An Overview of Workmen’s Compensation Act,1923

The workmen’s compensation act, 1923, is a type of social security legislation that was enacted to make the employer liable for paying the compensation to its employees who got effected or to their dependents in case of demise. The compensation is paid in event of an accident or injury (including some occupational disease) that arises out of or during the employment and that results in total or partial disablement or demise of the worker.

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The compensation act for workmen was formed after it came into notice that the laborers were becoming exposed to the danger by using more sophisticated and advanced machinery. According to the compensation act of 1884, the employer would take responsibility for the compensation of its workmen only when some major or fatal accidents occur on road. However, in 1885, the mining and factory inspectors realized that this Fatal Act, 1885, is not sufficient.

The Government gave it a hearing ear, when the Legislative Assembly members, representatives of employer, experts in medicine, workers, and insurance experts formed a committee that provided a report that led to the Workmen’s Compensation Act, 1923.

When this act was passed, it put a stop and provided relief to the workers who would have gone through the processing of court that is generally expensive. It was an effort to seek compensation whenever they encounter some injury during employment.

Scope of Workmen’s Compensation Act

The workmen’s compensation act, 1923, is applicable for those workers who are working with an industry that is mentioned in the act. Under this act, the protection of workmen from injuries and losses caused through an accident in course of and arising out of the employment subject to specific expectations as mentioned in the act.

The objective of the Workmen's Compensation Act

The Workmen’s Compensation Act, 1923 was majorly formed to provide compensation to the workmen at the time of an accident.

The act mentions that it is the duty and responsibility of the employer to include the welfare of the workers when an injury is the result of the employment in the same way the employer has reserved the right of making profits. The main aim of this act is to ensure that the workmen have sustainable life even after encountering an employment-related injury.

The Liability of the Employer for Compensation

To make the employer pay the workers compensation at the time of injury or death suffered by the employee or workman should be a consequence of some accident in course of or out of his/her employment depends on the following four conditions:

  • The causal connection between the accident and the injury (which is personal injury is caused to a workman while he/she is on work).
  • The probability is based on the reason that work has contributed because of personal injury.
  • The accident and injury that is caused during the employment course.
  • The applicant who proves that the accident or injury occurred during work and its results strain that has aggravated or contributed to the injury.

Applicability of the Workmen’s Compensation Act

This act is applicable across India except for Jammu and Kashmir. This act does not apply to the areas that are covered by the Employees State Insurance Act, 1948.

The Rules for Workmen’s Compensation Have Changed in 2020

There is good news for the workers as the Central Government has changed the rules for the calculation of the compensation of the employees under the Workmen's Compensation Act, 1923. The notification for the same has sent on 3rd January 2020 in which the amount of the wages, which were considered previously for compensation’s calculation was Rs.8, 000, are now increased to Rs.15, 000 as per the Ministry of Labour and Employment.

Since 2010, the Workmen's Compensation Act, 1923 was known as the Employee’s Compensation Act. It offers compensation to the employees who suffer or die total or partial disablement because of an accident while on work. The compensation is paid by the employer and an employee who is eligible to get compensation from ESIC cannot claim compensation under the Employee’s Compensation Act, 1923.

Conditions When Employer is Not Liable to Pay Compensation

According to the workmen's compensation act, an employer has to pay the compensation to its employee when he/she encounters some personal injury due to an accident that arose during an employee's employment. An employer is not liable for paying the compensation if:

  • An injury that doesn’t result in partial or total disablement of the employee for more than three days.
  • Any injury that does not result in permanent total disability or death because of an accident in the influence of drugs or drink.
  • If an employee meets with an accident that is caused because of wilful disobedience of the rules by him/her and wilful safety guard removal.

Calculation of the Compensation

The calculation of compensation as per the act is performed according to the provisions under Section four of the Workmen’s Compensation Act:

  • In Case of an Accident that Results in Permanent Total Disablement: In this case, an amount equal to 60% of injured employee’s monthly wage into the relevant factor or Rs.1, 20, 000, whichever is more is given.
  • When an Accident Results in Death: An amount that is equal to 50% of the monthly wage of the deceased employee into the relevant factor or an amount equal to Rs.1, 20, 000, whichever is more.

Note: According to the new rule mentioned by the government, Rs.15, 000 is considered as wage for computation under the workmen's compensation act, 1923. The relevant factor here is provided in Section IV of this Act.

The Final Words:

The Workmen’s Compensation Act, 1923 was made to offer compensation to the workers who have encountered injuries due to an accident during their employment. This act ensures that rights of the laborers are maintained even after they encounter some disability or death due to an accident during their work. Therefore, the employers are obligated to offer compensation to their workers who encountered injuries that have led to demise or disablement during employment.    

Written By: PolicyBazaar - Updated: 03 August 2022