Workplace injuries and illness can have severe consequences for employees, both physically and financially. Recognizing the importance of protecting the rights and well-being of workers, India has established a comprehensive framework to ensure adequate compensation for those affected by such incidents.
Laws Governing Employee Compensation in India
India’s compensation system for workplace injuries and illnesses is primarily governed by two key legislations – the Employee’s Compensation Act and the Employee’s State Insurance Act, 1923.
- The Employee Compensation Act (ECA), 1923, formerly known as the Workmen Compensation Act, focuses on providing apt compensation to employees who encounter any work-related injury or accidents. It applies to all employees, irrespective of their salary or wages, in organizations that fall under the scope of this Act.
Under the provisions of this Act, the employer is liable to provide compensation to an employee who suffers an injury, disability, or death due to an accident arising out of and during the course of employment.
- The 2017 amendment deemed employers to be responsible for informing employees about their compensation rights under the provisions of this Act. This must be done either in writing or electronically and in a language understood by the employee.
- Failing to do so may result in a fine of INR 50,000 on the employer. This fine can extend up to INR 1 lakhs.
- The Employees State Insurance (ESI) Act, 1948 aims to provide all comprehensive social security benefits to employees in India. The Act covers areas such as medical benefits for employees and their dependents, maternity benefits, disablement benefits in case of an employee’s death due to employment-related reasons, etc.
Types of Compensation
Injured employees and their dependents are eligible for different forms of compensation under the provisions of the
Employee Compensation Act. Some of these types of compensation are mentioned below.
Disability Compensation
Employees who suffer partial or total disability due to a workplace injury are eligible for compensation. The amount is determined based on the extent of disability and the employee’s monthly earnings.
Medical Expenses
The Act covers the cost of medical treatment and rehabilitation for workplace – related injuries or illness. This includes expenses for hospitalization, medication, surgeries, etc.
Dependent’s Benefits
In the case of an employee’s death from or in the course of employment, the Act provides for the dependents to be compensated, where the amount consists of a lump sum payment or a monthly pension.
Funeral Expenses
The Act also covers funeral expenses in case of an employee’s death due to a workplace injury. This compensation helps reduce the financial burden on the deceased employee’s family.
Applicability of Workmen Compensation Act, 1923
As per
Section 1 of the Act, it is applicable to the whole territory of India. Several aspects are reviewed when claiming compensation under the Act’s definition of an ‘employee’.
- Employees in the docks, mines, factories, and other businesses fall under the scope of Schedule II of the Act.
- As stated in Schedule II of the Act, it applies to people who are employed to work overseas.
- It applies to workers engaged as pilots or other members of the flight crew, as well as mechanics, helpers or other individuals associated with motor vehicles.
- It does not apply to Union and Workmen's Armed Forces personnel, who fall under the ambit of the Employee State Insurance Act.
Liability of the Employer to Compensate Injured Employees
Section 3 of the Act includes provisions that address an ‘Employer's Liability for Compensation’. This section outlines the circumstances under which an employer must compensate its employees. The following conditions must be fulfilled for the employer to be liable for compensation:
- If an employee encounters any occupational disease listed in Part A, Part B, or Part C of Schedule III of the Employee's Compensation Act, it must be caused by an accident that occurred while the employee was at work.
- If an employee sustains any personal injury due to an accident that occurred during employment, the employer shall be liable to pay an apt amount of compensation.
Calculation of Claim of Compensation
Section 4 of the Act directs employers to compensate an employee who has suffered an accident while performing their duties during work hours, which lead to:
- Permanent total disability
- Permanent partial disability
- Temporary disability
- Death
Permanent Total Disability
It applies when an employee's work-related injury prevents them from carrying out any of their prior responsibilities and results in them never being able to work again. It must be determined whether this injury will have a long-term impact on the employee's capacity to execute their tasks.
- In this situation, the employee is entitled to a minimum payment of an amount equal to 60% of their monthly salary multiplied by the relevant factor based on the employee’s age or an amount of INR 1,40,000, whichever is more.
Permanent Partial Disability
Employees are eligible to permanent partial disablement benefits when an injury prevents them from performing their job in the same capacity for the remaining working years.
- The Act provides a list of possible permanent disability injuries and identifies the loss of earning capacity.
- For partial permanent disability, the compensation is determined based upon the type of injury and the employee's loss of earning capacity.
- If the worker's injury is not covered by the provided schedule, the compensation for the injured worker will be calculated using a formula that takes into account the employee's possible future earnings and divides the percentage of lost earning capacity by the monthly income.
Temporary Disability
In cases of temporary incapacity, an injured worker will be compensated 25% of their income every two weeks, making their monthly compensation 50% of all earned wages.
- A medical doctor must assess the injured worker and determine whether leave is necessary.
- The month after the injury, a worker on temporary disability leave is required to get a medical examination once in a subsequent month, if they are still claiming disability.
Death
An employee’s immediate dependents are entitled to compensation in the tragic event of death of the employee. The death benefit is equal to 50% of the employee’s monthly salary multiplied by the relevant factor or INR 120,000, whichever is more.
Liability of Employer to Compensate in Case of Occupational Illness
Some occupational illnesses that are specific to the diseases during the course of employment are described in three parts (A, B, and C) of Schedule III of the Act.
The employer must provide remuneration to the employee in cases where Schedule III applies.When a legal issue involving the employer's liability as against the employee arises, it is implied by the mention of these occupational diseases in the schedule that they would be treated as accidental injuries.
| Note: ‘Occupational illnesses and diseases’ refers to any illness or harm that is sustained as a result of the work the individual has been employed for. For example, loss of vision in case of welders, breathing issues for individuals working around chemicals and saw dust, etc. |
In case an occupational sickness is contracted while performing the duties described in Part A, the employee is entitled to compensation from the employer.
If an employee who has been working in the Part B-specified position for at least six months develops an occupational sickness as a result of that job, they may be entitled to compensation.
The employee will be entitled to compensation from the employer if they acquire an occupational sickness while working in the Part C-specified capacity for more than one employer for a period that may be determined by the Central Government.
Procedure to Claim Compensation
In case an employee encounters an accident or illness at the workplace, they must adhere to the following process to claim compensation:
- An application must be made to the designated officer, under whose jurisdiction it has occurred, within 90 days of the accident.
- The documents that must be included with the application are victim’s proof of age, death certificate or certificate of permanent disability issued by a government-recognized medical board, certified copy of the accident’s FIR, and proof of the applicant’s relationship with the victim.
- In order to resolve the claim, the Designated Officer may request any additional documentation from the claimant(s).
- The applicant must include the names, residences and relationships they have to the victim if there are numerous dependents. The Designated Officer may, at his or her discretion, send notices to each before releasing the compensation.
When is an Employer not Liable to Pay Compensation?
Under the provisions of Section 3, when the following conditions are met, an employer need not pay compensation:
- The injury does not leave the employee totally or partially disabled for longer than three days.
- The injury does not cause complete or partial disability or if the employee’s death occurred because (1) they did not adhere to the rule or order that the employer clearly formulated for the employee's safety; or (2) they were under the influence of drugs or alcohol at the time of the accident; or (3) they voluntarily removed the safety guard.
Conclusion
The Workmen's Compensation Act guarantees that an employee's rights are upheld even if they become incapacitated or are hurt in an accident at work. As a result, the employer is responsible for (1) making sure that the employee is safe and secure; and is also responsible for (2) compensating any of its employees who were hurt or lost their lives while on the job.
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