What are the Statutory Requirements for Workers’ Compensation Insurance?
An employer can take the Workers’ Compensation Insurance to get protection against financial uncertainties. It covers the risk of injury, disease and death of an employee at the workplace. Note that buying a workman compensation insurance is not mandatory but paying workers a compensation on injury is. Also, many manufacturers need to buy workman compensation as a contractual requirement with their customers.
Understanding the Statutory Requirements for Workers’ Compensation – Who can take this policy?
Employers with over 20 workers come under the purview of the Workmen Compensation Act, 1923. This act is now called Employees Compensation Act, 1923. Employers need to register themselves under the Employees’State Insurance Act (ESI Act). Workers, whether full-time, contractual or employed to work at office premises are subject to insurance benefits. The policy provides coverage for workers employed in:
- manufacturing industries
- construction works
- garment industry
- plantations, and other such hazardous occupations factories.
The act holds any worker (including casual labor) entitled to receive compensation from the employer in case of an accident or death. It covers minor injuries as well as major ones that disable him or her while engaged in work.
Compensation covers death, permanent or temporary disablement, and total or partial disability.
- The Workers Insurance protects the employers against any liability that its workers can incur due to the applicability of the Workmen Compensation Act. Workers insurance benefits are primarily for work-related injuries and accidents. An employer can include policy extensions at extra premium to maximize thecoverage.The basic policy covers the below mentioned liabilitiesAny accidental injury caused during work.
- Hospital expenses, including ambulance charges and other medical expenses in respect of occupational accidents.
- Certain diseases mentioned in Part C of the Schedule III of the Act which also requires the employer to pay compensation if the disease arises out of or during employment.
Payment of Compensation
The Act states that the compensation as decided by the Workers Court is to be awarded to workers employees or their dependents, if they suffer disability or die during employment. The total worker compensation insurance amount is based on the nature of the injury, the average monthly income, dependents of the worker and age of the worker. The Act has also defined the minimum compensation that needs to be paid in each of the cases, i.e. death, permanent or temporary or partial disability.
Also, this policy covers the liability of an employer under the Indian Fatal Accident Act 1855 and the common law.
Case for Workers Compensation Insurance
Mr. Harsh Nair runs a small chemical manufacturing company with 28 workers. He comes under the purview of the Workmen Compensation Act as the number of workers engaged in his unit is over 20. Hence, he is liable to pay compensation to workers for any injuries caused during the work hours.
Since chemical manufacturing can be a risky affair and more prone to accidents, Harsh decided to cover his risk by buying a worker’s compensation insurance. This is how the insurance helped him on various occasions:
While working on the boiler one day, one of the workers, Ram, accidentally poured hot water on his hand. It caused 80% burns on his hand. The injury was severe enough to cause a partial disablement for Ram for about two months. The workers’ insurance paid Ram an appropriate compensation that the statutes of law entitled him to. Harish also agreed to employ him again in another role and paid some compensation.
Also, the chemical manufacturing conducts various science experiments. The fumes created in tests may have caused damage to health and lead to respiratory problems with the workers. Workers reporting respiratory problems claimed that they contracted this during the ordinary course of manufacturing of chemicals. They also became entitled to compensation under the Act as it was a covered disease under Part C of the Schedule III of the Act.
One day the bus carrying all the workers to the factory gate met with an accident. In the incident, some of the workers got injured. The labour courts asked employer to provide workers with adequate compensation since the incident happened during the work hours and on factory premises. Hence, all the injured workers were provided the requisite sum by the insurance company.
Understanding the requirements for workers’ compensation is important for an employer to know so they can mitigate the risk through a well-structured workman compensation insurance.