Introduction

The Workmen Compensation Act 1923 was enacted as social security legislation to reimburse
workers or employees in the event of an accident due to and during the course of their
employment. It came into force in 1924 and applies to the whole of India. This Act aims at
prioritizing workers’ welfare and preserving their dignity and well-being. It was implemented
keeping in mind the hazardous nature of some labour occupations such as mining, construction,
transportation, Plantations etc. It thus intends to insure workers against any injury or disease
occurring due to their work and pressurized employers to ensure a safe working environment and
a mentally and physically healthy workforce.

Who are Workmen?

The exhaustive list of persons classified as “Workers” is contained in Schedule II of the Act.
According to Section 2 (1)(n), Workmen (or Workers or Employees) broadly constitute:

1. Railway Servants

2. Master, Seaman or other members of the crew of a ship

3. A captain or other member of the crew of an aircraft

4. A person hired as driver, mechanic, cleaner or in any other capacity in connection with a
motor vehicle

5. A person recruited for work abroad by a company, and who is employed outside India

Note: Workers do not include members of the Armed Forces of India.

Who is/are (an) Employer(s)?

According to Section 2 (1)(e) of the Workmen Compensation Act 1923, an employer has been
defined as comprising a person or group of persons and any managing agent acting as a
representative on behalf of an employer (in a trade or business) and, any person who hires the
services of employees by entering into a contractual arrangement with the employer.

In the State of Kerala v. KhadeejaBeevi [1], it was held that even a Government servant,
working as a “Mahout” in the forest department shall be treated as an employee under the Act
even if he is covered by family benefits schemes under the Government.

In New India Assurance Co. Ltd. vs Mohan Kumar Sahoo[2], it was stated that a person
engaged even for one day to drive a vehicle belonging to the owner is also an employee under
this act. This is because the owner gives directions and exercises definite control over the person.
In Radhamony v. Secretary, Department of Home Affairs[3] also, it was held that an individual
working as a driver will fall under the label of an employee irrespective of whether he is a non-
governmental or government employee.

Who are dependants?

According to Section 2 (1)(d) of the Workmen Compensation Act 1923, dependants, who are
entitled to monetary compensation include:

1. Widow of the departed.

2. Widower

3. A son who is below 18 years of age

4. An unmarried daughter

5. Widowed mother

6. Parents of the departed

7. Paternal Grandparents (If parents of the deceased are not alive)

8. A legitimately adopted son or an unmarried daughter

9. A minor sibling or a widowed sister

10. Widowed daughter-in-law

11. A minor child of a pre-deceased son or daughter (if the minor has no parent alive).

When is an employer liable to compensate? (Section 3)

Generally, an employer is held liable in the following circumstances: –

Accident or injury is caused in the course of the worker’s employment. In Natwarsinh A.

Chauhan vs Niranjanbhai K. Shah[4], the court explained the expression- “arising out of and in
the course of employment”, adding that there must be a derivative or proximate relation between
the employer and the accident.

Occupational disorders and diseases, defined by the World Health Organization as “any disease
contracted primarily as a result of an exposure to risk factors arising from work activity”, their
main cause being the work environment. Examples- Occupational Asthma, COPD, and
Dermatitis. Schedule III of the Act lists all possible and proximate occupational diseases that
may occur in the particular nature of employment. An exhaustive list of occupation disorders is
given in Schedule III of the Act.

Further, we must consider the situations when the employer isn’t liable:

1. Injury not resulting in partial or total disablement (for more than 3 days).

2. Injury (not resulting in death) caused:

a. During the influence of drinks or drugs, or

b. By willful disobedience of express orders and in defiance of safety measures, or
c. By removal or disregard of safety devices or implements.

In DevidayalRalyaram v. Secretary of State[5], the doctrine of Added Peril was elaborated,

according to which if a workman while performing his duty does something which is not
required and involves extra danger, he shall not be liable to be compensated in the event of an
injury.

3. When a suit for damages has already been instituted before a commissioner in a Civil Court
and has been compensated by the employer.

Calculation of Compensation (section 4)

Section 4 of the Employee’s Compensation Act,1923 states the amount of compensation to get
paid by the employer. Such amount shall be as follows:

 In case of death of an employee: An amount equal to fifty per cent of the employee’s
monthly wage that gets multiplied with relevant factors; or an amount of one lakh
twenty thousand rupees, whichever is more.
 In case of permanent or total disablement: An amount that is equal to sixty per cent of
monthly wages paid to the employee who is injured, the amount to be multiplied with
relevant factors: or, amount of one lakh forty thousand rupees, whichever amount is
more.
 In case of permanent partial disablement: Such Injury are dealt with under Part II of
Schedule I of the act. In such a case, compensation percentage payable gets specified as
the percentage of the loss of earning capacity caused by the injury.

If in any case, Schedule I of the Act does not mention the injury, the compensation gets
calculated as the total disability in proportion to the loss of earning capacity.

 In case of temporary disablement: An amount equal to the half-monthly payment equal

to twenty-five per cent of the employee’s monthly wages.
What is the method of calculating monthly wages? (Section
5)
According to clause (a), the monthly wages shall be one-twelfth of the total wages payable for
service not less than 12 months in case of a subsequent accident.

According to clause (b), if the worker had served less than a month, he would be paid the
average monthly amount paid to a worker involved in the same work before the event of an
accident.

According to clause (c), if it is not possible to calculate wages under clause (b), the monthly
wages shall be 30 times the total wages earned in respect of the last continuous period of service
immediately preceding the accident from the employer who is liable to pay compensation,
divided by the number of days comprising such period.

When should the notice and claim be made? (Section 10)

In case of death, the notice must be given as soon as practicable or within 2 years. However, a
report of the circumstances of serious injury leading to death must be given within 7 days to the
Commissioner.

In the case of disease or disablement, it shall be deemed to be assumed from the day he was
continuously absent from work.

The employer must communicate the circumstances of the death within 30 days to the
commissioner. If he opines that it’s his liability, he may compensate within 30 days. If he opines
that it isn’t his liability, he can justify it through defensive claims. The commissioner will decide
whether he is liable to compensate or not and can ask the dependants to pursue their claim.

If the notice is irregular, it still can be entertained if:

1. The death was caused within the premises belonging to the employer

2. Other employers were aware of the time of accident or

The following needs to be mentioned in the notice:

a. Name and address of the person

b. Cause of injury of the person

c. Employer(s) responsible for managing the employee of a particular branch

The notice must be sent by a registered post to the residence or any office or place of business of
the person on whom it is to be served, or it can be entered into a notice book. A notice book is
mandatory for the employer to maintain so that the injured workers could themselves or through
others record their injuries.

Regarding Free Medical Examination (Section 11)

An employee who informs about his injury shall be entitled to free medical examination by a
qualified practitioner within 3 days of such information. Such a medical professional is tasked
with assessing the loss of earning capacity, which helps in estimating compensation.

If he does not submit himself or obstructs his examination, he shall not be liable to be
compensated.

If he leaves his place of work, he shall not be given compensation till he returns and submits.

Regarding Contracting (Section 12)

If there is an existing contract between the principal and Contractor in the course of a business or
trade, the principal would be liable to compensate the employee, which is calculated with
reference to the employee’s wages under the employer.

The principal gets indemnified by the contractor from whom the workman would have claimed
compensation. Other questions arising out of default of agreement, as to rights and amount of
such indemnity are dealt with by the Commissioner.

The principle shall not be liable to compensate if the accident occurs somewhere else (that is
either on the premises on which the principal has undertaken or usually undertakes, to execute
the work or which are otherwise under his supervision).

Regarding Insolvency of Employer (Section 14)

1. If there is a contract between the insurer and the employer or any scheme or arrangement with
creditors in respect of a liability to an employee, then in case of insolvency, he can recover such
amount to compensate the employee.

2. If the contract is void or voidable due to non-fulfillment of some conditions, the employer may
take to prove its validity during the proceedings for ascertaining compensation or during
liquidation.

3. In case the compensation is a half-monthly payment, the amount would be paid in a lump sum.

4. If the liability of the employer is greater vis-à-vis the insurer, the employee can prove his
claim for the balance amount during the proceedings or during liquidation.
5. Insolvency of the company will not be applied if the company voluntarily relocates or
reconstructs or merges with another company.

Special Provisions relating to:

1. Masters of ship and seamen (Section 15)

The Act is applicable with certain alterations, which are as follows:

1. The seamen need not give notice of any accident occurring onboard the ship.

2. The claim for compensation must be made within 1 year (after knowledge of the incident or 18
months if the ship goes missing.

3. No compensation shall be payable for such injuries for which provision of gratuity, allowance
or pension is made under the War Pensions and Detention Allowances Schemes (of 1939, 1941,
and 1942) or the Pensions (Navy, Army, Air Force and Mercantile Marine) Act, 1939by the
Union Government.

2. Captains and Other Members of the crew of aircraft (Section 15A)

The Act is applicable with certain alterations, which are as follows:

1. The crew need not give notice of any accident occurring onboard the aircraft.

2. The claim for compensation must be made within 1 year (after knowledge of the incident or 18
months if the aircraft goes missing.

3. Workmen abroad of companies and motor vehicles (Section 15 B)

Workmen who are recruited by companies registered in India and working abroad and persons
(drivers, mechanics, cleaners, etc.) operating motor vehicles registered under Motor Vehicles
Act, 1988 abroad shall fall under these provisions:

The notice and claim will be attended by the local agent (of the vehicle or company) in the
country where the accident occurred. Such a claim must be made within 1 year, subject to the
Commissioner’s consideration.

Who are Commissioners?

Commissioners are public servants appointed under Section 20 of the Workmen Compensation
Act 1923. Under Section 23, he/she is deemed to be a ‘Civil Court’ under the Code of Civil
Procedure, having powers to admit evidence and summon witnesses and produce documents.
According to Section 19, all queries as to the amount and duration of compensation, liability of
the employer, nature and extent of disability are addressed exclusively by the commissioner.

How is a Commissioner appointed?

The State Government issues notification for appointment in the official gazette. To be eligible, a
person must be/ have been:

1. A member of a State Judicial Service for a minimum of 5 years, or

2. An Advocate or a Pleader for a minimum of 5 years, or

3. A Gazetted Officer for a minimum of 5 years having experience in Personnel Management,

Human Resource Development and Industrial relations.

A commissioner can also appoint one or more persons proficient in a particular field of inquiry to
assist him/her in a matter.

Where can proceedings be undertaken by a Commissioner?

(Section 21)
The Venue for proceeding may be:

1. The area where the accident took place

2. Wherever the dependants reside

3. At the registered office of the employer

However, if a Commissioner or State Government deems it just, it can transfer a matter

completely to any other commissioner, who can conveniently deal with it.

Rules (Section 32)

Section 32 of the Workmen Compensation Act 1923, vests powers in State Government to make
rules regarding the following matters: –

1. Prescription of intervals where an application may be made, which is subject to conditions

when not attached with a medical certificate.

2. Prescription of intervals where an employee is required to submit himself/ herself for medical
examination.
3. Prescription of the procedure to be followed by the Commissioner(s) and the Parties while
disposing of the matter.

4. Regulation of transfer of cases from one commissioner to another.

5. Prescription of the manner of investment of money for the benefit of the dependants.

6. Representations of dependants (who are minors or unable to present them) in proceedings.

7. Prescription of the manner of formulation and registration of agreements.

8. Regulation of costs of proceedings

9. Prescription of the number of fees to be paid to the Commissioner relating to proceedings.

10. Maintenance of records and registers of proceedings (by the Commissioners)

11. Prescription of persons responsible for maintaining notice-books.

12. Prescription of the manner of diagnosis and certification, and measurement of incapacity
created by occupational diseases.

Rules made under the Act by State Governments are laid before the State Legislatures and on
similar lines, those made by Central Government are laid before the Parliament for modifications
or altogether annulment after considerations and discussions.

Workers Insurance Policy

Workers insurance policy ensures protection of labour from exploitation and any injury caused at
the workplace. This labour insurance has its importance in the lives of the labour working in
factories, industries.

Importance of Worker’s Compensation Insurance for Employees

The Worker’s compensation insurance for employees protects the employee and their dependents
in case of any mishappening at their workplace leading to death, permanent injury or any other
temporary injury which occurred while performing his functions while at the workplace. Such
insurance bears the cost of treatment of permanent disablement or death that occurs during
employment.

The employee gets the benefit of the compensation, in most cases, other than when it was the
fault of the employee himself.

Purpose of Workmen’s Compensation Insurance Policy

The Workmen Compensation Policy ensures that the employee gets good quality medical care,
and also it provides the part of income that the employee loses. At the same time, he is not able
to work. In case if the employee dies suddenly, then the benefit of the policy is given to the
employee’s family.

What does a Workers Insurance Policy Include?

WC Policy cover situations that lead to a medical emergency, such as:

 Bodily Injury that occurred during duty

 Death benefits to the family of the employee
 Any disability due to injury
 Legal expenses, if it gets incurred with the consent of the company.

What does the Workmen Compensation Policy Does Not Include?

WC policy does not include some situations:

 An injury that does not cause partial disablement of more than three days.
 An injury caused under the influence of drugs or alcohol
 Psychiatric disease
 Non-fatal diseases
 Employees not considered as workmen under the Employees Compensation Act

The Rules for Workmen Compensation Changed in 2020

The central government has changed the rules for the calculation of compensation of employees
under the Workmen’s Compensation Act, 1923.

The wages, which was Rs. 8000/- earlier, were increased to Rs. 15000/-.

Conclusion
Workers are crucial for the functioning of not only an industry or a business or trade, but they are
specialized human resources or assets that keep the nation’s economy in motion. Owing to these
contributions, they are respected and protected by law. One such legislation discussed in the
article is the Workmen Compensation Act, 1923, which aims at doing good the loss or injury
resulting from any accident or negligence of the employer. However, it must be noted that no
amount of compensation can be weighed to the worth. It can only give some relief to their
dependants or bridge the loss in their earning capacity due to disability.

Above all, it is necessary to ensure that workers are paid sufficient wages to lead a fair life with
dignity. The working conditions must also be made healthier and safer. They must not be placed
in extremely risky situations to realize tasks that undervalue their lives. Any injury that results
due to the negligence of the employer or by accident must be followed by free medical treatment
along with compensation in accordance with the Workmen Compensation Act 1923. Moreover,
the compensation ascertained must be adequate with due weightage given to changing times.

Workmen Compensation Policy FAQs

1. Is workmen’s compensation policy strictly followed in India?

In India, any organisation with more than 20 employees must mandatorily have Workmen’s
Compensation Insurance. This mandate by the Employees’ State Insurance Act, 1948 ensures
that employees and workers receive insurance benefits from their employers.

Even those companies that employ less than 20 employees must sign up for the insurance policy
in order to comply with the rules and regulations mentioned in the Fatal Accidents Act, 1855 and
Workmen’s Compensation Insurance Act, 1923.

2. What is the scope of coverage offered by Workmen’s Compensation?

A Workmen Compensation insurance policy covers the following:

 Temporary disability or fatality

 Injuries caused or worsened as a result of work conditions
 Any bodily harm caused by an accident while being employed
 Permanent disability
 Legal expenses and costs incurred

3. Whose responsibility is it to dispense the benefits of the Workmen’s Compensation Act?

Anything underwritten in the insurance policy must be provided by the employer. Typically,
employers must provide all the benefits mentioned in the policy within 30 days of claim.

In many cases, it’s the employer who provides individual insurance policies to employees and
settles claims.

4. How is The Employee Compensation Act different from The Workmen’s Compensation
Act?

They’re the same. When the government brought it into effect, it was called the Workmen’s
Compensation Act. Later on, it changed to Employee Compensation Act.

5. Is purchasing a worker compensation insurance policy online advisable?

There’s nothing wrong with purchasing a worker’s compensation insurance online. In fact, it’d
be a great place to start as most platforms allow you to compare all aspects of insurance policies
side by side. Just be sure to get on a genuine insurance comparison platform.

Furthermore, once you narrow down the list to a handful of insurance providers, read all the
policy documents carefully before settling on one.