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Labour LawEmployee’s Compensation Act, 1923

Employement Compensation Act

The Employee’s Compensation Act, 1923 (“hereinafter referred as the “Act”) was enacted with a view to provide payment in the form of compensation by certain classes of employers to their employees for any injury occurred by accident.

Employer’s Liability for Compensation

Section 3 of the Act enumerates the employer’s liability. It states if personal injury is caused to an employee by accident arising out of and in the course of his employment, the employer shall be made liable to pay compensation in accordance with the provisions mentioned in chapter II of the Act. 

It also states the when the employer shall not be liable. They are as follows:

  • Any injury which does not result in the total or partial disablement of the employee for a period exceeding three days.
  • Any injury not resulting in death or permanent total disablement caused by accident which is directly attributable due to employee being under the influence of alcohol/ drugs, or willful disobedience/removal/disregard of safety measures

Amount of Compensation

Section 4 of the Act provides the amount of compensation that is to be paid to employees for all the categories of injuries suffered. Section 5 of the Act provides the method for calculating wages, this is an important segment because the basis for calculation of compensation is monthly wage system, therefore, calculating the monthly wages is an relevant aspect and the method prescribed under section 5 is to be followed.

In case of Death Amount equal to 50% of the monthly wages of the deceased multiplied by relevant factor 


Amount of one lakh and twenty thousand rupees, whichever is more

In case of permanent total disablement  Amount equal to 60% of the monthly wages of the injured employee multiplied by relevant factor


Amount of one lakh and forty thousand rupees, whichever is more

In case of permanent partial disablement  For an injury specified in Part II of Schedule I, such percentage of the compensation which would have been payable in the case of permanent total disablement as is specified therein as being the percentage of the loss of earning capacity caused by that injury, 


For an injury not specified in Schedule I, such percentage of the compensation payable in the case of permanent total disablement as is proportionate to the loss of earning capacity (as assessed by the qualified medical practitioner) permanently caused by the injury.

In case of temporary disablement Half-monthly payment of the sum equivalent to 25% of monthly wages of the employee to be paid in accordance with section 4(2).


Section 8 of the Act provides for Distribution of Compensation to employees and their heirs and section 9 states that no lump sum/half-monthly payment which is payable under this Act shall not be assigned or attached or charged to any person other than the employee. Under section 10 a notice of accident must be given in the prescribed manner in order to claim compensation and no claim shall be entertained by the commissioner without such notice.

Section 15 of the Act deals with employees with regard to masters and seamen and provides for compensation and section 15A deals with captains and other members of the crew of aircrafts and the compensation thereunder. Section 15B delas with employees abroad of companies and motor vehicles.

Section 17A of the Act imposes a duty on the employer to inform the employees about their rights to compensation in writing and also through electronic means.


Section 18A of the Act states that whoever fails to maintain a notice-book as required under section 10(3) or fails to send a statement as required under section 10(A) to the commissioner or fails to send a report under section 10(B) or fails to make a return required under section 16 or fails to inform the employee about his rights to compensation under 17A shall be punishable with fine which is not less than fifty thousand rupees and may extend to one lakh rupees. 


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