Workmen’s Compensation Act, 1923: A Complete Guide

The Workmen’s Compensation Act, 1923, also known as the Employees' Compensation Act, 1923, is a key law designed to protect workers in India. It requires employers to provide compensation to employees who suffer injury, disablement, or death due to accidents while performing their work. The Workmen’s Compensation Act applies across India to many industries, including factories, mines, plantations, construction, transport, and more. It ensures that injured workers or their dependents receive financial help, strengthening social security and workplace safety.

What is the Workmen's Compensation Act, 1923?

The Workmen’s Compensation Act 1923 is a law aimed at guaranteeing financial compensation for employees who get injured or disabled or die due to job-related accidents or occupational diseases. It covers full-time, part-time, temporary, and casual workers in specified industries. The Act follows a no-fault principle, meaning an employee is entitled to compensation regardless of who caused the accident.

This Act defines key terms such as "workmen" (employees under the Workmen’s Compensation Act 1923), "employer," and "compensation." It also lists occupational diseases covered under the Act and has been amended over time to address modern workplace needs. The Act provides for medical care, rehabilitation, and monetary benefits for injured employees and their families. It also sets up tribunals to resolve compensation disputes fairly and promptly.

The bare act text formalises employers’ legal duty to pay compensation if an injury is caused during employment, even if the employer was not negligent.

Applicability and Coverage

The Act applies to factories, mines, plantations, railways, as well as industrial and commercial establishments where 10 or more workers are employed. It also covers some scheduled hazardous occupations detailed in the Act’s schedules.

Employees working abroad for Indian companies may be covered if the injury occurs while working for the company. The Act includes various categories of workers, such as drivers, cleaners, newspaper staff, and contract workers.

Who can file a claim?

Injured employees themselves or their dependents (like spouses, children, parents), in case of death, are eligible to claim compensation.

Employer’s Liability and Employee's Rights

Employers must compensate employees or their dependents for injuries, disabilities, or death caused by accidents arising out of and in the course of employment. This includes compensation for permanent or temporary disablement.

Employers must make provisional payments promptly and cooperate during the claim process. Injuries need to be reported swiftly, and compensation claims must follow prescribed timelines. The Workmen’s Compensation Commissioner handles and decides claims.

Employees have the right to claim compensation and to have disputes resolved fairly and quickly. If necessary, claims can be taken to Labour courts or tribunals established by the government.

Objective of the Employees' Compensation Act 1923

The core purpose of the Employees' Compensation Act 1923 is to:

●      Ensure fair compensation to workers or their families in case of accidental injury, disability, or death.

●      Establish the employer’s legal responsibility towards their employees' safety.

●      Provide a clear structure for the calculation and disbursement of compensation.

Key Provisions Under the Employees' Compensation Act 1923 Bare Act

The Employees' Compensation Act 1923 Bare Act provides for compensation in four main categories:

●      Death Compensation: Paid to dependents if the employee dies due to a workplace injury.

●      Permanent Total Disablement: For employees who become completely disabled and unable to work again.

●      Permanent Partial Disablement: For partial loss of earning capacity due to injuries.

●      Temporary Disablement: For injuries causing temporary inability to work.

The amount of compensation is calculated based on the employee’s monthly wages before the accident and the severity of the injury. Maximum and minimum limits apply as specified by the Act.

Dependents eligible for compensation include widow(er), children (up to age 18), dependent parents, and other family members as defined.

For example, as per Section 4 of the Act, compensation for permanent total disablement can be up to 60% of monthly wages or ₹120,000, whichever is higher. If death occurs, dependents receive 50% of the monthly wages or ₹120,000, whichever is higher.

History and Evolution of the Workmen's Compensation Act

The Workmen's Compensation Act was enacted as a response to growing workplace risks during the Industrial Revolution. In the 1800s, machinery-led industries caused frequent accidents, and workers had to fight long legal battles for justice.

The 1923 law streamlined this process, making employers directly accountable and setting up a compensation system that was fair, timely, and enforceable. In 2010, the name was officially changed to the Employees' Compensation Act 1923 to reflect inclusive labour practices.

Key Amendments in the Act

Over the years, several amendments were made to align the Act with modern labour conditions:

●      2010 Renaming: From "Workmen" to "Employees" to make it gender-neutral and inclusive.

●      2020 Wage Ceiling Update: The wage ceiling was raised from ₹8,000 to ₹15,000 to increase compensation payouts.

Role of Insurance in the Employees' Compensation Act

For employers, fulfilling these obligations can be financially strenuous, especially for small businesses or high-risk sectors. This is where insurance plays a vital role.

How Bajaj General Insurance Supports Employers?

Bajaj General Insurance offers Workmen’s Compensation Insurance that aligns perfectly with the provisions of the Employees' Compensation Act 1923. Here’s how it benefits employers:

●      Covers compensation liabilities under the Act

●      Takes care of legal costs during claim disputes

●      Covers medical expenses for the treatment of the injured employee

●      Provides extended coverage in hazardous work environments

●      Ensures peace of mind and legal compliance

By partnering with Bajaj General Insurance, businesses, especially MSMEs, can protect themselves and their employees from unforeseen accidents and legal complications.

Types of Insurance Policies Linked to the Act

Employers can combine Workmen’s Compensation Insurance with other insurance products to create a comprehensive safety net:

1. MSME Insurance

For small business owners, MSME Insurance packages often include employee coverage. These policies can:

●      Cover property damage, theft, and third-party liability

●      Include workers’ compensation and personal accident covers

●      Help MSMEs remain compliant with Indian labour laws

2. Marine Insurance

If your employees work in the shipping or cargo handling industries, marine insurance becomes relevant. It ensures not only the safety of goods in transit but also protection for the ship crew and port workers under the Workmen's Compensation Act.

Penalties for Non-Compliance

Employers who fail to provide compensation under the Employees' Compensation Act 1923 bare act face strict legal consequences, including:

●      Penalty up to ₹5,000

●      Imprisonment for up to 1 year

●      Liability to pay overdue compensation with interest

More importantly, non-compliance can damage a company's reputation, create distrust among workers, and trigger costly legal proceedings.

Filing a Claim Under the Act

Here’s how a worker or dependent can claim compensation:

1. Notify the employer immediately after the accident.

2. Get medical treatment and record the doctor’s report.

3. Submit a claim application to the relevant labour commissioner’s office.

4. Await the employer’s response or settlement.

5. Legal proceedings may be initiated if compensation is denied or delayed.

When the employer holds a Workmen’s Compensation Insurance policy with Bajaj General Insurance, the process is significantly smoother, as the insurer handles the paperwork, investigation, and payout efficiently.

Conclusion

The Employees' Compensation Act 1923, formerly known as the Workmen's Compensation Act 1923, remains a cornerstone of Indian labour law. It ensures that the rights of employees are protected and that employers stay accountable.

However, legal obligations needn’t be a burden. With MSME Insurance bundles to customised Workmen’s Compensation Insurance plans, Bajaj General Insurance ensures your business and workforce are protected every step of the way.

If you believe in the power of people, safety, and compliance, it's time to explore a policy that reflects those values. With Bajaj General Insurance, you’re not just insuring people, you’re honouring them.

Frequently Asked Questions

Q1: Is the Workmen’s Compensation Act still in force?

The Workmen’s Compensation Act is still in effect, but since the 2010 amendment, it has been officially renamed as the Employees' Compensation Act 1923 to reflect inclusive and modern terminology. The core provisions, objectives, and structure of the Act remain intact, continuing to ensure financial support for workers in case of work-related injuries, disabilities, or fatalities. The amendment not only changed the name but also aligned the language of the Act with evolving labour standards. It remains one of the key legal frameworks safeguarding employee welfare across various industries in India.

Q2: Can private companies avail coverage under this Act?

The Employees' Compensation Act 1923 applies to both public and private sector employers engaged in hazardous or high-risk occupations. Private companies are legally required to compensate workers in case of injury or death during employment. To manage this liability, many private employers purchase Workmen’s Compensation Insurance from reliable providers like Bajaj General Insurance. This insurance ensures compliance with the law and offers financial protection to the business. It covers compensation payments, legal expenses, and medical costs, enabling companies to protect their workforce without enduring sudden financial strain due to workplace accidents.

Q3: Are part-time or contract workers covered?

Part-time, contract, and even temporary workers can be covered under the Employees' Compensation Act 1923, provided they meet the definition of an “employee” under the Act. They are not already covered under the Employees’ State Insurance Scheme (ESIC). Many industries, particularly in construction, logistics, and manufacturing, hire contract labour, and these workers are equally vulnerable to workplace hazards. Employers are still liable to compensate them in case of injuries, permanent disability, or death caused during employment. This provision ensures that all categories of workers receive equal protection and that employers cannot evade responsibility based on employment type.

Q4: What happens if the employee dies while working overseas?

In such cases, compensation depends on the employment contract and the insurance arrangements made by the employer. If an Indian employee is deputed overseas and suffers a fatal accident while on duty, the employer may still be held liable under Indian labour laws or international agreements. To handle such risks effectively, businesses engaged in shipping, aviation, or global projects often secure marine insurance and specialised employee coverage. These policies ensure that the dependents of the deceased employee receive due compensation without legal complications, reinforcing the employer’s commitment to the well-being of their workforce, even across international borders.

Q5: Is medical treatment part of the compensation?

The Employees' Compensation Act 1923 mandates that employers bear the cost of medical treatment for injuries sustained by workers during employment. This includes first aid, hospitalisation, surgeries, medications, and rehabilitation where necessary. While the Act does not set a cap on treatment expenses, it does expect employers to act responsibly and provide necessary care. When the employer has a Workmen’s Compensation Insurance policy with Bajaj General, these medical costs are covered under the policy, ensuring that the employee receives quality treatment without delay, and the employer is shielded from unexpected financial liabilities.

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