Labour Insurance: Workmen’s Compensation Insurance

Workmen compensation insurance policy, a commercial insurance policy, establishes legal authority for an employer to compensate its employees in the event of their death or accident. The insurance, also known as employee compensation insurance or labour insurance, allows an employer to satisfy the duties set by the Workmen Compensation Act.

Who is a Workman?

Any individual hired for purposes other than the employer’s trade or business (other than a person whose employment is casual and engaged for reasons other than the employer’s trade or business) is a workman.

Workmen Compensation Act in India

The Workmen Compensation Act of 1923 is an employee compensation act that requires certain types of companies to compensate their workers or workmen in the event of an accident or injury. Employees and their families are entitled to damages if they are disabled or die due to an accident or injury caused on their job. The act requires employers to compensate employees in case of occurrence of occupational diseases.

The act is applicable to people working in potentially dangerous workplace environments such as plants, factories, building sites, mines, mechanically propelled vehicles, and other dangerous occupations. Furthermore, it also covers railway employees and people employed in similar capacities.

Workers’ compensation payments are based on their age, type of injury, and their average monthly salary.

However, for death and disability, the minimum and maximum compensation rates are fixed, subject to regular revisions. If a worker dies on the job, the employer is obliged to compensate the dependents of workers.

In India, the Ministry of Labour and Employment established the ‘Social Security Division’, which develops and enforces social security policies for workers. It is also in charge of enforcing the Workers Compensation Act in India. However, the legislation is administered by the various state governments through Workmen’s Compensation Commissions.

Importance of Workmen Compensation/ Labour Insurance

All employers should get workers’ compensation or labour insurance coverage because of the following reasons:

  • To pay the compensation that the insured policyholder is legally obliged to pay his employees and their families due to the death or bodily injury caused by accidents or diseases contracted at work and during employment.
  • To satisfy the insured employer’s liability arising under common law or laws listed in the Workmen’s Compensation Act of 1923.
  • With the approval of the insurance provider, to reimburse fees or expenditures incurred by the covered employee in defending any additional claims.

What does Workmen Compensation Insurance Policy cover?

The workmen’s compensation or the labour insurance policy covers the following:

  • Bodily harm caused by incidents occurring during the course and scope of employment
  • Bodily harm induced by sickness or aggravated by the working conditions
  • Death or temporary disability
  • Disablement, permanent or temporary
  • Legal fees and expenditures incurred with the permission of the corporation.

Worker’s compensation insurance add-ons:

  • If the contract is simply for labour, the tariff rate is based on the contract amount.
  • A labour and materials contract determines the labour value on merit, up to a maximum of 75% of the contract amount.

Who is Dependant on the Workmen Compensation Insurance

The dependants on labour insurance includes:

  • A widow or a widowed mother, a minor legitimate son, an unmarried legitimate daughter; if

    • Wholly or partially dependent on the earnings of the workman when the death occurred, a son or a daughter who attained the age of 18 years, and who is infirm;
    • The worker was entirely or partially reliant on his or her wages at the time of death,
  • A widower,
  • An unmarried illegitimate daughter, a minor illegitimate son, or a legitimate or illegitimate daughter if married and a minor, or a widowed minor,
  • A parent other than a widowed mother,
  • A widowed daughter-in-law,
  • An unmarried sister or a minor brother or a widowed sister if a minor,
  • A minor child of a predeceased daughter where none parents of the child are alive, or
  • A minor child of a predeceased son,
  • A paternal grandparent if no parent of the workman is alive

Exclusions in Workmen Compensation Insurance Policy

Major Exclusions of Workmen Compensation Insurance Policy (WCP)

Injuries in the course of action during war and invasion

An employer is not responsible for an employee’s injury, death, or disability caused by war, assaults, invasions, or other events. Therefore, employers do not need to settle for connected contingencies in the event of conflicts or assaults.

Injury due to terrorist activity in the office premises

Employers are not responsible for terrorist assaults on business premises. Therefore, in the case of terrorist assaults, employers are not obliged to reimburse the employee for any losses.

Cost payable to third parties

The remuneration includes fees paid to third parties who are neither employees nor employers. When third-party contractors or labourers sustain an accident, disability, or death, the WCP does not provide coverage because these people are not full-time employees of the organisation.

Attempt to suicide or self-harm

The coverage does not cover the employee’s self-inflicted injuries or suicide attempts, and it only covers unintentional injuries and not deliberate ones.

Injury when intoxicated

Injuries or disabilities sustained during working hours while under the influence of drugs or liquor are not admissible under the WCP.

Injuries suffered outside work.

Any form of injury, death, or disability suffered by an employee outside of the scope of their employment is not covered by the insurance. The company is not accountable for any bodily injury sustained by workers outside of work.

Compensation for injuries payable by employers under an agreement

Some businesses engage in a contractual arrangement with their employees to pay them for specific injuries that may arise during their job. If the claim and payment are made through contractual agreements, the WCP will not settle the claim or make payment. A contractual death benefit is one such benefit.

Required Documents for WCP

The documents essential for labour insurance or workmen compensation policy include:

Applicable to all Types of Claims

  • Duty filled and signed claim form
  • Medical bills
  • Compensation records

Claims for Permanent Disability

  • Disability-related medical certification
  • Memorandum of understanding between the wounded (employers) and the injured labourers according to the Workmen’s Compensation Act

Claims for Temporary Disability

  • Medical bills
  • Disability-related medical certification

Applicable for Fatal Claims

  • Death Certificate
  • Final investigation report
  • A copy of the postmortem report
  • The statement given by the witness if any
  • Form A by Workmen’s Compensation Act filled by the insured.

Amount of Compensation

In labour insurance, the amount of compensation depends on certain factors:

  • In the event of death: a sum equivalent to 50% of the monthly wage multiplied by the applicable factor as specified in Schedule IV of the Act, or Rs. 80,000/- whichever is greater.
  • In the entire permanent disablement, it is 60% or Rs. 90,000/-, whichever is greater, and
  • In the scenario of permanent partial disablement, the compensation is proportionate to the disability as determined previously.

Conclusion

The Workmen’s Compensation Act of 1923 was enacted to provide labour insurance or compensation to employees injured during their employment due to an accident. This act ensures that workers’ rights are protected even if they suffer a disability or die from an accident at work. Therefore, employers should compensate employees sustaining injuries resulting in death or disability while on the job.

FAQs Regarding Labor Insurance

Objective of The Workmen Compensation Act?

The Workmen's Compensation Act of 1923 was enacted to compensate workers in the case of an accident.

According to the Act, employers should have duties and obligations that include workers’ well-being following an accident caused by their employment, just as they have reserved the right to make profits. The goal of the act is to ensure that workers have a stable sustenance after an accident on the job.

What treatment do injured workers receive under labour insurance?

Injured workers receive all medically necessary and acceptable treatment. With medical prices skyrocketing, several states have implemented cost-cutting initiatives including management standards for certain injuries, including appropriate treatment regimens and diagnostic testing.

When is an employer liable to pay compensation to an employee?

  • If an employee has suffered personal harm
  • If such a personal injury occurred as a consequence of an accident, that is, if such an accident occurred as a result of and during employment
  • If such an injury resulted in an employee's permanent or partial disablement for more than three days
  • If an employee died as a result of such an accident

Who is eligible for the Workmen Compensation Act?

Every employee (including people hired through a contractor but excluding casual employees) employed for the employer's business and sustaining an injury in an accident arising out of and in the course of his employment is entitled to compensation under the act.