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HR Services1

Tuesday, 7 May 2013

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


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?


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


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


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)


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


  • 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.


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.


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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SSR said...

How will be the calculation of PARTIAL PERMANENT DISABILITY, where loss earning capacity is 11%.

Govind Singh Negi said...

Dear Friend,

you need to refer Schedule 1 of the the act.

Unknown said...

Dear sir,
Is there any rule from government for permanent disabled person to give employment along with compensation pls clarify and if such rule is available and company regret to give employment what is the appox compensation that company has to give on such situation

Unknown said...

Dear Sir,

Is there any law stating that if contractor provide the employee on contract basis needs to be collect the bonus from the principal employer and distribute among the employees employees by him in any organization

surekha kotwal

Unknown said...

bonus is payable by contractor or the principal employer

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