers as per IRDAI approved insurance plans. Premium varies on the basis of Occupancy, Business Activity & Coverage Type By clicking on "View Plans" you agree to our Privacy Policy and Terms Of Use and also provide us a formal mandate to represent you to the insurer and communicate to you the grant of a cover. The details of insurance coverage, inclusions and exclusions are subject to change as per solutions offered by insurance providers. The content has been curated based on the general practices in the industry. Policybazaar is not responsible for the factual correctness of these details.
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