The Workmen Compensation Act, now officially renamed as the Employees’ Compensation Act, 1923, is one of India’s oldest and most important labour welfare legislations. Its main purpose is to ensure that if a worker suffers an injury, disability, or death during the course of employment, the employer must provide financial compensation.
This Act applies to a wide variety of occupations including factories, construction sites, transport services, mines, shipping, and many labour-intensive jobs.
What Is Workmen Compensation?
Workmen compensation is financial protection given to employees (or their dependents) when an accident arises out of and in the course of employment. It includes compensation for:
- Death
- Permanent total disability
- Permanent partial disability
- Temporary disability
- Occupational diseases
Who Is Covered Under the Act?
The Act covers:
- All workers not covered under ESI
- Casual workers, contract workers, daily wage workers
- Workers in manufacturing, mining, construction, transportation, shipping, warehousing, etc.
It does not apply to clerical staff or employees working in administrative roles unless notified.
When Compensation Becomes Payable?
Compensation becomes payable if:
- The accident occurred during employment, and
- It happened because of employment-related work.
Compensation is mandatory, even if the employer was not at fault.
Compensation Calculation Under Workmen Compensation Act
The amount of compensation depends on:
- Monthly wages of the worker
- Age factor (as per Schedule IV of the Act)
- Type of injury (death / disability)
Let’s break it down separately.
1. Compensation for Death
Formula:
50% of monthly wages × Age factor
Minimum compensation: ₹1,20,000 (latest amendment)
2. Compensation for Permanent Total Disability
Formula:
60% of monthly wages × Age factor
Minimum compensation: ₹1,40,000
What Is the Age Factor?
The age factor is a number specified in Schedule IV of the Act, which decreases as age increases.
- It represents the “future earning capacity” of the worker.
- Younger employees have a higher age factor because they have more years of work remaining.
- Older employees have a lower age factor.
Below are some commonly used age factors:
| Age | Factor |
|---|---|
| 16 | 228.54 |
| 20 | 224.00 |
| 25 | 218.47 |
| 30 | 207.98 |
| 35 | 197.06 |
| 40 | 184.17 |
| 45 | 169.44 |
| 50 | 153.09 |
| 55 | 135.37 |
| 60 | 116.43 |
(These are as per Schedule IV of the Act.)
Worked-Out Example of Compensation Calculation
Example Case
A worker, aged 35 years, earning ₹15,000 per month, dies in an accident at work.
Step 1: Take 50% of monthly wages
50% × ₹15,000 = ₹7,500
Step 2: Find the age factor for 35 years
Age factor for 35 = 197.06
Step 3: Multiply
₹7,500 × 197.06 = ₹14,77,950
Final Compensation Payable: ₹14,77,950
Example for Permanent Total Disability
Worker age: 30 years
Monthly wages: ₹18,000
Step 1: Take 60% of monthly wages
60% × ₹18,000 = ₹10,800
Step 2: Age factor for 30 years = 207.98
Step 3: Multiply
₹10,800 × 207.98 = ₹22,46,184
Final Compensation Payable: ₹22,46,184
Important Points Under the Act
✔ Employer must pay compensation within 30 days
✔ No need to prove employer negligence
✔ Compensation is payable even in case of contractor labour
✔ Employers can purchase a Workmen Compensation Insurance Policy to cover their liability
✔ Occupational diseases like silicosis, hearing loss, chemical poisoning are also covered
Penalties for Not Paying Compensation
If the employer does not pay compensation:
- Interest becomes payable
- Penalty up to 50% may be imposed
- Legal action may follow
Conclusion
The Workmen (Employees’) Compensation Act is a vital safety net for Indian labourers. It ensures that employees and their families receive financial support when something unfortunate happens at the workplace. Understanding wages, age factor, and injury type helps calculate compensation accurately.
