Workmen Compensation


The Factories Act, 1948 and the Workmen’s Compensation Act also known as Employees’ Compensation act of 1923, are based on the idea of improving work conditions, to regulate the health and safety of young persons, women and children who work in the factories. Under these Acts, there has been an exhaustive coverage of situations and instances of provisions where health and safety measures are required. Whether it is in regard to hazardous substances, heavy machinery or equipment that may cause injuries or accidents, almost every situation has been accounted for in terms of keeping workers’ welfare and safety in mind. 


Implications of these acts on a business owner


  • under the employees’ compensation act, 1923


The Employee’s Compensation Act, 1923 ( EC act) provides financial protection to workmen and their dependents, by means of compensation, in case of any accidental injury arising out of or in course of employment and causing either death or disablement of the worker. This Act applies to factories, mines, docks, construction establishments, plantations, oilfields and other establishments like employment in clerical capacity in railway, employed as master or a seaman, involved in manufacturing or handling of explosives, among others listed in Schedules II and III of the said Act. The Act provides for payment of compensation by the employer to the employees covered under this Act for injury caused by accident. Generally, companies take insurance policies to cover their liability under the EC Act.



  • Duties conferred on an employer/ business owner



Under the Employees’ Compensation act, an employer should pay compensation if personal injury is caused to an employee out of the blue arising out of and within the course of his employment. 

(a) The leader of any institution/ owner of the business outlined below this Act, is needed to compensate an employee: 

  • if accident suffered arose out of and within the course of employment, ensuing into (i) death, (ii) permanent total disability, (iii) permanent partial disability, or (iv) temporary disability whether or not total or partial, or
  • if he contracts an industrial disease.
  • in case of omission on the part of the owner to maintain safe conditions of labour, machinery or plant connected to his trade or business, or the omission on the part of somebody within the service of the owner with the duty of overseeing aforementioned conditions.
  • if an employee suffered injury after following the orders of an authorised subordinate of the leader/owner, provided there was no negligence on the part of the subordinate. 

(b) Burden of Proof

There can be a situation where injury occurs as a result of intentional disobedience on the part of the Worker. For the same, punishing the owner is unreasonable. Therefore, in order to absolve himself of liability, the owner must prove such disobedience. In other words, the burden of proof lies on such owner.



  • Under the factories’ act 1948


The Factories Act lays down provisions for the health, safety, welfare and service conditions of workmen working in factories. It contains provisions for working hours of adults, employment of young persons, leaves, overtime, etc. It applies to all factories employing more than 10 people and working with the aid of power, or employing 20 people and working without the aid of power. It covers all workers employed in the factory premises or precincts directly or through an agency including a contractor, involved in any manufacture. Some provisions of the Act may vary according to the nature of work of the establishment.


  • duties conferred on an occupier of premises and certain authorised subordinates


Duties conferred under this act are two: one pertaining to disclosure of certain information and the other requires taking measures for safety and health of workers.


  • Disclosure of Information


– Occupier must send a written notice to the Chief Inspector in respect of all establishments which come within the scope of the Act for the first time, before a factory engaged in a manufacturing process. 

-To ensure the health, safety and welfare of all workers while they are at work in the factory.

(b) Measures to be taken for safety and health

It is the duty of the owner to ensure that safety and health of the workers are taken care of, and for that, they must take certain steps like maintenance of such plant and systems of work that are safe and without risk to health of the workers, ensuring safety with the use, handling, storage and transport of articles and substances, providing such information, instruction, training and supervision as are necessary to ensure the health and safety of all workers at work, appointing a Safety officer in a factory, drawing up an on-site emergency plan and detailed disaster control measures for his factory (with the approval of the Chief Inspector), maintaining accurate and up-to-date health records or, as the case may be, medical records, of the workers in the factory, providing for medical examination of every worker and conducting health surveys, among others. 

Determination of Compensation

The compensation or benefit given to the worker depends on the monthly wage of the worker, the nature of the injury and a relevant factor (defined in Schedule IV of the Workmen’s Compensation Act).

(i)In case of death, the compensation payable equals to 50% of the monthly wages of the deceased employee multiplied by the relevant factor, or a sum of Rs. 120,000, whichever is higher. 

(ii) In case of Permanent Total Disablement, the compensation payable equals to 60% of the monthly wages of the deceased employee multiplied by the relevant factor, or a sum of Rs. 120,000, whichever is higher. 

(iii) In case of Permanent Partial Disablement, the compensation is calculated proportionally on the basis of the loss of earning capacity due to the injury. Except for those defined in the Act, other specific cases depend on the assessment of qualified medical practitioners.  

(iv) In case of temporary disablement, the employer is liable to pay amount equivalent to 25% of the monthly wages on the 16th day from the day of the disablement. 

Moreover, if the employer fails to pay compensation in respective deadline, there’s a delayed payment penalty of 6% per annum for a sum not more than 50 % of the total amount. Since the nature of this liability is unpredictable, buying workmen’s compensation insurance is recommended.