What is workmen compensation?

For any organization, employees are the most valuable tangible assets. The human asset needs the most in the evolution of business in this competitive and dynamic business world.  It’s important to safeguard the company’s human assets from workplace hazards. There are some job profiles that would involve a higher risk of injury and even death. Workmen’s compensation is the most effective solution for this. As per Workmen Compensation Act, 1923 it’s mandatory for companies to seek workmen compensation insurance cover for employees working in hazardous situations. 

Key Takeaways

• The Asset Protection Strategy: Beyond legal compliance, the policy treats employees as “valuable tangible assets,” ensuring their welfare to maintain business continuity in high-risk sectors.

• The “Higher Of” Principle: Statutory payouts ensure a “floor” for compensation. For instance, in a death claim, the insurer pays whichever is higher: the fixed ₹1,20,000 or the formula based on the age-related “relevant factor.”

• Inclusion of Non-Workmen: Even if an employee does not fit the strict legal definition of a “workman” under the 1923 Act, they can still be covered under Table B to protect the employer from common law suits.

• Excluded Misconduct: The “No-Fault” protection ends where intoxication (alcohol/drugs) or willful non-compliance with safety laws begins. Self-inflicted injuries are strictly excluded.

• Contractual Nuances: Standard policies often exclude liabilities for contractors and their employees unless a specific “Contractor Liability” rider is added to the plan.

• Bilinear Benefits: The policy provides a dual advantage: it shields the employer from expensive lawsuits while providing the employee with rehabilitation expenses and income loss coverage.

Workmen Compensation Insurance – an Overview

A workmen’s compensation policy is an insurance program that helps the company to protect its employees when he/she suffers an injury or die during the course of employment. Hence, the compensation under the workmen’s compensation policy is payable as per the norms of the Workmen’s Compensation Act of India, monitored by the Ministry of Labour. The workmen’s compensation policy covers the statutory liability of the company or firm or any employer for death or physical injuries caused to employees. due to workplace accidents while performing job duties. 

Workmen’s compensation policy provides coverage mainly in two forms mentioned below.

• Table A – table A policies offer coverage for the company’s statutory liabilities to employees as per the terms of:

1. The Workmen Compensation Act, 1923. And any subsequent amendments to the said Act. Before the policy insurance.
2. The Fatal Accidents Act, 1855. And any subsequent amendments to the said Act. Before the policy issuance.
3. The Common Law

• Table B – table B policies offer coverage for the company’s statutory liabilities to employees as per the terms of:

1. The Fatal Accidents Act, 1855. And any subsequent amendments to the said Act.
2. The Common Law

Coverage offered under Workmen compensation policy :

• Death: Employer’s statutory liabilities to employees when the employee dies in a workplace accident or illness. Therefore, Compensation is payable as mentioned in the Workmen’s Compensation Act, 1923. Compensation payments will be higher than INR. 1, 20,000, or 50% of monthly wages X relevant factor (based on age) stated in Schedule IV of the Workmen Compensation Act, 1923.
• Permanent total disablement: The policy covers the employer’s statutory liabilities to employees when the injury is caused due to a workplace accident or illness. As a result, in permanent total disablement. Compensation payments will be higher than INR. 1, 40,000, or 60% of monthly wages X relevant factor (based on age) stated in Schedule IV of the Workmen’s Compensation Act, 1923.
• Permanent partial disablement: The policy covers the employer’s statutory liabilities to employees when the injury is caused due to a workplace accident or illness. As a result, in permanent partial disablement, the calculation of compensation would be according to the permanent total disablement. As well, depending on the percentage of disability.
• Temporary disablement: policy covers the employer’s statutory liabilities to employees when workplace injuries or illnesses result in temporary disablement. Therefore, 25% of the monthly wages is payable as compensation on a half-monthly basis.
• Medical and legal expenses: Apart from these, there are many add-on covers or optional riders offered under the workmen compensation policy.  Some of the riders offered are as follows:
• Cover for contractor liability
• Occupational illness, etc

Exclusions in workmen’s compensation policy :

Following are some of the exclusions in the workmen’s compensation policy

• Workplace accidents cause injuries. As a result, invasion or mutiny or some hostility and all sorts of revolution, rebellion, or military power are excluded from the workmen’s compensation policy.
• It excludes all liabilities of the insured’s contractors and their employees.
• It excludes all liabilities which have been included in a particular contract. In fact, it does not declare at the time of the policy which under normal circumstances would not have been a liability
• Any injury or accident occurs at the workplace. Especially, negligence under intoxication and alcohol or even drug usage.
• All self-inflicted injuries are caused by non-compliance or by disobeying certain laws and rules.

Who can buy a workmen’s compensation policy?

Any employer who employs ‘workmen’ as defined in the Workmen’s Compensation Act, 1923 can buy a workmen’s compensation policy, and employees who are not defined as per the term ‘workmen’ in the Workmen’s Compensation Act, 1923 can also be covered under Table B workmen compensation policy.

Some of the examples of businesses/employers who can seek workmen compensation insurance cover are as below –

• Nuclear firms or companies 
• Engineering firms and civil contractors
• Businesses that employ workers on a contract basis
• Builders and construction companies
• Farming companies
• Establishment of companies employing watchmen
• Indian companies or firms hiring workers abroad for menial jobs
• Shipowners and shipping companies, etc.

Summary Table: Workmen’s Compensation Policy Framework

Benefits of workmen’s compensation policy :

Following are some of the main advantages of the workmen’s compensation policy

• The policy provides legal liability cover to employers to safeguard them against lawsuits from employees. Therefore relating to death and injuries caused by workplace accidents.
• It provides protection to employees by way of covering job-related illnesses like asthma, bronchitis, etc.
• The policy provides comprehensive protection to employees. In addition, giving them coverage for income loss along with, rehabilitation expenses
•  Employees and employers do not have to pay extra costs with additional covers and extensions.

Workmen’s compensation policy offers bilinear benefits to an employer and the employee. Besides, for most businesses, a workmen’s compensation policy is a statutory requirement not just as a statutory need, every business needs a workmen’s compensation policy to protect its most valuable asset-human resources.

Frequently Asked Questions (FAQs)

1. What is the difference between Table A and Table B coverage?

A) Table A is the standard for statutory compliance; it covers your liabilities under the Workmen’s Compensation Act, 1923. Table B is designed for employees who are not technically “workmen” (like high-level management) but still need coverage against lawsuits filed under the Fatal Accidents Act or Common Law.

2. How is the “Relevant Factor” used to calculate compensation?

A) The Relevant Factor is a multiplier based on the employee’s age, found in Schedule IV of the Act. Because younger employees have more years of potential earnings ahead of them, their “factor” is higher, resulting in a larger compensation payout for death or permanent disability.

3. Does the policy cover accidents that happen during a “revolution” or “military rebellion”?

A) No. Most Workmen’s Compensation policies specifically exclude injuries or deaths resulting from war, invasion, mutiny, hostility, or military power. These are considered extraordinary risks outside the scope of standard industrial insurance.

4. Can an engineering firm cover their “contract labor” under this policy?

A) Yes, but it usually requires an additional rider. Standard policies cover direct employees; however, engineering and construction firms can (and should) opt for “Cover for Contractor Liability” to protect themselves when third-party workers are on their sites.

5. What happens if a worker develops “Occupational Asthma” after working for many years?

A) If the illness is directly linked to the work environment (like asthma from factory fumes), it is treated as a “workplace injury.” The policy provides coverage for such occupational illnesses, though some insurers offer this as an optional rider rather than a core benefit.

About The Author

Rahul Kumar 

MBA Finance

With a wealth of experience in the insurance industry, Rahul is a seasoned writer specializing in articles related to workmen compensation policies (WC policies) for SecureNow. With 12 years of experience in the field, he has acquired in-depth knowledge and expertise in workmen compensation insurance, understanding its complexities and nuances. Their insightful articles provide valuable insights into the importance of WC policies for businesses and employees alike, offering practical advice and guidance on navigating the intricacies of insurance coverage. Trust him to deliver informative and engaging content, backed by years of experience and a passion for educating readers about insurance-related topics.