What is Employee Compensation Act (Earlier known as Workmen Compensation Act)?

Introduction

Employee Compensation Act which was earlier known as Workmen Compensation Act which supports employee and its dependents in case of mis-happening with employee during course of employment.  As per this act Employer is liable to compensate in case of death or major/ minor injuries to an employee and his dependents.

Downloads : 

Bare Act : Workmen Compensation Act
Notification by government to cover all employees under this act

How to calculate compensation in case of mis happening?

IN CASE OF DEATH

50% of the monthly wages  X  Relevant Factor OR Rs 120,000/- whichever is more.  Also Rs 2500 for funeral expenses.

IN CASE OF TOTAL PERMANENT DISABILITY 

60% of the monthly wages  X  Relevant Factor or Rs 1,40,000/- whichever is more.

IN CASE OF PARTIAL PERMANENT DISABILITY

Such percentage of the compensation payable in case of TOTAL PERMANENT DISABILITY above as is the percentage of the loss in earning capacity (Refer Schedule I)

IN CASE OF TEMPORARY DISABILITY

A half monthly installment equal to 25% of the monthly wages, for the period of disablement or 5 years whichever is shorter


Note:

• Relevant Factor for the calculation of the amount of compensation has been mentioned in Schedule IV of the act.
• In case where wage of an employee less than minimum wage of the state, minimum wage should be considered for the purpose of calculation of compensation.
• Maximum of Rs 8000/- can be considered as wages for the purpose of calculation of compensation wherever wages of employee is more than Rs 8000/-. Download notification in this regards.
• Monthly wages is the average of last 12 months wages.

Examples 1 : An employee whose age is 25 years and monthly wage is Rs 3,000/- died in an accident during work.

Calculation:

As the age of the employee is 25 years hence the relevant factor as per Schedule IV is 216.91
In case of death we take 50% of monthly wages i.e. Rs 1,500/- in this case
Hence total compensation under the act will be Rs 3,25,365/- which will be paid as lump- sum amount
Also employee family will be paid Rs 2,500/- for funeral expense

Examples 2 : An employee whose age is 25 years and monthly wage is Rs 3,000/- incurred and get total permanent disability.


Calculation:

As the age of the employee is 25 years hence the relevant factor as per Schedule IV is 216.91
In case of death we take 60% of monthly wages i.e. Rs 1,800/- in this case
Hence total compensation under the act will be Rs 3,90,438/- which will be paid as lump- sum amount

What does Accident means?

Any accident with employee while working will definitely fall under the definition of Accident under the act but there are some occasions which are doubtful hence below are some cases and verdicts by authority, sharing with you, which will help you to understand what does accident means under the act.
Supreme court in one of its verdict mentioned that there must be a casual connection between the injury and the accident AND the accident and the work done in the course of employment for entitlement of compensation under the act.

Below are considered as accident and compensation is applicable:

• Employee falling in well while going to attend a call of the nature while on duty and died
• Driver killed by co driver while taking company truck from one place to another
• Employee got chest pain and died while on duty
• Employee got died or permanent total disability while operating some one else machine.
• Accident of driver while vehicle was not moving

Also see:

10 Facts you should know about Employee /  Workmen Compensation Act in India

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