How Is Compensation Calculated Under the Employees' Compensation Act?

The Employees' Compensation Act provides compensation to employees who suffer injuries or death while performing their duties at work. Compensation is calculated based on several factors, including the severity of the injury, the wages of the employee, and the nature of the disability or death. The Act ensures financial support for employees and their dependents in the event of work-related incidents.

Steps to Calculate Compensation:

Determine the Type of Injury or Death:

If the injury results in temporary disability, permanent disability, or death, compensation calculations differ. For example, death leads to compensation for dependents, while disability requires an assessment of loss of earning capacity.

Assess the Employee's Wage:

The average monthly wages of the employee are a key factor. This is usually calculated by averaging the employee's wages for the 12 months preceding the injury.

Degree of Disability:

In case of disability, the degree of disability (permanent or temporary) is evaluated. A medical board assesses the degree of impairment or loss of physical or mental abilities.

Age of the Employee:

The age of the employee plays a crucial role, as younger workers may receive higher compensation amounts due to a longer expected working life and wage-earning capacity.

Multiplier Factor:

Compensation is typically calculated by multiplying the employee’s wages with a certain factor based on the degree of disability, the employee's age, and the severity of the injury. For example, for permanent total disability, the compensation could be 60% of the wages multiplied by a factor based on the employee's age.

Compensation for Death:

If the employee dies as a result of the injury, the dependents receive compensation, which is typically 50% of the wages of the deceased, multiplied by the factor corresponding to the age of the deceased employee.

Legal Actions and Protections:

Claim Filing:

The employee or their dependents must file a claim with the employer or the Employees’ Compensation Commissioner, providing all required evidence, such as medical reports and proof of wages.

Medical Evidence:

Medical evidence, including doctor’s reports and certificates of disability, plays a vital role in determining the compensation for injuries.

Appeals:

If the claim is denied or the compensation is insufficient, the employee or their dependents can appeal to the relevant authorities for reconsideration.

Example:

If an employee suffers a permanent total disability due to a workplace accident and their monthly wages are ₹30,000, the compensation under the Employees’ Compensation Act might be calculated as:

60% of ₹30,000 = ₹18,000

The compensation is further adjusted based on the employee's age and the severity of the disability.

If the employee is young, say 25 years old, the compensation factor might be higher, ensuring that the amount is adequate to support the employee for a longer period due to their remaining working years.