Can We Deduct Workmen Compensation Insurance from Employee Salaries? Seeking Clarity!

Dear Seniors, as an employee contributes to the ESIC Facility, is it possible to deduct the Workmen Compensation Insurance Premium from the employee's salary? Do we have any concrete communication regarding this? Clients are generally not willing to deduct the same. Need clarification, please help.

Best Regards,
Vikram Aditya Singh.

Workmen Compensation Insurance (WCI) and Employer Obligations

WCI is not compulsory, but the employer must pay compensation as per the Employees' Compensation Act in case of any eventualities to the employees at the workplace. It is a statutory requirement and not deductible from the employees.

Mr. Pon has given you the apt reply. The Workers' Compensation (WC) Policy is not required for any employee; it is required for the company. In case of any accident, the company will have to bear the cost of treatment and compensation. To have financial support for the company (to relieve itself from such a huge expenditure), the company takes out the WC Policy. Whether the company has taken the policy or not is not considered at all. The company will have to pay the medical treatment costs and any other compensation that needs to be provided to the victim.

Workmen's Compensation and Employer Liability

The workmen's compensation is a liability of the employer in case of accidents while on duty if the company is not covered under the ESI Act or if the employees are outside the purview of the ESI Act (not covered by the ESI Act).

As such, the employer has to bear the cost of the WC insurance policy; they should not deduct it from the employee's salary.

At the outset, let me make it clear that you should not equate both the Acts. Both are different in terms of benefits, administrative authorities, manner of compliance, etc. You are right, an employee and employer need to contribute under the ESIC scheme to avail the facilities. However, remember that one cannot choose between the Acts.

Employee's Compensation Act 1923

The Employee's Compensation Act 1923 (previously known as the Workmen's Compensation Act 1923) is applicable only where the ESI scheme is not implemented. The Employee's Compensation Act 1923 does not require either the employee or the employer to contribute. First, you have to examine whether the Act is applicable to your organization. Section 2(1)(dd) defines an employee, and there is a Schedule II annexed to the Act specifying who is considered an employee. Section 3 of the Act stipulates that if personal injury is caused to an employee by an accident arising out of and in the course of his employment, his employer shall be liable to pay compensation in accordance with the provisions of Chapter II of the Act.

I hope I have been able to clear your doubt.

Regards,
BS Kalsi

Types of Work for Workers' Compensation Policy

In which types of work is the workers' compensation policy applicable? Is it applicable for more than supervisory level work?

Thank you.

The Employees' Compensation Act, 1923, does not specify the profession or occupation under the Act. Instead, the Act has defined a list of employees under Section 2(dd) and Schedule II, which specifies a list of persons who are included under the definition of employees.

Regarding your second query, I am of the opinion that all categories are covered under the Act after the amendment vide Act 45 of 2009.

Best regards,
BS Kalsi

Dear Vikram,

Mr. Pon has given you an apt reply. The WC Policy is not required for any employee; it is required for the company. In case of any accident, the company will have to bear the cost of treatment and compensation. To have financial support for the company (to relieve such a huge expenditure), the company takes the WC Policy. Whether the company took the policy or not, it is not considered at all. The company will have to pay the medical treatment cost and other compensation to the victim.

I don't know what this discussion is all about. Once an employee is covered under ESIC, no workman compensation in addition to it is required. Employers nowadays opt for an Accident policy instead of workman compensation, which is much more beneficial than the WC Policy. Moreover, the liability of compensation lies with the employer, and no deduction can be made from employees.

Hope this satisfies your query.

Regards,
V S Chauhan
[Phone Number Removed For Privacy Reasons]

I was rather surprised to note your observations that "I don't know what this discussion is all about." Instead of showing your ignorance, you should have seen the query as well as the subsequent responded emails before subscribing your expert comments. I fully agree with your views that "once an employee is covered under ESIC, no workman compensation in addition to it is required, and the liability of compensation lies on the employer, and no deduction can be held from employees."

I couldn't exactly make out from your other statement where you have said that "Employers nowadays go for Accident policy instead of workman compensation, which is much beneficial to WC Policy." Do you mean to say that one can replace workman compensation with an Accident policy? If you mean so, I feel you are wrong as statutory provisions under the Employee's Compensation Act, 1923 are mandatory, which cannot be replaced by any kind of accident policy.

Regards,
BS Kalsi
Member since Aug 2011

Thank you, Seniors. I have received the proper and matching responses and forwarded the same to my seniors and compliance team. This updates my knowledge too.

Regards,