Workers’ compensation insurance is mandatory insurance that businesses in India must purchase to cover the legal and medical expenses for employee accidents, injuries, occupational ailments, and death.
What exactly does the workers’ compensation policy do?
In India, workers’ compensation is mandatory insurance that businesses of all sizes must purchase to provide wage and medical benefits for employees. These wage and medical benefits are only given if the employee suffers an injury or falls sick during the course of performing their job. It also pays a death benefit to an employee’s family if someone kills the employee on the job.
Workers’ compensation was made into law with the Workmen’s Compensation Act, 1923, which was later renamed the Employee’s Compensation Act. This Act was one of the country’s first legislative policies on labour welfare and social security.
Workers’ compensation insurance is mandatory in India regardless of the size of the company. So, if the business has only one employee, it is still necessary to purchase this insurance. Businesses that employ a staff of fewer than 20 people fall under the purview of the Employee’s Compensation Act. Businesses that employ 20 people or more staff would fall under the purview of the Employees’ State Insurance Act, 1948.
Both these Acts give recognition to the fact that employees who are a victim of workplace-related injuries, accidents, occupational ailments, and death, have a right to receive compensation for the same.
What does workers’ compensation insurance cover?
Workers’ compensation insurance covers the following:
Temporary disability –
If the employee sustains an injury that gives him a disability such that he is unable to perform their job for a limited period: compensation is payable to the employee. Here the employee receives 25% of their total salary every two weeks, therefore, making it 50% of their total salary. The employee also has to undergo a physical assessment twice a month during the month right after the injury and once a month if they continue to claim compensation.
Permanent partial disability –
Compensation is payable if the employee sustains an injury at work that leaves them disabled and incapable of performing their job-related tasks; to the same capacity (as before the injury) for the rest of their career. Here the compensation depends on the employee’s loss of earning capacity and the nature of the injury itself. There is a schedule of possible permanent disability injuries in the Act and the related loss of earning capacity. If the employee’s injury is not given in the schedule; a medical doctor has to be provided by the employer, to assess the injury and provide an estimate of the loss of earning capacity.
Permanent total disability –
Compensation is paid if the employee sustains a workplace-related injury at work leaving them permanently and totally disabled rendering the employee incapable of performing any tasks related to their job. The employee here would receive a compensation amount of Rs 1,40,000 or 60% of their monthly salary multiplied by a factor based on their future potential earnings. Depending on the age of the employee, the compensation amount can be significantly larger.
Where the employee dies due to workplace-related injury or disease, their immediate dependents receive compensation for this unfortunate event. The compensation amount has to be either Rs 1,20,000 or the employee’s half-monthly salary multiplied by a factor based on their future potential earnings.
Occupational diseases –
These are diseases that an employee sustains because of the nature of their job during their employment. Schedule III of the Employee’s Compensation Act covers these diseases.
Legal expenses –
The employee may receive coverage for legal liabilities arising from accidents that occur at the workplace during the course of employment.
Insurance extensions that businesses may take in addition to a workers’ compensation policy
Businesses can take extensions on the workers’ compensation policy by paying an additional premium. These extensions may cover contractual employees, medical expenses for workplace-related injuries and more occupational ailments as mentioned under Part C of Schedule III of the Employee’s Compensation Act.
Workers’ compensation and prescriptions cover
Workers’ compensation covers the medical expenses of injuries that have taken place while on the job or occupational ailments that arise due to the nature of the job. So, these often include the cost of prescription medication, medical supplies available at pharmacies, and over-the-counter medicines. The prescription should be provided by a doctor with the approval of the insurance provider.
Supposing the employee has injured his leg and requires medical treatment and prescription medicines to heal and recover. The prescription medicines that are meant to help the employee heal the injured leg; are under the coverage of workers’ compensation insurance.
Additional Insurance coverage in Workmen Compensation
Some organisations may take additional insurance to cover more medical expenses such as hospitalisation costs and surgical costs. They may also take additional insurance to cover transportation/ambulance expenses to cover transportation expenses incurred by the employee.
The doctor overseeing the employee’s medical case should provide the employee with the medical prescriptions for the same. The doctor may also choose to send the medical prescriptions directly to the pharmacy. The insurance provider may have a stipulation that the medicines should only be bought from a certain pharmacy chain, or the employee may have the freedom to choose any pharmacy.
The insurance provider may sometimes question the employee regarding certain medical expenses claimed, such as strong painkillers or non-prescription drugs or a brand-name medication versus a generic version of the same. The employee has to provide a note from their doctor validating the need for those expenses.
If the insurance provider or employer disputes the workers’ compensation claim; the employee may have to pay out-of-pocket for the medicines. Later, when the insurance provider approves the claim; the employee may be able to put in a reimbursement claim for those medicines.
Common exclusions under workers’ compensation insurance cover
It is important for business organisations to inform their employees about the expenses covered by workers’ compensation insurance. The employees need to know the list of exclusions of the Workmen’s Compensation Insurance Plan. The list of exclusions may vary by the insurance provider.
The following is a list of common exclusions in which case the medical expenses and compensation are not covered by the insurance:
- Injuries and diseases that are the result of war, invasion, and other such man-made or natural disasters and perils
- An injury that is not fatal and does not result in disability for more than three days
- If the employee
- Has ignored safety measures while on the job
- Was in a state of intoxication with food or drink when the injury took place
- Was a part of a criminal activity
- If the injury was sustained by a contractor’s employees unless the employer has taken additional insurance for the coverage of contractors.
Workers’ compensation insurance is compulsory insurance that every business should purchase. Moreover, it makes economic sense as the organisation ends up paying far more if they don’t have workers’ compensation insurance; versus if they purchased a policy. Organisations must make an effort to limit the risk of accident and injury; as well as, choose the appropriate workers’ compensation insurance cover for the benefit of both the employees and the business.