T A T A A I G

Version 2,June 23
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One of the oldest legislation of social security in India.
A Workman (Employee) who dies or suffers disablement (partial or total) due to
accident in course of his duty is entitled to get compensation.
This act came into force on 1st July 1924.

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This act contains total 36 sections and 4 schedules .
Schedule 1 – List of injuries are mentioned
Schedule 2 – List of persons who are included in the definition of
employees.
Schedule 3 –List of occupational disease
Schedule 4 – Factors for working out lump sum equivalent of compensation
in case of death or PTD

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The Act extends to the whole of India.
It applies to workmen employed in factories, mines, plantations, transport
establishments, construction work, railways, ships, circuses, & other
hazardous occupations & employments specified in Schedule II to the Act.
Every employee, including those employed through contractor are also
covered.
The coverage of this act is also to cooks employed in hotels and restaurants.
The Act does not apply to members of Armed Forces of the Union.

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 Coverage: If at any time during the Period of Insurance any employee in the
Insured’s employee(s) shall sustain personal injury by accident or disease
arising out of and in the course of his employment by the Insured in the
Business, then the insured shall be liable to pay compensation for such injury
either under:
1. The Employees Compensation Act, 1923
2. The Fatal Accidents Act, 1855
3. Common Law

 Below are the covers which can be extended by way of endorsement:

1. Medical expenses

2. Occupational Diseases

3. Coverage for Contractors Workers, Sub Contractor Workers / Employees

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Commissioner
Dependant
Employer
Employee
Disablement
Wages
Theory of Notional Extension

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Commissioner means a Commissioner for Workmen’s Compensation
appointed under Sec.20.
Commissioner is appointed by State Govt to look into the :
1. Settlement of disputed claims
2. Disposal of case of injuries involving death
3. Revision/review of periodical payments from time to time.

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Dependant means any of the following relatives of a deceased workman,
namely:
1. a widow, a minor legitimate or adopted son and unmarried legitimate or adopted
daughter, or a widowed mother.
2. if wholly dependant on the earnings of the workman at the time of his death, a son or a
daughter who has attained the age of 18 years and who is infirm.*
3. And any of the following wholly or partly dependent on the workman at the time of his
death—
 a widower, a parent other than a widowed mother, a minor illegitimate
son, a unmarried illegitimate daughter or a daughter legitimate or
illegitimate or adopted if married & a minor or if widowed & minor, a minor
brother or an unmarried sister or a widowed sister if a minor, a widowed
daughter-in-law, a minor child of pre-deceased son & daughter where no
parent of the child is alive & a paternal grandparent if not the parent of the
workman is alive.
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“Employer" includes

Any body of persons whether incorporated or not;

Any managing agent of an employer; and
The legal representative of a deceased employer.

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Employee means a person who is-
1. Railway servant
2. Crew member of ship
3. Crew member of aircraft
4. Driver ,cleaner , helper or mechanic of motor vehicles
5. Employee recruited abroad
6. Persons employed in activities like manufacturing process, explosives, mines
, ship loading/unloading, construction electricity generation & distribution
,drivers , horticulture,circus.
Note:
Employee does not include any person working in armed force.
This act includes employee employed through contractor.*

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Disablement means loss of capacity to work or to move. Disablement of
workman may result in loss or reduction of his earning capacity. In the later
case, he is not able to earn as much as he used to earn before his
disablement.
Disablement may be (1) partial, or (2) total.
Further it may be (i) permanent, or (i) temporary.

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This means any disablement as reduces the earning capacity of a workman
as a result of some accident. It may be temporary or permanent.
Temporary partial disablement means any disablement as reduces the
earning capacity of a workman in any employment in which he was engaged
at the time of the accident resulting in the disablement*.
Permanent partial disablement is one which reduces the earning capacity
of a workman in every employment which he was capable of undertaking at
that time of injury.*

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 Velu, who worked in a printing
business, got his fingers cut off
by accident. This is “Partial
Disablement” as it reduces his
capacity to work in any such
employment of similar nature.

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 Ramamurthy, a powrakarmika
(Road sweeper employed on
contract basis for Bangalore City
Corporation) slipped and fell
from a garbage truck and
fractured his hand. He could not
work for one month. This is
temporary disablement.

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‘Total disablement’ means such disablement, whether of a temporary or
permanent nature, which incapacitates a workman for all work which he
was capable of performing at the time of the accident resulting in such
disablement

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As Shiraz can no longer work as a coolie or do any work of a similar nature, he can
be considered 100% disabled under this law.
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‘wages’ includes any privilege or benefit which is capable of being estimated
in money, other than a travelling allowance or the value of any travelling
concession or a contribution paid by the employer a workman towards any
pension or provident fund or a sum paid to a workman to cover any special
expenses entailed on him by the nature of his employment.

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When is an employer liable to pay compensation?

As per Section 3 of the Act, the employer is liable to pay compensation if the worker is injured
by accident that:

arises out of (i.e. while engaged in work), and;

in the course of his employment (i.e. during work hours),and;
such an injury results in disablement of the worker

Example: A bus was on its last trip for the day. Some assailants
entered the bus, sprayed chilli powder on the passengers and shot the conductor dead. It
occurred during work hours, but could such an act be termed as an injury ‘arising out of the
course of work’? In this particular case, it was argued – successfully - that such an incident is a
contingency that can arise during the course of duty. He was exposed to that particular risk by
reason of his employment
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In respect of any injury which does not result in the total or partial
disablement of the workman for a period exceeding three days;
In respect of any injury, resulting in death or permanent total
disablement, caused by an accident which is directly attributable to
1. The workman having been at the time thereof under the influence
of drink or drugs, or
2. The willful disobedience of the workman to an order expressly
given, or to a rule expressly framed, for the purpose of securing the
safety of workmen, or
3. The willful removal or disregard by the workman of any safety guard
or other device which he knew to have been provided for the
purpose of securing the safety of workmen

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The general rule of the employment is that the employment of the employee commences from the time he
reaches the place of work ,where he has to do his duty, when he leaves the place of work ,then he is not said
to be in the employment.
The time taken in reaching the place of work from home and returning home from the place of work is not
included in the time of employment.
What if he meets with an accident ? Will he be eligible for a compensation ?
In order to answer this question , The Principal of Notional Extension has been propounded, extended and
applied. According to Notional extension theory, the nature and result of the accident will be taken in
consideration.
Employer will be liable only when such injury is caused due to an accident arising out of & in the course of
employment.
Eg: A boy employed in the canteen crosses the road to give tea in the company, while returning after giving
tea he meets with an injury due to police firing.
Whether this will be treated as an accident out of course of employment?*
X. an employee of a factory, after finishing up his day’s work was going on a cycle to collect his pay from the
cash section of the factory which was situated on the other side of the road. On the way, he was knocked
down by a speeding bus and died.

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The amount of compensation payable to a workman depends on
the nature of injury caused by accident,
the monthly wages of the workman concerned, and
the relevant factor for working out lump sum equivalent of compensation
amount as specified in Schedule IV.
There is no distinction between an adult and a minor worker with respect to the
amount of compensation.

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In case of death resulting from injury, the amount of compensation shall be
equal to 50% of the monthly wages of the deceased workman multiplied by
the relevant factor.
Or an amount of Rs 120,000/- whichever is more.
Funeral Expenses of 5000 are also payable.

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Relevant
Factor

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A workman is employed in a factory on a monthly wage of Rs 12000. While working
he met with an accident and dies on Oct 2000. His date of birth is July 18 , 1970. The
amount of compensation payable to his dependent would be

50* monthly wages* Relevant factor of age 30

100

0r 1,20,000 whichever is higher

50* 12000* 207.98 =12,47880

100

Since Rs 12,47,880 is more than 1,20,000 the compensation payable to him shall be
Rs 12,47,880.
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In case of permanent total disablement resulting from the injury, the
amount of compensation shall be 60% of the monthly wages of the injured
workman multiplied by the relevant factor or Rs 140,000/- whichever is
more.

For the above example the compensation would be

60* 12000* 207.98 = 1497456

100

Since Rs 14,97,456 is more than 1,40,000 the amount of compensation

payable should be Rs 1,497,456.

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Where permanent partial disablement occurs, the amount of
compensation payable shall be as follows:

In case of an injury specified in part II of the schedule I, the amount of

compensation shall be such percentage of the compensation which would
have been payable is the percentage of loss of earning capacity caused by
that injury.
In case of an injury not specified in schedule I, such percentage of the
compensation is payable which is proportionate to the loss of earning
capacity (as assessed by a qualified medical practitioner) permanently
caused by the injury.

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A worker whose monthly wages is Rs 12000 loses one eye as a result of
Injury caused to him on Nov 15, 1995. On Oct 1, 1995. He had completed 20
years of age. The amount of compensation payable to him would be

40% of 60* 12000* 224 =645120

100

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Permanent or Partial

If the temporary disablement, whether total or partial results from the

injury, the amount of compensation shall be a half monthly payment of the
sum equivalent to 25% of the monthly wages of the workman to be paid in
accordance with the provisions.
The half monthly payment shall be payable on the sixteenth day from the
date of disablement
In cases where such disablement lasts for a period of 28 days or more
compensation is payable from the date of disablement
In other cases after the expiry of a waiting period of three days from the
date of disablement.

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EC insurance is a policy to protect the employer against his legal liability under EC Act ,
Fatal Accidents Act and Common Law
Policy can be taken by either Principal Or Contractor
Correct Number of employees and Wages to be declared at the inception of the policy
including that of Contractor and subcontractor if these are being covered.
Act specifies ceiling of Rs 15000 on which compensation is calculated. However actual
wages to be declared while taking policy even if it is higher than 15000 as beneficiary can
apply compensation under Fatal accident act where actual wages may be considered
ESIC and EC are different Acts and if compensation is paid under ESIC then ESIC Act does
not allow compensation to be paid under EC policy or any other Act.
GPA and EC can be taken together. On getting compensation under the PA policy an
employee/ dependents can claim compensation under Employee compensation act, over and
above the compensation under PA
Earnings include wages, salaries, over time, board/ lodging, and other perquisites but
travelling allowances and Incentive are excluded.

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 Medex on per person basis, aggregate basis or as per Actuals.

 Occupational disease as per Part A of Schedule III can be granted on case to case basis

 Single policy with location specific certificated

 Defense Counsel cost

 On Account Payment

 Waiver of Subrogation

 Workshop on Claim process

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To claim the compensation:
The claimant shall give notice of accident to the employer or by entering in the
notice book within the reasonable period.
Every such notice shall give the name and address of the person injured, the cause of
the injury and the date on which the accident happened and
Submit the claim application to the commissioner within two years from the date of
accident.
In case of occupational disease the accident is deemed to have occurred on the first
day of disease.
Defect if any in the notice or not giving notice or delayed application will not bar the
claim for compensation.

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Claim Form
Attendance Register
Wage Slips (register)
Document confirming age proof
FIR & PM report (in case of death fatal injury)
Form A filled & duly discharged by WC commissioner
Address Proof of deceased and legal hire of deceased.
Disability Certificate from Doctor
Intimation letter to WC/Labor commissioner
Attendance records in case of TTD

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Version June 2023. Verified by Nisha Bansal
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•WC PUP Logics are being continued in EC
* Old discounting logic is no longer applicable
•Trade category code to be selected form Trade category sheet
•Risk location 1 has to be most dominant risk location
•Trade category 1 has to be the most dominant
•Parameters can be used for Loading & Discount
•Medex can be given for Loading

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 Particulars Workmen’s Compensation Policy Employees Compensation Insurance

Law and Jurisdiction Policy had no mention of applicable Law and Law and Jurisdiction have been specified
Jurisdiction
Occupational Diseases Though the WC Tariff prescribed that occupational Policy clearly and transparently states that
diseases were to be covered by way of an express occupational diseases are excluded. For professions
endorsement, the policy itself was silent about or occupations where this cover may be required, the
coverage of occupational diseases. same can be covered by way of endorsement.

Medical Expenses Though WC Tariff prescribed that medical expenses Policy clearly and transparently states that medical
were to be covered for a specified amount, on expenses are excluded. Where this cover is required,
payment of additional premium, by way of an express the same can be taken by way of endorsement.
endorsement, the policy itself was silent.

Cancellation Clause Policy provided that Insurer can cancel the Policy by Policy provides that both Insurer and Insured can
giving 7 days notice to the Insured. cancel the Policy by giving 15 days notice

Adjustment Clause Policy provided for adjustment of premium on the Insured has under the policy a Duty to Declare any
basis of actual wages, at the end of the policy period. increase in Employees and Wages and cover them on
Such adjustment was seldom done leaving gaps in payment of premium. While in case of decrease in
coverage of all employees and for the full amount of employees or wages, a refund can be obtained.
wages. Failure to declare increase will attract self or under-
insurance.
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 Particulars Workmen’s Compensation Policy Employees Compensation Insurance
Exclusions Current Policy does not have these • Exclusion for accidents occurring under the influence of intoxicating
exclusions which have now been liquor or drugs
included , as these are standard • Incapacity / death resulting from deliberate self injury or
exclusions. aggravation of accidental injury: Section 3 (b) (ii) & (iii) of the Act
provides that an Employer shall not be liable for accidents where the
employee has disobeyed safety instructions or regulations or
disregarded the use of safety devices.
• Nuclear waste and ionising radiations: Reinsurance treaties carry
this exclusion, the policy has been bought in line with the Treaty.
• Interest / penalty imposed under any law or otherwise.

Average Clause Not provided for. Provided in the current policy on parameters of number of employees,
total wages and affected employees wages, with the indemnity being
equal to the least amount payable.

General Maintenance of record of • Modified and made simpler

Conditions Employee/wage: • Misrepresentation / Non disclosure
• Due Observance of Policy terms, conditions, etc.
Current policy does not provide for • Contribution
these conditions. • Forfeiture
• Compliance with manufacturer’s recommendations and other safety
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 EC PA
• EC insurance is a policy to protect the employer against • A PA (personal accident) policy benefits the employees
his liability from the workmen compensation act as well in case of an unforseen event.
as Fatal Accidents and common Law. Therefore the
liability is beyond just the Workmen Compensation act
and the definition of “workmen” and encompasses all
employees of the organization.

• Employee Compensation is payable for accidents/ • A PA policy pays if the insured dies or sustains any bodily
diseases arising out of and during the course of injury resulting solely and directly from accident caused
employment... by external, violent and visible means whether due to
employment or otherwise

• After getting compensation under the PA policy an • As PA is a benefit policy and not under any Act all
employee/ dependants can claim compensation under compensations are benefits offered to the employees
the workmen's compensation act, over and above the and does not do away with the liability under law
compensation under PA

• In a Employee Compensation policy the compensation • In a PA policy the employer can choose the sum insured
that would be due to an employee is fixed by the Tariff. It which can be a multiple of the salary or a graded cover
is calculated on the basis of the severity of event, the according to the designation.
age of the employee and the wage of the employee.

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 EC ESI
• It is only those establishments, which employ a • All establishments hiring 20 workers and above
lesser number of workers, and therefore to do not must compulsorily register themselves under the
come within the purview of the ESI Act that the Employees’ State Insurance Act (ESI Act).
Workmen’s Compensation Act applies to. Also if
employers fail to register themselves under the ESI
Act, then they will be responsible to pay
compensation under the Workmen’s Compensation
Act.
• Under EC, compensation is to be paid by the • Under ESI act, a contribution from employer and
employer through the Commissioner employee is regularly deposited with the ESI to
create a pool to finance the various expenses such
as cash benefits, medical benefits, rehabilitation
etc.

• Intended to cover only legal liability of the • Covers legal liability + Benefit Policy
employer • However EC is used in areas where ESI does not
have jurisdiction or employees are less than 20

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