Human Capital Management

MODULE 5

INDUSTRY RELATION:

Syllabus:
Employer, Employee, Rights of an Employee at Work Place. HR Policy- Meaning and Its
Importance. Legal Issues Related to HR in the Organization. Compensation Act, 1923-The
Workmen's Compensation Act,1923- Introduction, Main Features of the Act, Definitions,
Provisions Under the Act

Definition of Employer and Employee:

 Employers are often an organisation, company or person that employs one or more
professionals. An employer might also be a government agency, a store, an institution or
a type of non-profit organisation. The employer pays salary to an employee as per their
employment contract terms. An employer is also responsible for providing benefits to
their workers. These may include insurance, gratuity and retirement benefits, depending
on local laws or labour union contracts.
 An employee works for a company, organisation or person. They collect an hourly wage
or a fixed salary as their compensation, depending on their work agreement. An
employee might work full-time, part-time or during fixed hours. An employer may hire
them for a specific purpose or during busy seasons. Independent contractors and
freelancers can be employees as well, although they often work independently with a
company and are usually ineligible for benefits. Salaried employees typically receive
several perks and benefits as part of their job, like insurance, retirement plans, paid
leaves, incentives and bonuses.

Employment Contracts:
Employers typically hire employees to work under employment contracts. These contracts
include:
 Verbal agreement: The employer and the employee verbally agree to the employment
terms.
 Implied agreement: The employer and the employee do not verbally agree to terms, but
they might suggest or infer employment terms without formalising them in writing.
 Written agreement: An employer, human resources professional and the employee
typically sign and date employment terms.

Type of status of Employer and Employee:

 Employers might hire employees as waged or salary. A waged employee typically gets
their salary on an hourly basis and may get paid daily, weekly or monthly. If they work
hours beyond their shift, they are eligible for overtime. Many waged work opportunities
come with relatively fixed responsibilities and there is little flexibility to change the
working hours and schedule.
 A salaried employee earns a set annual salary, paid weekly or monthly, and may not get
paid for overtime work. Typically, salaried employees include professional roles,
administrative positions, executive jobs and sales positions. They receive their salaried
wage at the end of each week or month, even if they stayed late some days or left early on
other days.

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Authority Employer and Employee:

 The employer has authority in the workplace. They assign work to employees and may
monitor productivity or individual work performance. The employer can also end a
professional engagement if an employee is in breach of contract. employer is typically the
ultimate authority in the workplace.
 An employee might have some authority in the workplace if they are operating as a
manager or the supervisor,

Responsibilities Employer and Employee:

 Employees of an organisation or company have to maintain productivity in order to
honour their work contract.
 Depending on the company and the nature of their work, some employees may also have
to maintain confidentiality of work-related matters, sensitive information and crucial
data.
 Employers expect employees not to misuse the resources and work privileges an
employer provides them.
 Employers are responsible for maintaining the safety and security of their employees in a
workplace.
 They manage compensation and benefits for employees to ensure that the employees
receive them timely and accurately.
 An employer may provide their employees with benefits like paid time off, sick leaves,
medical insurance and access to professional tools and resources. Many large companies
usually entrust their human resource, or HR, department with employee matters such as
hiring, remuneration and benefits. Top HR executives and leaders usually report to top
management officials, who in turn, report to company stakeholders.

Relationship Employer and Employee:

 Employers engage in a professional relationship with their employees. Most businesses
and organisations refrain from entertaining personal relations in the workplace.
 In most cases, companies do not encourage personal relationships between employees
and their managers or supervisors. This is because such a scenario can lead to biases and
clouded judgement from both parties.
 Many businesses encourage employees and their supervisors to engage in recreational
and team-building activities outside a work setting, as this can boost team morale and
foster healthy professional relationships with appropriate boundaries.

Compensation Employer and Employee:

 An employer compensates their employees for their work and time on an hourly wage
basis or with an annual salary that is paid in monthly or weekly instalments. Typically,
payment for salaried positions follows a fortnightly or monthly cycle. They may also get
bonuses based on their performance.
 Employers their earnings may depend on the profits generated in a financial quarter or
year. Some employers may file taxes on behalf of their salaried employees to ensure
compliance.
Goals Employer and Employee:
 Employers have business-related goals that focus on:
 improving the profitability of the business

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 increasing productivity
 hiring talented employees
 maximising the efficiency of operations and work processes
 An employee's goals are to follow the instructions of superiors or managers and complete
the tasks assigned to them within specified timeframes. These are some goals that
employees may have in a company:
 completing a relevant certification programme
 gaining work experience and training in a different department
 improving a performance metric to a specified level
 conducting team-building exercises
 improving or updating company technology or infrastructure
 enhancing the efficiency of a department
 completing training modules and skill development exercises
 improving productivity to a specified percentage

Rights of an Employee at workplace:

The employment laws in India lay down several provisions to safeguard the interest of
employees, there are 8 most important rights applicable to all employees in India, namely:
1. Employment Agreement: An Employment Agreement is a written document, which
lays down the terms and conditions of employment and establishes the rights and
obligations of the employer and employee. An employee is entitled to get a written
employment agreement duly signed by the employer before starting work. A well-written
agreement drafted by a labour lawyer can prevent any unforeseen discord between the
employer and employee, as the legal course to be taken to resolve any dispute is already
stipulated in the employee’s agreement.
2. Leave: During the course of employment, an employee is entitled to leaves and holidays.
Generally, there are 4 types of leaves available to an employee in India:
a. Casual Leave: An employee can take a casual leave in case of an urgent matter
like a family emergency or unforeseen personal matter.
b. Paid leave: An employee is entitled to paid leaves which can be availed monthly,
quarterly or annually. The employer cannot deduct the employee’s salary for the
paid leaves taken.
c. Sick leave: An employee is entitled to a fixed number of sick leaves which can be
taken in case the employee gets sick.
d. Other leaves: Unpaid Leaves can be taken by an employee for which, the
employer can deduct the salary of the employee.
Generally, an employee is required to submit a medical certificate in case the sick leaves
extend to a period for more than 2 days. This depends on the company’s HR Policies.
3. Timey Salary: An employee is entitled to receive a timely salary at the end of every
month. An employer has the duty to pay the salary amount to an employee after making
the requisite deductions like TDS, provident fund, etc. An employee can hire a labor
lawyer to take proper legal action against the employer for not paying a salary.
4. Maternity Benefit: A female employee is entitled to maternity/pregnancy leave for 26
weeks which can be availed during pregnancy and/or after the delivery. The Maternity
Benefit Act, 2017 safeguards the interest of pregnant and lactating women employers in

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India. Maternity leave can also be taken in case any complications arise during
pregnancy, premature birth, miscarriage, or medical termination of pregnancy. Some
private companies in India are also giving paternity leave to their male employers
allowing them to take care of their new born child.
5. Gratuity: Gratuity is a retirement benefit under the Payment of Gratuity Act, 1972 paid
to an employee at the time of retirement, termination, resignation or employee’s death. It
is paid in recognition of service to the company, to employees who have completed at
least 5 years of continuous service. If the employer does not pay the gratuity amount to
the employee, employment lawyers can be consulted to take proper legal action.
6. Provident Fund: Under the Employees’ Provident Funds & Miscellaneous Provisions
Act, 1952, employees have the option to keep a part of their salary invested in EPF,
which is transferred directly by the employer in the PF accounts. The contribution by
employer and employee are maintained by the Employees Provident Fund Organisation
(EPFO).
7. Notice Period: In case the employer wishes to terminate the employment of an
employee, then a notice must be served to the employee to prepare them for such
termination. An employer cannot terminate an employee without giving a notice period.
In case, the employer has fired an employee for no substantial reason and no notice, the
employee can talk to a labour lawyer to file a complaint against the employer for
wrongful termination of employment.
8. Protection against Sexual Harassment: The employer has an obligation to ensure that
all employers, women employees, in particular, are protected from any kind of
harassment. Any incident of sexual harassment with an employee has to be dealt with
promptly and immediately. The employer has to enact a company's policy prohibiting
sexual harassment at the workplace and establish a redressal committee to deal with any
case of sexual harassment in the office. A woman can file a complaint against sexual
harassment at the workplace under the Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013. An employee can also file a sexual
harassment case in the labour court by hiring an employment lawyer.
Apart from these rights, the employee also has the right to safe working place with basic
amenities, right to appropriate working hours, right to any incentive promised, etc.
HR Policies:
Meaning:
Policies are broad guidelines as to how the objectives of a business are to be achieved. Human
resource policies lay down the decision making criteria in line with the overall purpose of the
organisation in the area of Human Resource Management.
They are developed by the HR Manager in consultation with the top management to assist the
managers at various levels to deal with the people at work. HR Policies are continuing guidelines
of the organization which are intended for adoption in managing its people. HR Policies define
the conception and value of the organization on how people and things should be treated.
Some examples of personnel policies are given below:
1. The employees will not accept any gift from any supplier except for token gifts of purely
nominal or advertising value.
2. Each employee will proceed on at least one week vacation each year.

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3. The employees will not accept any outside assignment.

Needs of HR Policies:
The need can be highlighted by way of following points:
1. They provide clear communication between the organization and their employees
regarding their condition of employment.
2. They form a basis for treating all employees fairly and equally.
3. Policies are a set of guidelines for supervisors and managers.
4. They create a basis for developing the employee’s handbook.
5. They establish a basis for regularly reviewing possible changes affecting employees.
6. Policies form a context for supervisor training programs and employee orientation
program.

Types of HR Policies:
HR policies are discussed below:
1. Originated Policies – These are set-up by top management intentionally with a view to
guiding executive pondering over various levels.
2. Appealed Policies – These policies are formulated to fulfil the requirements of certain
unusual situations which are riot found covered by the earlier policies. Usually, such
requests came from subordinates who fail to handle the cases on the basis of the guidance
offered by the existing policies.
3. Imposed Policies – As it is evident from the name of these policies these are formed
under imposition or pressure from external agencies like government, trade associations,
and unions.
4. General Policies – These policies manifests the philosophies and priorities of the top
management in formulating the broad plan for mapping out the organisation’s growth
chart.
5. Specific Policies – As it is evident from their name, these policies cover specific issues
such as hiring, rewarding and bargaining. Such policies, however, should be in line
with the basic framework which is offered by the general policies.
6. Written Policies and Implied Policies – Implied policies as evident from the behaviour
of members like dress code, gentle tone while interacting with to customers, not getting
angry while at work, etc. On the other hand written policies, spell out managerial
thinking on paper so that there is very little room for loose interpretation.
7.

Qualities of HR Policies:
The ideal HR policy should have the following qualities:
1. HR policy should contribute to organisational objectives: An ideal HR policy should
be such that its implementation may help in the accomplishment of the desired objectives
of the organisation.

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2. HR policy should make the employees conscious of their importance and place in
the organisation: This makes the employees feel proud that they also have got a place in
the organisation and that the organisation realises their importance.
3. HR policy should be in writing: An ideal policy should be in writing. Putting policies in
writing is the best way of putting them to work. Management should not feel that written
policies lead to rigidity. Written policies eliminate vagueness and inconsistency. By more
precise communication in writing, the difficulty of communicating intentions and desires
is reduced considerably.
4. HR Policy should create a sense of security: An ideal HR policy should create a sense
of security among the employees. They should feel that the management has got a policy
whereby it ensures the security for employees.
5. HR policy should encourage cooperation between the management and the
employees: An ideal HR policy should aim at fostering the spirit of cooperation between
employees and the management. It should create an environment in which there is no
place for suspicion or doubt against each other.
6. HR policy should be flexible: Although policies should not change frequently, an ideal
HR policy is one which has the element of flexibility, that is, if the objectives of major
plans of the organisation change, then policies should also be reconsidered to meet the
changed circumstances. However, if an HR policy is disregarded quite often, then it
shows that the policy is not sound and it must be re-framed.
7. HR policy should aim at creating opportunities for the development of employees:
An ideal HR policy should aim at creating opportunities for the development of
employees. Such a policy would win the heart of the employees, and they would work
very sincerely.
8. HR policy should be consistent: An ideal HR policy should be consistent, otherwise it is
unlikely to help in the accomplishment of the desired objectives of the organisation.
Although everybody agrees with this contention, in practice, it is violated quite often. An
HR policy should be clear on all matters and may be suitable even in unusual situations.
An ideal HR policy should have the quality of clarity, leaving nothing to chance. It
should be able to withstand unusual situations.
9. HR policy should be controlled: As HR policies are likely to be misinterpreted or
getting obsolete, it is necessary that they may be controlled. The job of controlling the
HR policies can best be done by the top management. It should be controlled by a top
executive who is well versed in writing, teaching, familiar with the history and operations
of the organisation and has a lot of experience of administrative work. Harold Koontz and
Cyril O’Donnell have also favoured the control of policies.

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10. HR policy should be taught: Simply issuing a policy or statement is not enough. A
policy is likely to be misunderstood or misinterpreted, and we know the consequences of
a misunderstood policy. Hence, a policy must be explained and taught. Wherever and
whenever needed, it should be interpreted.
Thus, an ideal HR policy should have the aforesaid features to serve its desired purpose.

Significance of HR Policies:
The significance of HR policies can be highlighted with the help of the following points:
1. Sound basis for decisions – HR policies offer a sound basis for taking decisions with
regard to HR problems. Once a policy has been laid down, any executive can take a
decision easily on the basis of that policy.
2. Facilitate meaningful and effective HRM – Once HR policies are framed and declared,
everybody knows the course of action with regard to different HR problems. Hence, there
will be least confusion and HRM will be more effective.
3. Restrain discrimination and undesirable behaviour towards employees – With the
declaration of HR policies, the management cannot discriminate with the employees. It
has to maintain a standard behaviour towards all.
4. Restrain injustice – After the declaration of HR policies, practically no scope is left for
the management to exercise its discretion or sweet will. Hence, even biased management
cannot take undesirable decisions.
5. Help in decentralisation of authority – HR policies ultimately lead to decentralisation
of power and authority. As a policy matter, the middle-level or lower-level HR staff may
be delegated authority in certain spheres. This eases the job of senior or top-level
management.
6. Distinguish policy from procedure – Although some HR executives know how to tackle
the employees, they often confuse a policy with a procedure. A policy is meant for
general guidance, whereas a procedure is the implementation of the policy on a particular
problem.
7. Save time – As the HR policies serve as guidelines, there is no need of analysing and
discussing all problems separately and individually. The problems can be grouped
together and solved according to guidelines contained in the HR policies.
8. Bring continuity and uniformity – Once the policies are formed, whether these are in
the field of finance, or human resources, or sales, or distribution and so on, there will be
no difficulty if the manager is replaced by a newcomer. Thus, the policies bring
continuity and uniformity which, in turn, encourage the morale and faithfulness of the
workers.

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9. Help in accomplishing the organisational goals – As the formation and declaration of

HR policies lead to the contentment among workers, they offer their willing and effective
cooperation in accomplishing the desired objectives of the organisation.

Steps in formulation of HR Policies:

1. Identifying the Need: In case, an organisation has no appropriate HR policy, the HR
manager should convince the Chief Executive of the need of a HR policy. Policies are
required in various areas of human resource management since areas are hiring, training,
compensation, industrial relations, etc. A staff expert, a union leader, a first-line
supervisor, or a rank-and-file employee may voice the need for revision of an existing
policy.
2. Accumulating Information: After the need for a policy has been accepted, the ensuring
step is to collect requisite facts for its formulation. A committee or a specialist may be
assigned the task of collecting the required information from inside and outside the
organisation.
Facts may be gathered from any of the following sources:
a. Earlier practice in the organisation.
b. Current practice among the companies in the community and throughout the
nation in the same industry.
c. The attitudes and philosophy of the role management.
d. The attitudes and philosophy of middle and lower management.
e. The knowledge and experience gained from handling countless problems on a
day-to-day basis.
3. Examining Policy Alternatives: On the basis of data collected, alternatives are
evaluated in view of their contributions to organisational objectives. It is important to
secure active participation of those who are to use and live with the policies.
4. Putting the Policy in Writing: After the requisite information has been gathered and the
alternatives examined, the HR department begins with the priority of formulating the
written expressions of the company’s HR policy. While writing the policy it is
worthwhile to avoid emotional phrases.
5. Getting Approval: To seek approval the HR department should send the policy draft to
the top management. The reason is the top management is authorised to take the final
decision whether a policy is adequately represented the organisation’s objectives or not.
6. Communicating the Policy: Once the policy has got the final approval from the top
management, it should be communicated throughout the organisation. To teach people
how to handle various personnel problems a real education programme should be set-up
in the light of this newly formulated policy.
7. Evaluating the Policy: Evaluation of the policy is needed by the passage of time, on the
basis practical experience of those who use it and of those who are affected by it. There
may be situations when an organisation is not getting the expected output. This requires
the needed modifications in die policies.

For serious difficulty or hindrance with policy along with suggestions should be reported to the
top management. Such knowledge will help the management to decide whether there is a need to
re-state or re-formulate the policy.

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Major Factors affecting HR Policies:

These main factors and their effects on the HR policies are described below:
1. Company Business Policy: After having designed a business policy, a company would
want to ensure that it has the right number of employees with the right type of skills and
commitments to carry out the policy. It would also like to close the gap between the
required number and the qualities of employees and the available number and qualities at
the shortest possible time. A company’s human resource policy is designed with the
objective to execute its business policy irrespective of whether it is market driven or
resource driven. It should be kept in mind that the execution of a business policy becomes
easy when at the first place it is formulated taking into account the company’s internal
human resource environment, its strengths and weaknesses adequately.
2. Social Forces: Social forces and their effects on the supply of educated and experienced
manpower in the economy are important considerations that a company has to take care
while formulating HR policies and strategies. A policy which may appear very
appropriate from the business point of view may be non-executable because the
manpower supply position of the market is quite inadequate.
3. Regulatory Forces: The HR managers when designing HR policies should be fully
conversant with the existing labour regulations. A good number of regulations aim at
protecting the workers from undue hardship and strain.
4. Technological Forces: Due to availability of information technology and communication
system, new types of HR policies and practices are emerging. When others are already
using a new technology and are executing employment contracts with the new
technology, its non-use in a company is likely to make the operating cost higher than
those of its competitors.
5. Competition and Competitor Behaviour: While designing HR policies, labour market
conditions and employment practices of competitors are important considerations to be
taken care of. Under conditions of tight labour market, a company may have to adopt a
very flexible approach. It must be willing to spend more for maintaining a stable
workforce and motivating the employees for higher work effort.
6. Internal HR Environment: The external human resource environment is an important
factor that helps in shaping the human resource policies of a company. However, an HR
policy shaped entirely by considering the characteristics of the present external human
resource environment and company business goals may not yield much worthwhile
business result for a company that has been working for a good many years with a
completely different HR system.

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When designing any new HR policy an assessment should be done of the internal HR
environment of the company including the expectations, beliefs, and values of the
employees who got used to certain kind of HR services from their managers.

Important Responsibilities of HR Policies:

HR policies should be developed for key HR management functions covering eleven commonly
accepted responsibilities which are as follows:
1. Recruitment policy – Proper guidelines are formulated with respect to recruitment to
ensure uniformity in all recruitments.
2. Induction policy – Being important aspects, policies have to be formulated, clearly
indicating the length & kind of induction for all levels in the hierarchy.
3. Compensation and Benefits policy – It is important to indicate to the employees as to
the grade/scale etc., in the pay package to keep them motivated in job and maintain
uniformity.
4. Employee and Labor Relations policy – The relations of management with employees
and the union must be cordial and this has to be ensured by the HR team.
5. Employment Practices & Placement policy – All rules relating to employment must be
made in writing and the mode and basis for placement must be clearly stated.
6. Workplace Diversity policy – Employees from different backgrounds, sex, religion
work in the organization, therefore, policy must be laid down for dealing with workforce
diversity.
7. Health, Safety and Security policy – Health, safety and security are very significant
aspects of a job. HR Manager must state policies with respect to heath measures, safety
measures and security measures for employees.
8. Human Resources Information Systems policy – Policies must be designed so that the
information on human resource is readily available.
9. Human Resource Research policy – It is necessary to carry out continuous research
with respect to human resource recruitment, job description, maintenance and motivation
etc.
10. Training, grooming and Development – With training, grooming and development, the
employees grow and become better assets for the organization. Policies in this regard are
very significant.
11. Employee exit policy – All progressive companies keep good exit policies, so that
feedback can be obtained and improvement can be brought about.

Legal Issues in Human Resources:

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1. Confidentiality: The first great challenge that an HR professional faces is the need to
maintain confidentiality. We human beings are always willing to speak to people and
socialize. We find it very difficult to keep a secret. Maintaining confidentiality in a
workplace is both an ethical as well as a legal responsibility. If you fail to maintain
confidentiality, you will not just lose your reputation but also lose your job. In rare cases,
you may even be jailed or asked for financial compensation for leaking important
information. You must thus abide by this norm seriously if you are an HR professional.
2. Verification: In many organizations, human resource professionals have to shoulder the
responsibility of verification. This job is really not easy. You need to carry out
a background check of each individual with respect to their social, economic and more
importantly criminal background. This means that you need to verify from the details
provided by the individual whether he has revealed the facts in the interview. A legal
check of this kind helps the organization to retain its reputation. It also helps to prevent
the hiring of drug addicts or individuals with a criminal background into the organization.
This step in the process of hiring must be dealt with by HR professionals with extreme
care. Any error in the procedure may lead to issues not just with the candidate being hired
but also with your own reputation.
3. Special Company Strategies: Human resource plays a key role while managing
different positions in a company and also while executing some of the vital company
strategies. This clearly implies that an HR professional should be wise enough to
understand the implications of different company policies on different individuals. He
should be able to identify the legal as well as ethical implications of the strategies. Both
these factors affect the working of an organization to a great extent. He should be able to
evaluate the impact of each company strategy or decision and help his employers take the
right decision based on his judgment.
4. Workplace policies on different health issues: There are all sorts of people looking out
for job opportunities and this also includes individuals with certain special medications.
The companies need to take these individuals into account while making decisions
regarding insurance, remuneration as well as work-related policies. In some cases, the
organization may need to make special considerations. There are certain health conditions
that are very different from the routine health problems. The HR professional should
understand where which concessions should be applied and who should get special
health-related allowances.
5. Labour Rights and implications: Every individual has certain labour rights that give
them security when they work in an organization. Every organization has to abide by
these laws and rules and make sure that the workers get their basic rights while working
in an organization. An employee deserves a proper remuneration and a notice period of
specified duration before being removed from a job. The HR professional makes sure the
organization makes policies that abide by these laws.
6. Tax Laws of Organization: Every organization that runs in a nation has to abide by the
nation’s tax laws. The company is also subject to tax deductions just like all the
employees. Making the best policies that help the organization, as well as the employees,
needs to be supervised by human resource executives.

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7. Laws of the Organization: While there are very few chances of legal implications of the
laws of the organization, you still need to consider the impact of the laws on the
employees as well as the management. Some laws may displease the employees and if
the displeasure increases, it will directly impact the performance of an organization. The
laws of an organization also decide how long the employees prefer to stick to the
organization. Being an HR Executive, you must be able to assess the way in which each
organizational law affects employees.

Workmen’s Compensation Act, 1923:

Introduction:
Employee’s Compensation Act, 1923, or Workmen’s Compensation Act, 1923, ensures that
workers are adequately compensated for injuries sustained in the line of duty.
Employees are prized assets for any organisation, and ensuring their welfare is key to long-term
success. This includes ensuring workers and their dependents are cared for in the event of a fatal
accident at the workplace that results in a loss of income.

The Workmen’s Compensation Act 1923, led to the creation of a special type of insurance for
frontline workers. The policy is important for businesses as well, as it protects them from the
threat of a high compensation amount and further lawsuits. This is particularly true for
organisations with employees who are exposed to extreme health and life hazards.

Meaning:
The Workmen’s Compensation Act, 1923, also known as WCA or the Compensation Act in
some states, is a federal statute that mandates employers to pay compensation to their employees
or workmen for a work-related accident, fatality, injury, or illness.

Workmen’s Compensation Insurance

Definition:
A workmen’s compensation insurance policy is meant for commercial establishments. It
provides legal liability coverage to an employer and also assists employees in times of financial
emergencies. The policy compensates employees if they are injured at the workplace. Work-
related fatalities and illnesses are also covered under this policy.
This type of insurance also provides financial relief to employers as it can cover the legal costs
when employees press charges. Some policies may even cover compensations ordered by worker
and labour courts.

Scope of Workmen’s Compensation Policy

Frontline workers in India covered under Workmen’s compensation are as follows:
 Workers in factories, mines, docks, construction works, and specific establishments
mentioned under the Schedule II of the Act.
 Workers hired abroad under Schedule II of the Act.
 It is applicable to helpers, drivers, mechanics, or any work associated with vehicles, crew
members on an aircraft, or captains.

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 Railway servants not employed permanently in any administrative, district, or sub-

divisional office of railway
Coverage under Workmen’s Compensation cannot be availed by members of the armed forces as
they are covered under the Employee State Insurance Act.
As per the 2017 amendment in the Act, employers must inform workers of their rights to receive
compensation. This can be done through written documents, electronically, and in a language
understood by the worker.

Objectives of Workmen’s Compensation Act, 1923:

There are two main objectives of this act
1. First, it enables employees and their dependents to get compensation from their
employers in case an accident causes an employee’s death or disability;
2. Second, it mandates employers to pay compensation to their workers if they contract
certain job-related illnesses or diseases.

Factors to be considered for compensating the employees under Workmen’s Compensation

Act, 1923:
Employees who are injured on the job are entitled to workers’ compensation. The amount of
compensation depends on a number of factors: the employee’s age, the nature of the injury, and
average monthly salary or wages. However, the minimum and maximum compensation are set
for cases related to permanent disability or death. If an employee is killed on the job, the
employer must pay compensation to his or her dependents.

Need for Workmen’s Compensation Insurance:

A workmen’s insurance policy is a win-win for both companies and their employees. The 3 main
reasons why every employer should consider buying a workmen’s compensation insurance
policy.
1. Once an employer is insured under such a policy, any costs or expenses incurred are
covered by the insurance partner.
2. The compensation paid out to employees or their dependents in the event of a workplace
mishap, injury, illness or fatality can be substantial. It’s a legal liability for an employer,
which is covered by the insurance company that sells the workmen’s compensation
insurance policy.
3. The legal liabilities are governed by the Workmen’s Compensation Act, 1923. In order to
abide by the rules and regulations mentioned in the aforementioned and to fulfil the legal
liabilities, investing in a workmen’s compensation policy becomes quint essential.
When Do Employers Pay Compensation?
According to Section 3 of the Workmen’s Compensation Act, an employer is liable to pay
damages to its workers under the following conditions:
1. If a worker has an occupational disease mentioned under Part A, B, C of Schedule III.
The disease has to be a result of an injury by accident during work hours.
2. An injury sustained by an employee during work that leads to total or partial disability
3. Death of an employee due to a work-related hazard

Prof. Deepika V
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The Extent of Cover Offered by a Workmen’s Compensation Policy

The extent of coverage eventually depends on the insurance partner you choose. Some may
provide basic coverage whereas others may go above and beyond.
In general, the following are some of the common aspects that are covered by most workmen’s
compensation insurance policies in India.
 Any injury, bodily harm or otherwise, brought upon by a mishap during employment
 Disease, injury, or condition aggravated by work conditions
Temporary disablement or death
Partial or complete disablement that is permanent in nature
Any or all legal expenses and costs incurred
What is Not Covered Under Workmen’s Compensation Policy?
There are specific situations and cases where a workmen’s compensation insurance will not
cover your organisation and employees.
 Any or all liabilities assumed under an agreement
 Injury or accident caused by consumption of drugs or alcohol
 Injuries caused as a result of insurrections, war, or invasion
 Contractor employees are not covered unless they’re declared or insured
 The first 3 days of disablement when the disablement lasts less than 28 days
 Any type of injury that does not cause partial disablement for more than 3 days
 Any injury or disablement caused as a result of the employee flouting safety norms and
regulations
Amount of Compensation Payable under the Act
The amount of compensation an employer has to provide frontline workers is as follows:
1. Death of the worker: 50% of the worker’s monthly wages multiplied with relevant
factors; or ₹1, 20,000, whichever is more.
2. Permanent Total Disability: 60% of the monthly wages, multiplied by relevant factor;
or ₹1, 40,000, whichever is more.
3. Permanent Partial Disability: In such cases, the amount payable is a percentage of the
loss of earning capacity due to the injury. These injuries are mentioned in Part II of
Schedule I of the Act.
4. Temporary Disability: 25% of the employee’s monthly wages.

Workmen’s Compensation Insurance Policy Claims Process

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Human Capital Management

Here’s the typical procedure when a workmen’s compensation policy claim is to be made.
 Employer is intimated about the employee fatality or the accident
 On-premise accidents and mishaps must be communicated to the site inspector
 All documents and information as per the norms set by the provider must be gathered
 Collected documents should be deposited with the insurance provider
 Based on the information and documents gathered, the provider accepts or rejects the
claim and informs the same to the stakeholders
Documents for Workmen’s Compensation Policy
Here’s a look at the typical paperwork requirements for claims made under a workmen’s
compensation insurance policy.

All Claims Temporary Permanent Fatal Claims

Disablement Disablement

Duly filled and signed Medical bills. Medical certificate Death

claim form. for disablement. certificate and
final
investigation
report.

Medical bills and Medical certificate for MOA between the Post-mortem
compensation records. disablement. employer and the report copy,
claimant. witness
statements,
Form A filled
by the insured.

Prof. Deepika V
GIMS Page 15