Workmen Compensation

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Implication of Workmen’s Compensation Act, 1923 and Factories Act, 1948on a Business Owner.


The Factories Act, 1948 and the Workmen’s Compensation Act are based on the idea of improving working conditions. These Acts intends to regulate the health and safety of young persons, women and children employed in the factories. They offer exhaustive coverage of situations where health and safety measures are concerned. The Acts account for almost every situation, whether with regard to hazardous substances, heavy machinery or equipment that may cause injuries or accidents, to ensure workers’ welfare and safety.

Duties conferred on an employer/ business owner under the employees’ compensation act, 1923.

The Workmen’s Compensation Act also known as Employee’s Compensation Act, 1923 (EC act) holds an employer liable to pay compensation if personal injury is caused to his/her workers within the course of his employment. Under the Act, the owner of a business must compensate an employee or their families in case of the following instances:

  • accidents arising within the course of employment, ensuing into death, or disability whether permanent, total, temporary or partial, if he gets an industrial disease.
  • in case of failure to maintain safe conditions of labour, machinery or plant connected to his trade or business
  • omission on the part of the management to properly maintain the aforementioned conditions.
  • injuries suffered by workers while following the orders of an authorized supervisor.

Act applies to workers engaged in

  • factories
  • mines
  • docks,
  • construction establishments
  • plantations and, oilfields
  • clerical capacity in railway
  • seas
  • manufacturing or handling of explosives, among others listed in Schedules II and III of the said Act.

The policy also covers legal costs and the compensation awarded to employees by the Worker courts. As there is no upper limit on the liability, a workman compensation (WC)policy comes as an important plan. It helps to ease the financial burden on the employer. In other words, the Worker Insurance helps employers cover their liability under the EC Act.

In cases where the employer wants to reject a workman claim, the burden of proof lies with the employer. For example, in case of intentional disobedience by the worker,punishing the owner for the same is unreasonable. In such cases, the owner must prove such disobedience to absolve himself of liability. Thus, the burden of proof lies on such owner.

 Duties conferred on an employer Under the Factories’ Act 1948

The Factories Act lays down provisions for the health, safety, welfare and service conditions of laborers working in factories. It contains provisions for working hours of adults, employment of young persons, leaves, overtime, etc.

The Act applies to the following:

  • All factories employing more than 10 people and working with the aid of power.
  • Units employing over 20 people and working without the aid of power
  • 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

A written notice must be sent by business owners to the Chief Inspector for all establishments which comes within the scope of the Act for the first time, before it engages in a manufacturing process.

  • Measures 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 the following steps:

  • Maintenance of plant and working systems 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 relevant information instruction, training and supervision,
  • 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 medical record of the factory workers by way of medical examination conducting health surveys of workers.

Determination of Compensation

The compensation given to the worker primarily depends on the monthly wage of the worker, the nature of the injury, number of dependents, age and so on.It also considers a relevant factor (defined in Schedule IV of the Workmen’s Compensation Act).

(i)In case of death, the compensation payable equals 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 disabled 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 25% of the monthly wages on the 16th day from the day of the disablement.

Moreover, there is a delayed payment penalty of 6% per annum for employer failure to pay compensation in due deadline. This accounts for a sum not more than 50% of the total amount.

It is best for business owners to buy workmen’s compensation to avoid financial burden arising in case of unexpected mishaps.

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