The objective of the Workmen (now Employee) Compensation Act, 1923, as defined in the Act is…

“… to provide for the payment of compensation by certain employers to their employees for injury caused to them by accident while in employment. If an employee contracts an occupational disease while in employment, it is also treated under the Act as injury caused by accident.”

The real purpose behind the enactment of such a law can be understood as follows:

  • Huge number of the young human resource of the country is employed in factories, manufacturing units and various menial jobs
  • It is the responsibility of the employers of this workforce, to provide a safe and healthy work environment for these workers
  • If a worker is injured or dies on the job due to the hazards related to the occupation his dependents or the worker him/herself is not in a position to fight the employer for compensation
  • The employer and worker may not reach a reasonable amount when it comes to compensation in such cases
  • The employer’s liability cannot be unlimited, thus to limit the employer’s liability

Thus, the Act provided a mediator between the employee and the employer for resolution of employment-related disputes arising due to accidents in the workplace.

See: How to decide the Insurer in Workers’ Compensation?

Case on Purpose of Workmen’s Compensation

After successfully establishing its name in Singapore, R.J. Mills is planning to set up a factory in India.

Reports of R.J. Mills looking for a site have been doing the rounds for quite some time, and now finally, the company selected Mumbai. R.J. Mills is hoping to leverage its strong supply chain market, which is built over the two decades to get a foothold in the Indian market which is growing at a rapid pace.

However, the company is wary of one thing— the rising incidents of labour unrest in India, pointing towards increasing discontent among workers over issues like wages, working conditions, etc.

As it will be the first factory of R.J. Mills in India, the company doesn’t want to take any risk, and therefore, it is mulling over every measure to curtail the workers’ unrest. The company has hired a third-party agency for research on the rising level of workers unsatisfaction. Though the final report is yet to be submitted to the agency; the initial report results have showed that the working conditions are one of the prime reasons for unrest.

To deal with the issue, the company has allocated a special budget towards the employee working conditions and safety issues. Also, the company has decided to impart training to its employees on the safe working practices.

In addition to this, R.J. Mills can also think of buying a workers compensation insurance, which will fall under the workmen’s compensation act and covers the legal liability of the employer that may arise due to death or disability of the worker.

Though the safety measures will help to protect workers; you can’t completely rule out the possibility of accidents at the workplace. If while working, any employee dies or meets with an accident, the policy will pay the compensation to the worker or his/her family, and thus, this insurance policy offers legal liability coverage to R.J. Mills.

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