Workmen Compensation Insurance Policy: Who can be an Employer

An employer in a workmen compensation insurance policy is:

1. A group of individuals. These may or may not be incorporated,
2. Any managing agent of an employer. Managing Agent implies an individual appointed to represent another person for carrying out that other person’s trade or business. This does not include a subordinate to an employer or an individual manager. This simply means a person who is acting on behalf of another person so that the other person’s orders/directives to the worker are being expressed,
3. A legal representative of an already dead employer,
4. In many cases, a workman’s services are contracted, lent, or let on hire to a third party., This third party is the employer of that workman for as long as he stays under their contractual employment. He is being paid a salary/wage as compensation for his services.

Key Takeaways

• The Broad Definition: An employer isn’t just a “boss”; the term includes managing agents (those representing the owner’s trade) and legal heirs who take over a business after a death.

• Lent or Hired Workers: If you “borrow” or “hire” a worker from another company, you become their legal employer for the duration of that contract and are liable for any injuries they sustain on your watch.

• Universal Liability: Whether you are a solo entrepreneur like Rajan Saran or a large government body, you have a contractual or implied agreement to protect your workers from workplace hazards.

• Succession of Responsibility: As seen in Case 2, when Homi became CEO after his father’s death, he inherited the legal liability for the workers. Buying a WC policy was his first critical step in protecting the family legacy.

• Financial Protection: Without a policy, an employer must pay for medical expenses and statutory compensation (like the ₹2 Lakh paid to the worker in Case 2) entirely out of their own pocket.

• Safety vs. Unforeseen Events: Even if an employer implements “global safety norms” and has dedicated training departments, accidents can still happen. The insurance policy is the final layer of legal liability coverage.

Who can be an employer?

Simply put, an employer can be an individual or a legal entity with control over a worker or a servant. An employer directs the worker as per a contractual employment agreement or implied agreement between both parties. The employer also disburses salaries or wages as compensation to the workmen/servant.

Read More: What is covered under Workmen Compensation Insurance Policy?

Employers can be anyone ranging from someone giving the services of a babysitter to governmental bodies. Even companies with hundreds of employees are employers. Governmental bodies are the largest employers. However, it is the small and medium businesses in the private sectors that have most of the workforce in employment.

Case: 1

 After working for a decade in the corporate sector, Rajan Saran started his own manufacturing unit in 2013. Rajan’s hard work and diligence resulted in the company making an impressive client base within four years of its inception. The company founded with only one person has now 120 employees.

Rajan implemented all the safety measures in his manufacturing unit. As an employer, it is necessary for him to buy a workmen compensation insurance policy as well.

Accidents happen even at safe locations, and therefore, it is necessary to have the policy to cover the expenses of injured employees. Without a policy, Rajan will have to pay compensation and deal with medical expenses on his own.

To avoid a heavy financial burden, it is essential for Rajan to purchase a worker’s compensation insurance policy. WC policy will also offer legal liability coverage. If Rajan’s employees meet with an accident during working hours, the worker compensation insurer will pay compensation and medical expenses to the worker.

It will save Rajan from bearing the financial brunt that may arise in the case of an accident or injury to his employee.

Case: 2

The last year was tough for AKJ Electronics as it lost its founder Mr Vijayprakash. He died at the age of 75 due to a heart attack.

Lt. Vijayprakash had two sons— the elder son, Homiand Jeet. Homi was helping Vijayprakashin with the business and  Jeet was studying in college. After the death of Vijayprakash, Homi became the full-time owner of AKJ Electronics as per the will of Vijayprakash.

Homi had followed global safety norms at the workplace. He also built a separate department to train employees on safety practices.

Read More: What Is the Purpose of Workmen’s Compensation?

Summary Table: The Legal Definition of an Employer

As Homi was the new CEO, he also bought a workmen’s compensation insurance policy. This policy will help him cover his legal liability which could arise due to the injury of his employee during working hours.

A few days ago, one worker suffered major hand injuries when his gloves caught between the machine. Five other workers present at the time of the accident rushed the injured worker to the hospital. In this case, as Homi was the employer and had a workmen compensation insurance policy, he informed the insurance company immediately. The insurance provider agreed to offer legal liability coverage to the injured employee.

In this case, the worker’s compensation insurance company paid Rs 2 lakh to the injured worker as compensation. Moreover, it also paid for medical expenses.

To seek help in choosing the best insurance company for purchasing the policy of your need, be sure to visit SecureNow.

Frequently Asked Questions (FAQs)

1. If I am a “Managing Agent” and not the owner, am I still considered an employer?

A) Yes. Under the Act, a managing agent appointed to represent the owner’s business is considered an employer. This means if you are the one giving directives and orders to the workers, you share the legal responsibility for their safety and compensation.

2. What happens to the workers’ compensation liability if the business owner dies?

A) The liability does not disappear. The legal representative or heir of the deceased employer (like Homi in the case study) takes over the role of the employer. They are then responsible for maintaining the workmen’s compensation insurance and paying any claims that arise.

3. If I hire a contractor’s worker for a few weeks, who is responsible if they get hurt?

A) If a workman’s services are “lent or let on hire” to you, you are considered the employer for the period they are under your control. You would be liable to provide compensation for any accidents that occur during their time working for you.

4. Does an employer have to pay for medical bills in addition to the compensation amount?

A) Yes. A robust Workmen’s Compensation policy typically covers both the statutory compensation (the lump sum for the injury) and the medical expenses (hospitalization and treatment costs) incurred by the worker.

5. Can a private individual (like someone hiring a babysitter) be considered an employer?

A) Yes. Any individual who has control over a worker or servant through a contractual or implied agreement and pays them a wage is technically an employer and can be held liable for workplace injuries under the broad definitions of the law.

About The Author

Rahul Kumar 

MBA Finance

With a wealth of experience in the insurance industry, Rahul is a seasoned writer specializing in articles related to workmen compensation policies (WC policies) for SecureNow. With 12 years of experience in the field, he has acquired in-depth knowledge and expertise in workmen compensation insurance, understanding its complexities and nuances. Their insightful articles provide valuable insights into the importance of WC policies for businesses and employees alike, offering practical advice and guidance on navigating the intricacies of insurance coverage. Trust him to deliver informative and engaging content, backed by years of experience and a passion for educating readers about insurance-related topics.