The Employee’s Compensation Act, 1923 (formerly the Workmen’s Compensation Act), plays a crucial role in ensuring the welfare and protection of workers in India. It holds employers accountable for compensating workers who suffer injuries or death arising out of and in the course of their employment. The Employee’s Compensation Act outlines various provisions for compensation based on the nature and severity of the injury, and it sets clear guidelines on how compensation is calculated. Recent amendments to the Act, particularly the revision of the wage limit for compensation calculations, aim to enhance the protection of employees and ensure fair compensation for them and their dependents. This article highlights the key updates to the Act, focusing on changes in the wage ceiling and the revised compensation calculation process, along with the Relevant Factor Schedule IV that determines compensation based on the employee’s age.
The Central Government has revised the wage limit to be considered for the calculation of workmen compensation under the Employee’s Compensation Act, 1923, with the notification S.O. 71(E) dated January 3, 2020. Previously, the wage considered for compensation calculations was Rs. 8,000. However, with the latest changes, this amount has been increased to Rs. 15,000, as per the Ministry of Labour and Employment’s notification.
When is the Employer Not Liable for Compensation?
The employer will not be liable to pay compensation under the following conditions:
- Temporary Injury: If the injury does not lead to total or partial disablement for more than 3 days.
- Injury Due to Intoxication: If the injury is caused by the employee’s accident due to the influence of alcohol or drugs.
- Willful Disobedience: If the employee has caused the injury by willfully disobeying safety rules or removing safety guards.
- ESIC Compensation: If the employee is already entitled to compensation from the Employees’ State Insurance Corporation (ESIC).
Calculation of Compensation under the Workmen Compensation Act
As per Section 4 of the Act, the calculation of compensation is done based on the following provisions:
- Compensation in Case of Death:
- Formula: 50% of the monthly wages of the deceased multiplied by the relevant factor (based on the worker’s age) or an amount of Rs. 1,40,000, whichever is higher.
- Minimum Amount: Rs. 1,40,000.
- Funeral Expenses: Rs. 5,000 will be paid to the eldest surviving dependent of the deceased.
- Compensation in Case of Permanent Total Disablement (PTD):
- Formula: 60% of the monthly wages of the injured worker multiplied by the relevant factor (based on the worker’s age) or an amount of Rs. 1,70,000, whichever is higher.
- Minimum Amount: Rs. 1,70,000.
- Compensation in Case of Permanent Partial Disability (PPD):
- For injuries listed in Part II of Schedule I, compensation will be calculated as a percentage of what would have been payable in the case of permanent total disablement, according to the loss of earning capacity specified for that injury.
- For injuries not listed in Schedule I, the compensation will be proportionate to the loss of earning capacity, as assessed by a qualified medical practitioner.
- Compensation in Case of Temporary Disability (Total or Partial):
- Formula: A half-monthly payment equivalent to 25% of the monthly wages of the employee.
- Eligibility: Compensation will be payable if the worker is temporarily disabled for more than three consecutive days.
Summary of the Compensation Calculation:
| Type of Amount | Compensation Amount | Minimum Amount Payable |
| Death | 50% of monthly wage × relevant factor or Rs. 1,40,000 | Rs. 1,40,000 |
| Permanent Total Disablement (PTD) | 60% of monthly wage × relevant factor or Rs. 1,70,000 | Rs.1,70,000 |
| Permanent Partial Disablement (PPD) | Percentage of compensation based on loss of earning capacity | Varies |
| Temporary Disability | 25% of monthly wage paid for each half-month of disablement | Varies |
Key Points to Remember
- Rs. 15,000 is now considered the maximum monthly wage for calculating compensation under the Act.
- The minimum payable compensation has been increased to Rs. 1,40,000 for death-related claims and Rs. 1,70,000 for permanent total disablement.
- Funeral expenses of Rs. 5,000 are payable to the eldest dependent of the deceased employee.
For further details, it is advised to consult the Workmen Compensation Act and relevant schedule IV to check the exact relevant factors based on the worker’s age.
Revised Schedule IV – Relevant Factor for Compensation Calculation (Compact Version)
| Age Group | Relevant Factor | Age Group | Relevant Factor | Age Group | Relevant Factor | Age Group | Relevant Factor |
| Upto 15yrs | 206 | 27-28 yrs | 150 | 41-42 yrs | 98 | 55-56 yrs | 42 |
| 15-16 yrs | 202 | 28-29 yrs | 146 | 42-43 yrs | 94 | 56-57 yrs | 38 |
| 16-17 yrs | 198 | 29-30 yrs | 142 | 43-44 yrs | 90 | 57-58 yrs | 34 |
| 17-18 yrs | 194 | 30-31 yrs | 138 | 44-45 yrs | 86 | 58-59 yrs | 30 |
| 18-19 yrs | 190 | 31-32 yrs | 134 | 45-46 yrs | 82 | 59-60 yrs | 26 |
| 19-20 yrs | 186 | 32-33 yrs | 130 | 46-47 yrs | 78 | 60-61 yrs | 22 |
| 20-21 yrs | 182 | 33-34 yrs | 126 | 47-48 yrs | 74 | 61-62 yrs | 18 |
| 21-22 yrs | 178 | 34-35 yrs | 122 | 48-49 yrs | 70 | 62-63 yrs | 14 |
| 22-23 yrs | 174 | 35-36 yrs | 118 | 49-50 yrs | 66 | 63-64 yrs | 10 |
| 23-24 yrs | 170 | 36-37 yrs | 114 | 50-51 yrs | 62 | 64-65 yrs | 6 |
| 24-25 yrs | 166 | 37-38 yrs | 110 | 51-52 yrs | 58 | Above 65 | 2 |
| 25-26 yrs | 162 | 38-39 yrs | 106 | 52-53 yrs | 54 | ||
| 26-27 yrs | 158 | 39-40 yrs | 104 | 53-54 yrs | 50 | ||
| 26-27 yrs | 154 | 40-41 yrs | 102 | 54-55 yrs | 46 |
How to Use the Relevant Factor
The Relevant Factor remains the same as before, based on the employee’s age. You can look up the age group and use the corresponding relevant factor to calculate the compensation.
For example:
- If the employee is 28 years old, the relevant factor is 154 (for the 27 to 28 years group).
- If their monthly wages are Rs. 15,000, the compensation calculation for death or permanent total disablement would be:
Compensation = 60% of 15,000 × 154 = Rs. 1,38,600
In conclusion, the Employee’s Compensation Act, 1923, continues to evolve to meet the changing needs of the workforce, offering greater security and fairness to employees. The recent increase in the wage limit for compensation calculation, alongside the updated Relevant Factor Schedule IV, ensures that workers are better protected in case of accidents that lead to death or disability. By ensuring that compensation amounts are more reflective of an employee’s wages and age, the amendments strengthen the safety net for workers. Employers must remain vigilant about their responsibilities under this Act to avoid liabilities, while employees and their families can benefit from the enhanced provisions for compensation, providing greater peace of mind in case of unfortunate incidents.
