Employees' Compensation calculation procedure

The Workmen Compensation Act. 1923 & subsequent amendments impose statutory obligation upon Employers to compensate their own Employees and those of 'Contractors, for labour or otherwise employed by them when incapacitated as a result of an accident of employment.

We give below the working of compensation payable in the event of death or permanent total disablement.

There is a fixed chart of factors based on the completed years of age on the last birthday immediately preceding the date on which the compensation fell due.

A specimen of factors is given below

Age Factor
18 226.38
25 216.91
30 207.98
35 197.06

The factor goes down as the age increases.

According to the latest Employees Compensation Act 1923 under the vide order number no S.O. 71(E), minimum wages for calculation of workers' compensation have been raised from Rs 8,000 to Rs 15,000. The new minimum wage of Rs 15,000 will be effective from 3rd January 2020.

Now we give below the formula for working out compensation. The maximum wages are taken as Rs. 15000/- for the purpose of arriving at compensation payable.

For the purpose of the calculation we will take the age of the workmen as 33 and the corresponding factor applicable then will be 201.66

Case 1) Death of Employee

Age 33 Factor 201.66

Wages Rs. 15000 x 50% = 7500 x 201.66 = 15,12,450/-

Case 2) Permanent Total Disablement

Wages Rs. 15000 x 60% = 9000 x 201.66 = 18,14,940/- (maximum Rs. 4,52,760/-)

Case 3) Temporary Total Disablement

First 3 days are excluded

suppose no. of days was 28

Then calculation will be 28-3=25days

25 X 25% of wages
15

i.e. 1.66 x 3750 = 6225/-