Employees are prized assets for any organisation, and ensuring their welfare is key to long-term success. This includes ensuring workers and their dependents are cared for in the event of a fatal accident at the workplace that results in a loss of income.
The Workmen’s Compensation Act 1923, led to the creation of a special type of insurance for frontline workers. It ensures that workers are adequately compensated for injuries sustained in the line of duty.
The policy is important for businesses as well, as it protects them from the threat of a high compensation amount and further lawsuits. This is particularly true for organisations with employees who are exposed to extreme health and life hazards.
Definition: Workmen’s Compensation Insurance
A workmen’s compensation insurance policy is meant for commercial establishments. It provides legal liability coverage to an employer and also assists employees in times of financial emergencies. The policy compensates employees if they are injured at the workplace. Work-related fatalities and illnesses are also covered under this policy.
This type of insurance also provides financial relief to employers as it can cover the legal costs when employees press charges. Some policies may even cover compensations ordered by worker and labour courts.
Scope of Workmen’s Compensation Policy
Frontline workers in India covered under Workmen’s compensation are as follows:
- Workers in factories, mines, docks, construction works, and specific establishments mentioned under the Schedule II of the Act.
- Workers hired abroad under Schedule II of the Act.
- It is applicable to helpers, drivers, mechanics, or any work associated with vehicles, crew members on an aircraft, or captains.
- Railway servants not employed permanently in any administrative, district, or sub-divisional office of railway.
Coverage under Workmen’s Compensation cannot be availed by members of the armed forces as they are covered under the Employee State Insurance Act.
As per the 2017 amendment in the Act, employers must inform workers of their rights to receive compensation. This can be done through written documents, electronically, and in a language understood by the worker.
Understanding Workmen’s Compensation Act, 1923
The Workmen’s Compensation Act, 1923, also known as WCA or the Compensation Act in some states, is a federal statute that mandates employers to pay compensation to their employees or workmen for a work-related accident, fatality, injury, or illness.
There are two main objectives of this act. First, it enables employees and their dependents to get compensation from their employers in case an accident causes an employee’s death or disability; second, it mandates employers to pay compensation to their workers if they contract certain job-related illnesses or diseases.
Employees who are injured on the job are entitled to workers’ compensation. The amount of compensation depends on a number of factors: the employee’s age, the nature of the injury, and average monthly salary or wages. However, the minimum and maximum compensation are set for cases related to permanent disability or death. If an employee is killed on the job, the employer must pay compensation to his or her dependents.
The Ministry of Labour and Employment in India has set up a division called the Social Security Division, which drafts and implements social security policies for workers. The division also enforces the Workmen’s Compensation Act. However, the various state governments superintend this law through commissioners appointed by them.
The Need for Workmen’s Compensation Insurance
A workmen’s insurance policy is a win-win for both companies and their employees. Let’s take a look at the 3 main reasons why every employer should consider buying a workmen’s compensation insurance policy.
Reason #1: Once an employer is insured under such a policy, any costs or expenses incurred are covered by the insurance partner.
Reason #2: The compensation paid out to employees or their dependents in the event of a workplace mishap, injury, illness, or fatality can be substantial. It’s a legal liability for an employer, which is covered by the insurance company that sells the workmen’s compensation insurance policy.
Reason #3: The legal liabilities are governed by the Workmen’s Compensation Act, 1923. In order to abide by the rules and regulations mentioned in the aforementioned and to fulfil the legal liabilities, investing in a workmen’s compensation policy becomes quintessential.
When Do Employers Pay Compensation?
According to Section 3 of the Workmen’s Compensation Act, an employer is liable to pay damages to its workers under the following conditions:
- If a worker has an occupational disease mentioned under Part A, B, C of Schedule III. The disease has to be a result of an injury by accident during work hours.
- An injury sustained by an employee during work that leads to total or partial disability.
- Death of an employee due to a work-related hazard.
The Extent of Cover Offered by a Workmen’s Compensation Policy
The extent of coverage eventually depends on the insurance partner you choose. Some may provide basic coverage whereas others may go above and beyond.
In general, the following are some of the common aspects that are covered by most workmen’s compensation insurance policies in India.
- Any injury, bodily harm or otherwise, brought upon by a mishap during employment
- Disease, injury, or condition aggravated by work conditions
Temporary disablement or death
Partial or complete disablement that is permanent in nature
Any or all legal expenses and costs incurred
What is Not Covered Under Workmen’s Compensation Policy?
There are specific situations and cases where a workmen’s compensation insurance will not cover your organisation and employees.
- Any or all liabilities assumed under an agreement
- Injury or accident caused by consumption of drugs or alcohol
- Injuries caused as a result of insurrections, war, or invasion
- Contractor employees are not covered unless they’re declared or insured
- The first 3 days of disablement when the disablement lasts less than 28 days
- Any type of injury that does not cause partial disablement for more than 3 days
- Any injury or disablement caused as a result of the employee flouting safety norms and regulations
Amount of Compensation Payable under the Act
The amount of compensation an employer has to provide frontline workers is as follows:
Death of the worker: 50% of the worker’s monthly wages multiplied with relevant factors; or ₹1,20,000, whichever is more.
Permanent Total Disability: 60% of the monthly wages, multiplied by relevant factor; or ₹1,40,000, whichever is more.
Permanent Partial Disability: In such cases, the amount payable is a percentage of the loss of earning capacity due to the injury. These injuries are mentioned in Part II of Schedule I of the Act.
Temporary Disability: 25% of the employee’s monthly wages.
Eligible employers have to get a Workmen’s Compensation policy that provides comprehensive protection to their employees. There are specific documents needed to be eligible for this policy, and a structured process to file claims. Managing this process for a huge distributed workforce can be challenging.
An Employer’s Guide To Finding The Best Workmen’s Compensation Policy Online
Buying an insurance policy, that too for your employers, can be tricky. Why? Because there are many insurance companies in the market that have an assortment of products.
Furthermore, insurance needs are unique. A policy for one organisation may not suffice the needs of another. Keep in mind that the need for this type of insurance stems from rules and regulations enforced by concerned authorities and governments, which must be adhered to.
So, how do you find one that’s right for your organisation? Here are a couple of things you need to keep in mind.
- Coverage: Your workmen’s insurance policy should provide maximum coverage for your organisation and employees.
- Optional covers: A standard workmen’s compensation insurance policy may not cover all risks and liabilities. Explore the insurance market for a company that does. Before that, understand the requirements of your business and see if you really need any add-ons.
- Sum insured: Your insurance partner should provide you with the flexibility to enhance the sum insured based on the risks to your employees and business.
- Claims: You’ll have to look at the claim settlement ratio of your insurance partner. It’s an important part of any type of insurance policy so look for one that simplifies the process and provides excellent claims assistance 24×7.
- Extras: Look for an insurance partner that offers additional benefits like a no-claim bonus (if possible), reduction in premiums, offers, employee and employer self-service apps etc.
Every company wants to save money and minimise risks. While a low premium with maximum coverage and excellent claims process is the ideal policy, a lower price doesn’t always mean excellent benefits.
Spend some time comparing insurance policies. Get in touch with insurance representatives to get a complete picture of their policy offerings.
Workmen’s Compensation Insurance Policy Claims Process
Here’s the typical procedure when a workmen’s compensation policy claim is to be made.
- Employer is intimated about the employee fatality or the accident
- On-premise accidents and mishaps must be communicated to the site inspector
- All documents and information as per the norms set by the provider must be gathered
- Collected documents should be deposited with the insurance provider
- Based on the information and documents gathered, the provider accepts or rejects the claim and informs the same to the stakeholders
Paperwork for Workmen’s Compensation Policy
Here’s a look at the typical paperwork requirements for claims made under a workmen’s compensation insurance policy.
|Duly filled and signed claim form.
|Medical certificate for disablement.
|Death certificate and final investigation report.
|Medical bills and compensation records.
|Medical certificate for disablement.
|MOA between the employer and the claimant.
|Postmortem report copy, witness statements, Form A filled by the insured.
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Workmen Compensation Policy FAQs
1. Is workmen’s compensation policy strictly followed in India?
In India, any organisation with more than 20 employees must mandatorily have Workmen’s Compensation Insurance. This mandate by the Employees’ State Insurance Act, 1948 ensures that employees and workers receive insurance benefits from their employers.
Even those companies that employ less than 20 employees must sign up for the insurance policy in order to comply with the rules and regulations mentioned in the Fatal Accidents Act, 1855 and Workmen’s Compensation Insurance Act, 1923.
2. What is the scope of coverage offered by Workmen’s Compensation?
A Workmen Compensation insurance policy covers the following:
- Temporary disability or fatality
- Injuries caused or worsened as a result of work conditions
- Any bodily harm caused by an accident while being employed
- Permanent disability
- Legal expenses and costs incurred
3. Whose responsibility is it to dispense the benefits of the Workmen’s Compensation Act?
Anything underwritten in the insurance policy must be provided by the employer. Typically, employers must provide all the benefits mentioned in the policy within 30 days of claim.
In many cases, it’s the employer who provides individual insurance policies to employees and settles claims.
4. How is The Employee Compensation Act different from The Workmen’s Compensation Act?
They’re the same. When the government brought it into effect, it was called the Workmen’s Compensation Act. Later on, it changed to Employee Compensation Act.
5. Is purchasing a worker compensation insurance policy online advisable?
There’s nothing wrong with purchasing a worker’s compensation insurance online. In fact, it’d be a great place to start as most platforms allow you to compare all aspects of insurance policies side by side. Just be sure to get on a genuine insurance comparison platform.
Furthermore, once you narrow down the list to a handful of insurance providers, read all the policy documents carefully before settling on one.