Workmen's / Employees' Compensation Insurance

What is workmen’s or employees’ compensation insurance?

Employees’ compensation insurance, still widely known as workmen’s compensation or WC insurance, covers an employer’s legal liability to pay compensation when an employee dies or is injured by an accident arising out of and in the course of employment. The liability comes mainly from the Employees’ Compensation Act, 1923, which was called the Workmen’s Compensation Act until it was renamed. The policy can also respond to liability under common law and the Fatal Accidents Act, 1855 where the wording includes it.

It sits within our liability insurance range, but in practice it is one of the most basic covers any employer of manual or site workers should hold.

How the compensation is worked out

The Act sets a no-fault formula. For death and permanent total disablement, compensation is a set percentage of the employee’s monthly wages multiplied by a factor based on age, subject to minimum amounts and a wage ceiling notified by the Central Government. Permanent partial disablement is paid as a proportion of that figure according to the loss of earning capacity. Temporary disablement is paid as half-monthly payments. Funeral expenses and, in some cases, actual medical expenses are also payable. Because the notified figures change from time to time, the policy pays whatever the law requires at the date of the accident, subject to the wages declared.

How it relates to ESIC

This is where many employers get confused. Employees covered under the Employees’ State Insurance scheme receive employment injury benefits from ESIC, funded by the contributions paid, and the ESI Act generally bars them from also claiming compensation from the employer under the 1923 Act. So a WC policy is usually arranged for employees who are outside ESI coverage, for example:

• Employees earning above the ESI wage ceiling.
• Establishments or locations not yet covered by ESI.
• Contract and site workers who are not enrolled with ESIC.

Coverage rules, wage limits and notified areas change, and the new labour codes consolidate these laws, so we check each category of worker rather than assume. If an employer is required to be registered with ESIC but has not paid contributions, a WC policy does not fix that default.

What is not covered

• Injury, other than death or permanent total disablement, caused while the employee was under the influence of drink or drugs, or by wilful disobedience of safety rules or removal of safety guards.
• Injury that does not disable the employee for more than three days.
• Employees not declared, or wages under-declared, in the proposal.
• Occupational disease and medical expenses, unless specifically added.
• Contractors’ workers, unless the extension is bought.

How the premium is decided

Premium is based on the number of employees and the estimated annual wages in each job category, with rates varying by hazard. A clerk costs far less to insure than a welder, scaffolder or driver. Most policies are issued on estimated wages and adjusted at expiry on the actual wages paid, so honest declaration avoids an unpleasant surprise. Named policies list individual workers; unnamed policies cover categories and headcounts, which suits sites with changing labour.

Who needs it

Manufacturers, construction companies and contractors, real estate developers, warehouses, security and housekeeping agencies, transport operators, hotels and restaurants all employ people at risk of workplace injury. Builders often buy it with contractors’ all risk insurance so site workers and the works are both protected. Many employers also add group personal accident insurance for round-the-clock cover that pays regardless of legal liability.

How MILES helps

• Map your workforce: we split employees and contract labour by category and check ESI status before the proposal goes out.
• Compare insurers: we collect rates from several insurers and explain which extensions are worth buying.
• Get wages right: we help you estimate wages sensibly and manage the year-end adjustment.
• Support claims: we guide you on the accident report, medical records, wage proof and any proceedings before the Commissioner, with help from our claims team.

What we need for a quote

• Job categories, headcount and annual wages for each category.
• Work locations and nature of work at each.
• ESI registration status and which employees are covered.
• Contractor details if their workers are to be included.
• Extensions wanted and past claims.

Cover, exclusions and premiums depend on the insurer’s policy wording and underwriting. MILES Insurance Brokers Pvt. Ltd. is an IRDAI-licensed direct broker (Life & General, Reg. No. 954); the insurance is issued by the insurer. Insurance is the subject matter of solicitation.