Workmen’s Compensation Policy is an essential requirement for employers in order to save themselves from the expenses or cost of legal liabilities towards an employee due to injury, temporary or permanent disability or death of an employee in the workplace during the course of employment.

Employers can often be held responsible for any kind of injury that an employee suffers during his job. They are solely responsible for the safety and security of their valued employees. However, there can never be an absolute guarantee that there will never be an accident or mishap at work that may lead to bodily injury or disability or death of a worker. Such incidents always occur unexpectedly and in such a case, the employer may also be sued.

In order to cover medical expenses and legal liabilities arising in such situations, the workers’ compensation Insurance Policy can prove to be a source of great relief for the employers. While most organisations are aware of only the basic benefits of this insurance policy, there are only a few top organisations that focus on certain extended benefits that secure their reputation in public view. Below are a few benefits that make this policy a must for each and every organisation:

  1. Legal liability coverage:

The Workers Compensation Policy was formed in the first place as a bargain between employers and employees. The employers were tired of paying up against the legal suits that were done by the employees. Now, in today’s context, legal costs can be really high and small businesses may not be able to afford them in case they are sued without a suitable insurance cover. It gives legal liability coverage.


  1. Vocational rehabilitation expenses:

Suppose an employee gets hurt while working at a construction site in such a manner that he cannot continue the work in the same field again, this insurance policy will also cover expenses of training him in some other field where he can get employment in future.

This can be really advantageous for the employer to retain the efficient workforce and reduce attrition.

  1. Covers for occupational diseases:

Diseases like asthma, bronchitis etc. are certainly on the rise and what if a worker claims for any such occupational disease that he is suffering from? You just cannot put off the liability on your part by saying that it is part of his work. In such cases, you can use the workmen compensation policy to save the worker from shedding precious money on medical expenses. It will also help in improving your reputation.

  1. Calculation of income lost and corresponding compensation:

Compensation for partial or total disability suffered by any employee is certainly covered in this policy. But, in some cases where the employee is rendered jobless for partial or whole life due to such disability, the employer is also held responsible for providing the income lost. The correct calculation of this income liability is also necessary. Without an insurance policy, there might be a dispute between the employer and the employee.

But, this can be avoided as under the Workers’ Compensation Act, in case of temporary disability to a worker that renders him inactive for a short period of time, an employer has to pay 25 percent of his wages every two weeks. In short, he is paid half of his income lost per month. If there is a partial permanent disability like a worker loses an arm, the compensation is calculated accordingly. The compensation for the injured worker is then established based on the percent of lost earning capacity multiplied by the monthly wage multiplied by a factor based on the employee’s potential future earnings.

  1. Inclusion of special covers

Special add-on covers are also available in certain insurance policies, if the employer opts them. For example, you can include liability towards sub-contractors who may or may not be in direct contact with you in the coverage that you avail. Some policies also cover injury or disability to employees during working hours due to terrorist attacks.

  1. Comprehensive inclusion of all employees:

It is not just the labour that is covered in the policy. Each and every employee will be covered from the start date whenever the policy comes into effect. The claims under the fatal disability act, 1855 are also covered along with the Workmen Compensation Act, 1923.

So, a workmen’s compensation insurance policy is an indispensable part of any business. It is bilinear as it benefits both the employer and the employee. The above benefits are the ones that only the best organisations are aware of and these ensure the best use of this policy by any organisation.

By Chakraborty

Dr Chakrabarty is the Chief Innovation Officer of IntuiComp TeraScience. Earlier she was Assistant Professor of Delhi University, a QS ranked university in India. Before that she has held research positions in IIT Mumbai, IIT Chennai and IISc Bangalore. She holds 2 patents and over 20 research publications in her name which are highly cited. Her area of research is in smart technologies, integrated devices and communications. She also has a penchant for blogging and is an editor of Business Fundas.