Employee’s Compensation Act 1923: Increasing the Wage limit

The Central government has changed the amount of wages to be considered for the calculation of compensation to workers under the Employee’s Compensation Act 1923 vide notification S.O.71 (E) dated January 3, 2020. The amount of wages considered previously for the calculation of compensation was Rs 8,000. Now, it will be Rs 15,000, according to the notification by the Ministry of Labour and Employment.

As per the Employee’s Compensation Act, an employer is liable to pay compensation of personal injury is caused to an employee during an accident arising out of and in the course of his/her employment. If personal injury is caused to an employee by accident arising out of and in the course of his employment, also where death results from the injury/accident arising out of and in the course of his/her employment, his/her employer shall be liable to pay compensation under the provisions of the Act. The employer will not be liable to pay compensation when,

An injury does not result in the total or partial disablement of the employee for more than 3 days.
An injury doesn’t result in death or permanent total disablement caused by an accident under the influence of drink or drugs.
In case of accidents caused by wilful disobedience of the rules by the employee and wilful removal of safety guards, the employer is not liable to pay compensation.

Also, an employee cannot claim compensation under the Act if he/she is already entitled to compensation from ESIC.

Compensation calculation

The computation of compensation under the Act is done as per provisions on Section 4 of the Act:

1. In case of accidents resulting in death: an amount equal to fifty per cent. of the monthly wages of the deceased multiplied by the relevant factor or an amount of Rs 1,20,000, whichever is more. The relevant factor is as per the age of the worker.

2. If the accident results in permanent total disablement: an amount equal to sixty per cent. of the monthly wages of the injured employee multiplied by the relevant factor Rs 1,40,000, whichever is more.

As per the new rule notified by the government, Rs 15,000 will be considered as wage for calculating compensation under the Act.

Also Funeral expenses of Rs. 5000 is payable to the eldest surviving dependent of the deceased employee.

The relevant factor for computation is mentioned in Schedule IV of the Act

1. Compensation in Case of Death:

50% of the Monthly Wage x Relevant factor as per the age of the worker
Funeral expenses of Rs. 5000 is also payable
The minimum amount payable is Rs. 1,20,000

2. Compensation in case of Permanent Total Disability (PTD)

60% of the Monthly Wage x Relevant factor as per the age of the worker
The minimum amount payable in this case is Rs. 1,40,000

3. Compensation in case of Permanent Partial Disability (PPD)

(i) In the case of an injury specified in Part II of Schedule I, such percentage of the compensation which would have been payable in the case of permanent total disablement as is specified therein as being the percentage of the loss of earning capacity caused by that injury; and
(ii) In the case of an injury not specified in Schedule I, such percentage of the compensation payable in the case of permanent total disablement is proportionate to the loss of earning capacity (as assessed by the qualified medical practitioner) permanently caused by the injury.

4. Compensation in case of Temporary Disability (Total or Partial)

A half monthly payment of the sum equivalent to 25% of monthly wages of the employee, to be paid in accordance with the provisions of sub-section (2)
The compensation is payable if the worker is temporarily disabled for more than three consecutive days.

Relevant Factor Schedule IV of the Workmen Compensation Act (now known as – Employee Compensation Act)

Age is the completed years of age of the workman or employee on the last birthday. The last birthday is the latest birthday of the workman which is immediately preceding the due date of compensation liability.