The major differences between the Workmen Compensation Act (1923) and the Employee Compensation Act are as follows:
Workmen Compensation Act, 1923 |
Employee Compensation Act |
| The insured party is called workman or workmen in the act | The insured party is called employee or employees in the act |
| Clerks were not considered to as workmen and thus, not covered by the act | Clerks are treated as employees and are included in the act |
| The minimum payable compensation for death is Rs. 80,000 | The minimum payable compensation for death is now Rs. 1,20,000 |
| The minimum payable compensation for permanent total disability was Rs. 90,000 | The permanent total disability compensation is Rs. 1,40,000 |
| No medical treatment expense reimbursement (but can be included by paying extra premium) | The employees now can submit their medical expense bills for reimbursement for the injuries caused during the course of employment |
| Maximum wage was Rs. 4,000 for computing the death or permanent disability benefits | Maximum wage is Rs. 8,000 for computing the same |
| The maximum funeral expenses payable was Rs. 2,500 | The maximum funeral expenses payable is revised to Rs. 5,000 |
| No claim settlement time limit | The claims must be settled within three months from the intimation |
Key Takeaways
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The Wage Ceiling: For the purposes of calculating compensation, the monthly wage is capped at ₹15,000. Even if an employee earns more, this is the figure used in the formula to determine the final settlement.
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Calculation Formula: Compensation is determined by a specific formula:
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Death: $(50\% \text{ of Monthly Wage} \times \text{Age Factor})$.
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Permanent Total Disability: $(60\% \text{ of Monthly Wage} \times \text{Age Factor})$.
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Medical Bills are Mandatory: Unlike the old Act, the current law requires the insurer/employer to reimburse actual medical expenses incurred during treatment for work-related injuries.
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Strict Timelines: Claims must be intimated immediately and settled within three months. Failure to do so can lead to the employer paying interest (often 12%) or additional penalties.
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Broad Inclusivity: By moving from “Workman” to “Employee,” the law now protects everyone from laborers to office clerks, acknowledging that accidents like fires or structural collapses can affect any staff member.
Case: 1
Due to his family’s modest financial condition, Mukesh Saran was unable to pursue his education further. Therefore, soon after completing his 12th, he started working in M.K.S Clothing. He was working as a senior machine operator and earning Rs 9,000. Though the salary was not very high, it was sufficient to meet the ends.
Read More: What is the Workmen’s Compensation Act?
Destiny had a different plan for him and one day while working, his hand gloves caught between the machine and he suffered a major injury to his right arm. Some workers around him rushed him to a nearby hospital.
Hospital treatment started immediately. However, his right arm became permanently disabled due to the severity of the accident. And Hospital discharged Mukesh after 10 days. His supervisor came to see him at his house.
The supervisor also advised Mukesh to file a claim under the workmen compensation insurance policy because the accident occurred during working hours. Mukesh did the same and approached the insurer for claim settlement.
Furthermore, the insurer approached M.K.S Clothing and asked for a complete report on the accident. The insurer also asked Mukesh to submit medical reports as well to know the extent of the disability. Upon receiving all the documents and necessary details, the insurer reviewed them and settled the claim accordingly.
Since Mukesh was covered under the Workmen Compensation Act, his medical expenses were not reimbursed. In this case, Mukesh incurred medical expenses of Rs 60,000. But the insurer did not reimburse anything. The WC Insurance company paid compensation only for the permanent disability which was Rs 90,000.
Case: 2
For the last three years, Mr Amit Shukla was working as a contractor with T.L. Construction Company. His seniors always appreciated his punctuality and dedication to work. Last year, he married his long-term girlfriend, Riya. However, when everything was looking amazing, life’s uncertainty turned Amit’s world upside down.
One day at the construction site, he was inspecting the work. Suddenly some rods kept there for construction purposes, fell on him and he suffered serious injuries to his head and back. Workers at the site rushed him to a nearby hospital where doctors started the treatment immediately.
Read More: What are the Legal Responsibilities of the Company under Workers’ Compensation insurance?
Though doctors tried their best and saved Amit’s life, the accident left him permanently disabled from the lower body. Suddenly, the future of Amit’s family was at stake. Amit’s colleagues came to see him when the hospital discharged him after 15 days. They also advised him to file a claim under the Employee Compensation Act. He could now get a claim under the act because the accident occurred during working hours. As T.L Construction Company had the employee compensation insurance policy, they approached the insurer and it agreed to settle the claim.
Besides, the insurer asked for the salary details of Amit and medical reports to know the extent of disability. After analyzing all the facts, the insurer agreed to settle the claim and paid the compensation of Rs. 1,40,000. The insurer settled medical expenses incurred by Amit, amounting to Rs 2 lakh.
Summary: Workmen vs. Employee Compensation Act
The difference in compensation on a case-by-case basis
Both Mukesh and Amit got permanently disabled. However, the compensation received by both was different. While Mukesh got Rs 90,000 under the workmen compensation act, Amit received Rs 1,40,000 under the Employee Compensation Act.
Frequently Asked Questions (FAQs)
Q1: What is the “Age Factor” used in the calculation?
A) The Age Factor (found in Schedule IV of the Act) is a multiplier that decreases as a worker gets older. This is because younger workers have more years of potential earnings lost due to an accident, resulting in a higher lump sum.
Q2: Does the Act cover injuries that happen while traveling to work?
A) Generally, yes, if the travel is “in the course of employment.” This often includes transport provided by the employer or travel for specific work assignments.
Q3: Is the compensation paid as a monthly pension or a lump sum?
A) In cases of death or permanent disability, the compensation is typically paid as a lump sum to provide the worker or their family with immediate financial stability. Temporary disabilities are usually paid as half-monthly installments (25% of wages).
Q4: Can an employee get compensation if the accident was their own fault?
A) Yes. The Act follows “Strict Liability,” meaning the employer is liable regardless of who was at fault, provided the injury happened during work. Exceptions exist only for willful disobedience of safety rules or intoxication.
Q5: What happens if an employer fails to pay the compensation?
A) The employee can file a claim with the Commissioner for Employee’s Compensation. If the employer is found to have delayed payment without a valid reason, they may be ordered to pay the principal amount plus interest and a penalty of up to 50%.
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.
