Nov 292016
 

An Overview of Workmen’s Compensation Insurance Policy

Do you own a business? Do you have employees? If the answer to both these questions is yes then, this article is for you. Why so? That’s because you need to learn about Workmen’s Compensation Insurance Policy and understand its significance. You being an employer need to be aware of this and possibly use it. In this article, we are going to understand the concept of this insurance and we will also learn how it actually came to existence. We will learn about the things that are covered under this type of policy and finally, we will take a look at the benefits of this insurance policy from the perspective of an employer.

An Overview of Workmen’s Compensation Insurance Policy

So, if you are ready…

Why on Earth Does and Employer Need to Buy Workmen’s Compensation Insurance Policy?

Did you know that the work environment you are offering to your employees need to be safe? If not and if anything happens to any of your employee because of unsafe work conditions, you, as an employer will be held accountable? So, providing a safe working environment to your employees is absolutely your responsibility. No one else will take that responsibility on your behalf.

But again, no matter how vigilant you are and no matter how good a fortress you build for your employees, the possibilities of accidents in a workplace can never be ruled out. The Ministry of Labour in India reported 1 lakh non-fatal accidents and 1,400 fatal accidents in various non-domestic workplaces across India. Well, that’s scary and hence, you need to stay on your toes always. Your employees are your responsibility.

Now the question is, ‘what if an accident happens in the workplace you have offered to your employees?’ If that happens, the accident can lead to some kind of physical injury to a worker or several workers and in worst case scenario, it can cause death of one or multiple employees working for you. Given that situation, you will be held accountable and you will be responsible for providing compensation to the injured employee(s) or to the family or families of the deceased employee or employees.

This is where the Workmen’s Compensation Insurance Policy kicks in and helps to protect the interest of both the employer and his or her employees. So, what does this Workmen’s Compensation Insurance Policy actually mean and do? Let us find out in this small and quick table:

Other name The Employees Compensation (Amendment) Bill
Act under which it was created Workmen Compensation Act
Safeguards whom or what Interests of employees and also of the employer
What does it cover Employer’s statutory liability for physical injury or death of employee or employees
What does it give Compensation to employees or to the dependents of the employees if the employees become victim of any form of occupational disease or industrial accident which may lead to disability or death during the employment tenure. Such disability or death needs to be a result of the nature of work done by the employees.

From the Standpoint of Employers

The Workmen Compensation Act of India states that it will be the responsibility of the employer to provide a safe working place for the employees. In case of any kind of mishap in the workplace causing death or disability of the employees, it will be the employer who will be responsible for providing compensation.

Now, an employer may have put all security and safety measures in place. However, accidents do happen. When something bad happens, no one will say that it was not employer’s fault. In fact, the employees will get together and start blaming the employer and even state that it was employer’s negligence that led to the disaster. That is when they will go on strikes, demand money or compensation and drag the employer into expensive lawsuits.

Having a Workman’s Compensation Insurance Policy will take out a lot of drama and save a lot of trouble and expenses for the employer. As a matter of fact, the employer is not required to pay a single dime for any lawsuit if an employee sues the employer. Put in other words, legal liability to unlimited extent gets covered under this insurance policy. Hence, it is kind of must for employers.

What Led to the Creation of Workmen’s Compensation Insurance Policy?

This was a love child of a bargain between the employers and the employees. What really happened earlier was that the employees sometimes sued employers for accidents caused by their own negligence and demanded hefty amounts. The employers had to pay the money. This frustrated the employers and they came into an agreement with the employees wherein it was clearly mentioned that in case of any accident or mishap in the workplace, the employees will get their compensation from the insurance policy.

This made both the parties happy because the employees received their financial compensation while the employers were not sued for every little thing and obviously not for mistakes of the employees that led to disasters.

Once the Workmen’s Compensation Insurance Policy came to existence, employees were given cover under this policy and thereby the question of court and suing etc. was ruled out. Using this policy, the employer can easily cover a number of issues like death, permanent complete or partial disability, temporary disability etc. So in essence, this Workmen’s Compensation Insurance Policy is a good option for both the employees and the employers.

What Are the Things That Are Covered Under Workmen’s Compensation Insurance Policy?

Of course, the Workmen’s Compensation Insurance Policy has a number of different variants. The benefits that can be enjoyed under this policy will solely depend on the type of the policy the employer chooses. However, some of the most basic benefits that are usually covered under this policy include:

  • Death at workplace because of an accident.
  • Complete and permanent disability.
  • Partial and permanent disability.
  • Coverage for legal expenses if any.
  • Temporary disablement.
  • Cost of medical treatment (usually, this is chosen separately if the employer wants to and this medical treatment cost is usually claimed by the employees who become victims of accident).

How Is a Worker Defined Under This Act?

When we are saying Act, we mean the Workmen Compensation Act of India. This act explicitly defines a worker or a workman. The definition in the Act states that a worker or a workman is a person who:

  1. Is a servant of the railways according to the 1989 Railways Act and is not employed permanently in railways’ sub-divisional or district office, is not employed as an administrator or is not working in any capacity which has been explicitly mentioned in Schedule II.
  2. Is a crewmember, a seaman or a master of any ship.
  3. Is a crewmember of a captain of any aircraft.
  4. Is employed as helper, driver, cleaner, mechanic or any other position in the field of motor vehicles.
  5. Is employed abroad in any country by a company in capacity that has been mentioned in Schedule II or in motor vehicle, ship or aircraft or any company which is registered in Indian Republic.
  6. Is employed in any one of the capacities mentioned in Schedule II irrespective of whether the contract was made prior to or after the Act was passed and irrespective of whether the contract is present in express writing or is verbally implied. However, the person who is in the Union’s Armed forces will not be included.

How Does One Decide the Compensation Amount?

Now, when an employee gets into trouble (that is, meets an accident that leads to death or injury), he or she needs to get compensation. But, how much? This is not an easy question to answer. The amount of compensation will depend on the extent of the injury in question. But, there is one small clause in there. The compensation amount is inversely proportional to the employee’s age. If the age is high, the compensation is low and if the age is low, the compensation is high.

Now, there has to be some basis for calculating the compensation. What is that basis? The basis for compensation calculation is the wage earned by an employee. It may sound a bit of injustice but you need to understand that if two people have exact same injuries but they have two different wages, their compensations will differ.

Now, the question is, ‘what is wage and how is it defined?’

The Act defines wages as well. As per the act, apart from pension, Provident Fund, travel allowance etc. if there are some other benefits that can be easily calculated in terms of a monetary value during the whole employment tenure, it will be considered as wage.

Now, there is something called Minimum Wages Act. This act was passed in 1948. In case an employee is actually receiving a monthly wage, which is less than the minimum wage as defined by the 1948 Minimum Wages Act, in order to calculate compensation, it will be considered that he or she is receive the minimum wage that the Minimum Wages Act defines. Hence, his or her compensation will be higher which would have otherwise been lower if the actual wage was considered.

In case the worker gets some disease because of the nature of the work, how will the compensation be calculated? In that case, the wage the employee last drew when his job was terminated will be used for compensation calculation and not the wage that the employee drew on the date on which the employee contracted the disease. In sadly, an employee dies at workplace because of an accident, the dependents of the employee will get the compensation amount.

Is There Something Which Is Not Covered by Workmen’s Compensation Insurance Policy?

Of course, there are a few things which are not covered by Workmen’s Compensation Insurance Policy. Those that are not covered have been mentioned below:

  • If an accident or an injury that has taken place is linked to some perils and war invasions, such an accident or an injury will not be covered.
  • If an employee gets into an accident or is injured while being under the influence of alcohol or drugs, such an accident or an injury will not be covered at all.
  • If the employees disobey direct orders related to any safety mechanisms and protocols, injuries and accidents will not be covered.
  • If an accident is not causing an injury which leads to permanent or partial disablement for a period of more than 3 days, such an accident or injury will not be covered.

Conclusion

It is simple – both employer and employees benefit from this insurance policy. Unnecessary lawsuits and hence wastage of time and resources can be easily avoided by this insurance policy. Thus, an employer should buy this insurance policy.

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