Workmen Compensation Act 1923: An Overview & Compensation Amount

By Okbima 14 Mar 2024
Workmen Compensation Act


The Workmen Compensation Act 1923 is legislation designed to provide financial protection for workers who suffer from work-related injuries or illnesses. The act requires employers to provide compensation to employees who are injured or disabled due to their work. As per the act, employers are liable to pay compensation including medical expenses and lost wages to the affected workers.


What is the Workmen Compensation Act 1923?

The Workmen's Compensation Act was established in response to the increasing risks faced by laborers as a result of more advanced machinery. Initially, the Compensation Act of 1884 only required employers to compensate workmen for major or fatal accidents. However, by 1885, it became evident that this was insufficient, as confirmed by mining and factory inspectors.

Following the realization that the Fatal Act of 1885 was inadequate, a committee was created in 1923 consisting of Legislative Assembly members, employer representatives, medical experts, workers, and insurance experts. This committee conducted hearings and produced a report that ultimately led to the passing of the Workmen's Compensation Act.

The Act was designed to provide relief to workers who had been injured on the job, eliminating the need for costly court proceedings. It aimed to ensure workers could receive compensation for workplace injuries without unnecessary delays or financial burdens.

This law protects front-line workers in the industries listed below:

  • Temporary railway employees who are not part of the sub-divisional, district, or administrative offices.

  • Pilots and flight attendants on a plane.

  • Workers hired overseas by Schedule II of the Workmen's Compensation Act 1923.

  • Workers employed in construction sites, mines, docks, factories, and other designated locations outlined in Schedule II of the Act.

  • Drivers, mechanics, assistants, and any other individual involved in the operation and maintenance of vehicles.


Coverage Under the Workmen Compensation Act 1923

The financial coverage and the terms and conditions associated with it are determined by the insurance company that the employer is partnered with.

However, some common aspects are covered by all insurers.

  • Injuries sustained during an accident while performing work duties

  • Temporary disablement 

  • Permanent disability (full or partial)

  • Death due to an accident at work 

  • The harm caused by poor working conditions such as injury, illness, or fatality.


Liability of the Employer for Compensation

When an employee experiences an injury or death during their work, the employer should provide compensation. This compensation is contingent on four conditions that relate to the accident occurring during or as a result of the employee's work.

  • The accident at work resulting in personal injury to an employee is directly linked to the cause of the injury.

  • The likelihood is determined by the fact that work-related factors caused the injury.

  • The accident and injury that occurs while on the job.

  • If the applicant can demonstrate that the accident or injury occurred on the job and that the resulting strain exacerbated or played a role in the injury.


Workmen Compensation Policy Rules Have Changed in 2020

Good news for workers came with the recent change in rules by the Central Government regarding the calculation of compensation under the Workmen's Compensation Act of 1923. The notification, issued on 3rd January 2020, raised the amount of wages considered for compensation calculation from Rs. 8,000 to Rs. 15,000, as announced by the Ministry of Labour and Employment.

In 2010, the Workmen's Compensation Act of 1923 was renamed the Employee Compensation Act 1923. This act provides compensation to employees who suffer total or partial disablement, or death, due to work-related accidents. The compensation is paid by the employer, and employees eligible for compensation from ESIC cannot claim compensation under the Employee’s Compensation Act of 1923.


Conditions When Employer is Not Liable to Pay Compensation

Under the workmen's compensation policy, it is required that an employer provide compensation to an employee who suffers a personal injury due to an accident during their employment. 

However, an employer is not liable to pay compensation in the following circumstances:

  • When an injury does not cause the employee to be partially or disabled for more than three days.

  • If the injury does not result in permanent total disability or death due to an accident that occurred while the employee was under the influence of drugs or alcohol.

  • In cases where an employee's accident is a result of willful disobedience of safety rules or the removal of safety guards.


Compensation Amount Under Workmen's Compensation Act 1923 (Employee Compensation Act 1923)

The calculation of compensation under the Workmen’s Compensation Act is determined by the guidelines outlined in Section 4 of the Act.

  • In cases of permanent total disablement due to an accident, the compensation amount is calculated as 60% of the injured employee's monthly wage multiplied by the relevant factor or Rs.1, 20,000, whichever amount is higher.

  • In the event of an accident resulting in the death of an employee, the compensation is equal to 50% of the deceased employee's monthly wage multiplied by the relevant factor or Rs.1, 20,000, whichever amount is greater.


Note: As per the recent government ruling, the wage considered for computation under the Workmen's Compensation Act is Rs.15,000. The relevant factor for these calculations can be found in Section IV of the Act.


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In conclusion, the Workmen Compensation Act of 1923 has played a crucial role in protecting the rights and interests of workers in India. By providing financial assistance and medical benefits to employees who suffer from work-related injuries or illnesses, this legislation has helped improve workplace safety and ensure that workers are properly compensated for their injuries. To reduce your expenses on your employees, contact “Our Experts” to buy the best workmen's compensation insurance.


When looking for an insurance policy, it is crucial to consider the level of coverage provided. In addition, employers should also take into account the sum insured, optional add-ons, additional benefits, and the process for settling claims.

To file for workmen's compensation insurance, employees must first report the accident or fatality to the site inspector. They are then required to submit all necessary documentation to the insurance company and await approval of the claim. It is important to note that the process for settling claims may differ between insurance providers.

To file for workmen's compensation insurance, an employee must provide certain documentation. This includes a fully completed and signed application form, along with medical bills and records of compensation. Additionally, in cases where disabilities or death occur due to an accident, medical certificates verifying the situation must also be submitted.

As per regulations, if an employee passes away while on the job, their dependents are entitled to financial compensation. This same benefit also applies in situations where accidents result in disabilities.

Yes, it is a wise decision to look for workmen’s compensation insurance plans online. By doing so, employers can compare the advantages and disadvantages of various providers before selecting the best option for their needs.

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