What is Workers’ Insurance or Workmen Compensation Insurance

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In today’s increasingly competitive work atmosphere, employee rights have also stepped forward. Providing a safe and secure work environment is one of the main responsibilities of every employer. However, one cannot deny the fact that injuries at the workplace are the common part of every business. In order to protect your business from the threat of costly lawsuits and high compensation amount, it becomes imperative to buy workmen compensation policy. The workmen compensation insurance policy covers statutory liability of an employer for death or bodily injury caused to employees. Now, this policy is known as Employee Compensation Policy.

Employees Compensation insurance policy covers these liabilities of the employer as prescribed by the Workmen Compensation Act. Therefore, any Employee compensation policy should cover the following:

  • Death
  • Permanent total disablement
  • Permanent partial disablement
  • Temporary disablement
  • Medical care from the injury or illness
  • Replacement income costs
  • Costs for retraining
  • Legal costs incurred if any
  • Benefits to survivors of workers who are killed on the job

Besides the above employee’s compensation, insurance is not limited to accidents only. It also covers problems and illnesses that may develop over an extended period of time due to the same injurious activity. Under the worker’s insurance, the employers are protected against any liability that he can incur due to the applicability of the Workmen Compensation Act.

Extension to Workers’ Insurance

The workers’ insurance policy or workmen compensation insurance can be extended to cover :

  • The liability to employee as an employer for any accidental injury caused during work
  • Hospital expenses, including ambulance charges and other medical expenses in respect of occupational accidents
  • There are certain diseases mentioned in part C of the Schedule III of the act which also requires the employer to pay compensation if the disease arises out of or during employment. Employer’s liability does not arise in the following cases :
    • Any injury that does not result in a fatality or disability for 3 days subsequent to the accident.
    • Influence of drinks or drugs
    • Wilful disobedience of an order that would have secured the workman’s safety
    • Wilful removal or disregard of any safety device
    • Liability assumed under an agreement.

Any employee who is not a workman as per the Workmen’s Compensation Act. The act has also defined the maximum compensation payable in each of the cases, ie the death, the permanent or temporary and partial disability. So, the employer needs to make sure that he buys sufficient insurance to cover these risks. 

Before the calculation following should be noted :

Settlement Under W.C. Act

  • Maximum monthly wage allowed for the calculation of compensation under the act is Rs. 8000
  • Workers from the age of 16 years and above are eligible for the compensation.
Types of Injury/ Loss Compensation given
In case of Death
  • 50% of the Monthly wage into * relevant factor as per the age of worker
  • Funeral expenses of Rs. 5000 is also payable
  • The minimum amount payable is Rs. 1,20,000
In case of Permanent Total Disability
  • 60% of the monthly wage * relevant factor as per the age of the worker
  • The minimum amount payable in this case is Rs. 1,40,000
In case of Permanent Partial Disability
  • A percentage of the compensation payable under PTD. This percentage needs to be estimated based on the extent of the reduction in earning capacity of the worker.
In case of Temporary Disability (Total or partial)
  • 25% of the Monthly wage of the worker payable every half month
  • The compensation is payable if the worker is disabled for more than three consecutive days
  • The maximum tenure for the compensation is 5 years.

How Does Workers’ Insurance Work?

Let us consider the following example to understand how workers’ insurance operates and where it is useful:

Paramveer Knitwears is a small hosiery firm in Moga, Punjab with Mrs Paramveer as the head owner. The firm had employed total no. of 15 employees. Since the no. of employees are less than 20 firm comes under the purview of the Workmen Compensation Act and is liable to pay compensation to workers for any injuries caused during the work hours. Since Hosiery manufacturing involves various cutting instruments and dying machinery it is a risky affair. So she decided to cover herself by‘ Workmen Compensation Insurance‘.

Back in November 2016, Manpreet Kaur one of the female employees accidentally burnt her hand, receiving 70% burns on her hand. The injury was severe enough to cause a partial disablement for Manpreet for about one and a half month. The worker’s insurance paid Manpreet the appropriate compensation that the statutes of the law entitled him along with some compensation from Paramveer.

Let us take another case from the same firm which happened back on June 17. One of the male employee Harkrishan deliberately burnt his hand in the same manner of that of Manpreet Kaur happened on Nov 16. It seemed like an accident but Harkishan was found to be drunk at the workplace.

The employer only reprimanded Harkishan for unprofessional behaviour and he had to bear the cost of treatment himself since the employer was not liable for it.

Conclusion

According to the Employees Compensation (Amendment) Bill, 2016 the new legislation offers a compensation of Rs. 50,000 and Rs. 1 lakh to employees and their dependents in case of injury caused due to industrial accidents.

Overall, the Employee Compensation Policy is a boon for both employees and employers. It gives employees several benefits which help in keeping up their motivation and reducing attrition. Similarly, employers can also protect themselves from the legal liability that may arise due to the injury of workers. On one hand, the workers’ insurance protects the employees, and on the other, it also limits the cost of accidental compensation for the employer.

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