Saturday, January 24, 2009

Workmen Compensation Act - A Quick Overview

Workmen Compensation Act: A Brief

The Workmen’s Compensation Act, 1923 provides for payment of compensation to workmen and their dependants in case of injury and accident (including certain occupational disease) arising out of and in the course of employment and resulting in disablement or death. The amount of compensation to be paid depends on the nature of the injury and the average monthly wages and age of workmen. The minimum and maximum rates of compensation payable for death (in such cases it is paid to the dependents of workmen) and for disability have been fixed and is subject to revision from time to time.

Applicability of the Law?

The Act extends to the whole of India. The act applies to factories, mines, docks, construction establishments, plantations, oilfields and other establishments which are explicitly mentioned in Schedule II and III of the act. Moreover it excludes establishments covered by the ESI Act.

Every employee including those employed through a contractor except casual employees, who is engaged for the purposes of employer’s business and who suffers an injury in any accident rising out of and in the course of his employment, shall be entitled for compensation under this Act.

Definition of the Workmen under the Act:

“Workman” means any person other than a person whose employment is of a casual nature and who is employed otherwise than for the purposes of the employer’s trade or business.

A “Casual” workman is one who is engaged on work which is of a casual nature or which is of a non-recurring or intermittent nature.


Scope of Cover:

The Workmen’s Compensation Insurance Business in India is controlled by the Workmen’s Compensation Insurance Tariff (W.C.Tariff). The Tariff provides for two types of Insurance as follows:

Table A: This policy provides indemnity to the Insured if any employee in the Insured’s immediate service shall sustain bodily injury by accident or contracts disease arising out of and in the course of his employment by the Insured in the Business and if the Insured shall be liable to pay compensation for such injury either under.

Table B: This Policy provides indemnity to the Insured against their legal liability under the Fatal Accidents Act, 1855, and at Common Law. (This Policy is not issued to cover employees who fall within the definition of “workmen” under the Workmen’s Compensation Act, 1923, as amended).

Calculation of the Sum Assured:

This insurance policy stands subject to the provisions of the Workmen’s Compensation Act. The sum insured is based on the annual wages of the workmen during the insurance period. So the compensation is adjusted at the end of the policy period or submission of the statement of actual wages paid during the insurance period. The policy can also cover the medical expenses of the employer’s workmen up to the limit specified under the policy.

Employer’s Liability Arises:

ü if personal injury is caused to a workman by accident arising out of and in the course of his employment;

ü If a workman employed in any employment contracts any disease, specified in the Act as an occupational disease peculiar to that employment.

Employer’s Liability Does not Arise:

ü Any injury that does not result in a fatality or disability for 3 days subsequent to the accident.

ü The first 3 days of a temporary disability if the total temporary disability period does not exceed 28 days.

ü Any non-fatal injury caused by an accident that is directly attributed to.

ü Influence of drinks or drugs.

ü Willful disobedience of an order that would have secured the workman’s safety.

ü Willful removal or disregard of any safety device.

ü War or nuclear group of perils.

ü Liability towards employees of the contractors of the insured (unless specifically declared).

ü Any employee who is not a “Workman” as per the Workmen’s Compensation act.

ü Liability assumed under an agreement.

ü Occupational diseases unless cover is extended on payment of extra premium.

ü Any change in statute provisions after the policy has commenced.

When the Compensation is to be paid :

ü Compensation shall be paid as soon as it falls due.

ü In cases where the employer does not accept the liability for compensation to the extent claimed, he shall be bound to make provisional payment based on the extent of liability which he accepts, and, such payment shall be deposited with the Commissioner or made to the workman, as the case may be, without prejudice to the right of the workman to make any further claim.

Penalty Applicable for Non Payment of Claim :

ü If the employer defaults in paying the compensation due under this Act within one month from the date it fell due and has a material justification for the same than in addition to the amount of the arrears, he will have to pay a simple interest thereon at the rate of twelve per cent per annum or at a higher rate but not exceeding the maximum of the lending rates of any scheduled bank.

ü If the employer defaults in paying the compensation due under this Act within one month from the date it fell due and does not have a material justification for the delay than he can be directed to pay, in addition to the amount of the arrears and interest a further penalty of a lumpsum amount not exceeding fifty per cent of the total Arrears payable.

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