Understanding GPA Policy vs. Employee Compensation Act: Are Both Required for Factory Accidents?

Dear Members, I am from Chennai, Tamil Nadu. Kindly request you to clarify my doubts as follows:

GPA Policy and Employee Compensation Act

1) As our factory is not covered under ESI, we opted for a GPA policy. In case of any fatal accident happening in the factory, can the employee claim benefits via GPA? Does the employer also need to pay compensation as per the Employee Compensation Act? In other words, if a company opts for GPA, is the company liable for the Employee Compensation Act as well?

Ceiling Amount for Employee Compensation Act

2) Is there a ceiling amount for the Employee Compensation Act?

Kindly clarify.

Dear Mohan Babu, I would like to request you to go through the Policy Document of GPA obtained. If I am correct, in case of any accident, the employee would be entitled to compensation only based on the sum assured. Whereas a policy taken under the EC Act, 1923 would determine the compensation amount based on the percentage of loss of earning capacity and the wages last drawn immediately before the employment accident. Certainly, the GPA cannot be a substitute to absolve the employer's liability to pay compensation in respect of death or disability arising out of an employment accident.

Thank you very much, Umakanthan sir, for your response and time. Could you please let me know if there is any substitute for the EC Act, 1923? If an employee's salary (Basic and DA) is greater than 15,000/-, does the EC Act not apply to them? Kindly provide clarification. Thank you.

Dear Mohan, there is no substitute for an EC Policy other than ESI. This is applicable only if the employee is covered under it. In the absence of both, it becomes the ultimate liability of the employer to pay compensation to any employee falling under the definition clause of Sec. 2 (dd) of the ECA, 1923, along with the exhaustive list found in its Schedule II, regardless of the salary drawn. However, when the monthly salary exceeds Rs. 15,000, the compensation would be limited to Rs. 15,000 for calculation purposes under the Act.

Dear Mohan Babu, why is your factory establishment not covered under ESI? (Is the factory located in an area notified for ESI coverage, or has your factory been declared exempt by the appropriate government from ESI, or is it not in an ESI-notified area?) Simply put, you cannot avoid ESI based on GPA policy or WC Policy. Please verify why ESI is not applicable to your establishment.

In the event of any fatal accident occurring in the factory, your establishment may face severe complications due to not having ESI coverage. The factory occupier or manager is responsible for paying compensation to employees in the case of fatal or non-fatal accidents claimed through GPA.

I hope this clarifies any doubts you may have.