Concept of Wages under the Employees’

Compensation Act, 1923

Dr. Shilpi Jha

Neelam Lalwani 15 May 2021 Div C - 155

INTRODUCTION
The Employees Compensation Act,1923 (‘Act’) is one of the important social security legislation which
aims to provide compensation in case of accidents arise out of and in course of employment.
The Act provides for payment of compensation to the employees’ and their dependents in the case of injury
by industrial accidents including certain occupational diseases arising out of and in the course of
employment resulting in death or disablement.
The Workmen's Compensation Act,1923 has been renamed as the Employees’ Compensation Act, 1923.
For the words “workman” and “employee” and “employees” have been substituted respectively for making
the Act gender neutral. The amendment has been brought about by the Workmen's Compensation
(Amendment) Act, 2009 came into force on January 18, 2010.
Applicability-
It extends to whole of India and applicable to -

• Employees working in factories, mines, docks, construction establishments, plantations, oilfields and
other establishments listed in Schedule II of the Employee’s Compensation Act.
• Persons recruited for working abroad and who is employed outside India as in Schedule II of the Act.
• Person recruited as the driver, helper, mechanic, cleaner or any other in connection with a motor
vehicle and to a captain or other member of the crew of an aircraft.
• Employees working in abroad recruited by companies registered in India.
Exception-
The act does not apply to the members of armed forces of the Union & Workmen who are covered under
ESI (Employee State Insurance) Act.

OBJECT
The Employees’ Compensation Act is social security legislation. It imposes statutory liability upon an
employer to discharge his moral obligation towards his employees when they suffer from physical
disabilities and diseases during the course of employment in hazardous working conditions. The Act also
seeks to help the dependents of the employee rendered destitute by the ‘accidents’ and from the hardship
arising out from such accidents.
An additional advantage of legislation of this type is that by increasing the importance for the employer of
adequate safety devices, it reduces the number of accidents to workmen in a manner that cannot be achieved
by official inspection. Further, the encouragement given to employers to provide adequate medical
treatment for their workmen should mitigate the effects of such accidents as do occur.
The Act aims at quick disposal of disputes relating to compensation through special proceedings than
possible under the civil law
Main Features of the Act

• The Act is shaped on British Law. The payment of compensation is made obligatory on all employers
whose employees are entitled to claim benefits under this Act.

• Compensation is payable in case of temporary or permanent disability or death resulting from any
injury caused during the course of the employment. The contracting of any disease as specified in
Schedule III to the Act is considered to be an injury caused by accident.

• If an employee who is employed under the employment specified in Schedule III to the Act contracts
some occupational disease peculiar to that employment, he is entitled to get the compensation under
the Act. The occupational diseases should be contracted in the specified employment while serving
an employer.

• Compensation claims fall broadly into three groups, namely ;

o uncontested cases of disablement;
o disputed cases of disablement, and
o fatal cases

• The amount of compensation payable depends upon the average monthly wages in case of deceased
employee and additionally on nature of disability in case of disablement.

Given the above features it may be noted that the compensation under the Act is extremely depended on
the “wages” of the employee. Accordingly, it is pertinent to understand the term wages.

CONTENT
The term “wages” has been defined under section 2(1)(m) of the Act. It includes any privilege or benefit
which is capable of being estimated in money, other than a travelling allowance or the value of any
travelling concession or a contribution paid by the employer to an employee towards any pension or
provident fund or a sum paid to employee to cover any special expenses entailed on him by the nature of
his employment.
It is pertinent to note that paid leaves granted to an employee is a privilege provided to the employee during
the course of employment and it may not be considered that the employee can claim an equivalent amount
in lieu of such leave unless specifically provided in the employment contract. In the case of J.C. Mills Ltd.
vs Deshraj Singh Bachchusingh AIR 1959 MP 119, it has been held that “Annual leave with wages no doubt
is a privilege but this privilege only means that no money shall be deducted from the wages when the worker
is on annual leave. This privilege does not mean that there should be an accretion or addition to the wages
of the next year.”
It is pertinent to note that the term “wages” has different meanings under various Acts like Payment of
Wages Act, Factories Act and Industrial Dispute Act. However, to determine the compensation to be paid
under the Employees Compensation Act, the definition the Act as defined above has to be given
significance.
Privileges / Allowances to be included in ‘wages’:

• Free Accommodation : the accommodation provided by the employer to the employee free of cost
form part of wages under the Act and the value of same has to included while computing
compensation under the Act. In the case of Brahma Metal and General Engineering vs Bahadur
Singh, AIR 1955 All 182, (1955) ILLJ 553 All, it has been held that the words 'privilege or benefit' as
mention in the definition of wages in the Act would include the benefit of "free accommodation". The
hon’ble has further mentioned that to compute compensation to be awarded to an employee who has
been injured, the term 'wages' has to be interpreted in the light of the definition given in the
Workmen's Compensation Act (Employee’s Compensation Act) and not in the light of the definition
given in the Payment of Wages Act. Thus, the Commissioner was right in including the monetary
value of the accommodation which was provided free to the respondent in the term 'wages' for the
purpose of assessing the amount of Compensation.

• Maternity Benefit Payable to a woman: Maternity benefit payable to a women employee under the
provisions of Maternity Benefit Act form part of wages as defined under section 2(1)(m) of the Act.

• Dearness Allowances: The allowance paid by an employer as certain percentage of basic salary with
the aim of hedging the impact of inflation. It is a part and parcel of salary/wages of an employee. In
the case of Godavari Sugar Mills, Ltd. vs Shakuntala, (1947) 49 BOMLR 791 , it has been held that
dearness allowance must form part of wages while computation of compensation since it is in no
sense a bonus, but is something which attaches continuously to the wages in order to enhance it, so
as to be on a more comparative basis with the cost of living.

• Overtime pay: The definition of wages is a comprehensive definition and includes a privilege or
benefit which is capable of being estimated in money. The amount of overtime can be estimated in
money. Accordingly, the same may be included in the computation of compensation in terms of
wages. The view has been upheld in the case of Messrs. Bharat Heavy Plates and Vessels Ltd vs
Commissioner For Workmen's Compensation (1983) ILLJ 477 All.

• Food Allowance: In the case of Divisional manager, Oriental Insurance Co. Ltd vs Giriwal
Transport Corporation (1995) IILLJ 169 Ori , it was held that the “Daily payment of Bhatia (fooding
allowance) may be made to facilitate an employee to meet his daily needs. Bhatia takes characteristics
of an expenditure of food which is a daily requirement. It cannot be held that Bhatia would not be
wages and there is nothing to show Bhatia was being paid on account of special expenses payable to
the workman by nature of his employment. Payment of food allowance has nothing special in it, as it
is an ordinary requirement.” Given the same, it may be said that the food allowance shall form part
of wages under the Act.

• Bonus: The money / payment granted s bonus by an employer is a privilege / benefit enjoyed by an
employee which is capable of being estimated in money. Thus, it may form part of wages under the
Act. In the case of Chitru Tanti vs Tata Iron and Steel Co., AIR 1946 Pat 437 , it has been held that
 in a profit-sharing scheme of a company bonus declared after the date of accident will also form the
part of wages while computing compensation since the employee has earned that bonus already on
the date of accident. The contention that the same was declared after the date of accident was not
acceptable as the bonus was based on the work done by the employee prior to accident.

Given the above, it may be noted that the term ‘wages’ is very vast and inclusive in nature. The definition
of wages under the Act is not exhaustive. Accordingly, the reliance has to placed on various judicial
pronouncement and the facts on case-to-case basis to determine if the various components of the payments
made to employees will form part of wages under the Act.

CONCLUSION
The Act is basically made for the employees so that when they incur expenses for the injury suffered during
an accident, they can get compensation from the employers. The basic rule of Vicarious liability applies in
the act. The employer is the master and the employee is the servant. It may however be noted that the
employee gets compensation only when the injury takes place in the course of employment and in the
workplace.
It is for providing the worker’s social security against any injury or disease that resulted from an accident
at the workplace. Amount of compensation is payable in the event of an employee meeting with an accident
resulting into temporary or permanent disability or disease as stated in Schedule II and III in terms of
Section 4 of the Act, read with Schedule IV. The computation of the compensation under various event is
majorly dependable on the computation of wages by the commissioner and the severity of the disease or
disablement.
Compensation shall be paid as soon as it falls due. Where an employer is in default in paying compensation,
he would be liable to pay interest thereon and also a further sum not exceeding fifty percent of such amount
of compensation as penalty. The interest and the penalty stated above is to be paid to the employee or his
dependent as the case may be.

BIBLIOGRAPHY

• Textbook on Labour and Industrial Laws by S.N Mishra.

• https://indiankanoon.org/
• https://www.icsi.edu/
• https://labour.gov.in/