Is ESI or a Private Accident/Mediclaim Policy, a substitute for Workmen Compensation Policy?
Employees’ Compensation • India
Is ESI or a Private Mediclaim a Substitute for a Workmen’s Compensation (Employees’ Compensation) Policy?
Understand what the Employees’ Compensation Act requires, where ESI fits, how private policies help, and why WC/EC insurance remains critical for employers.
The Workmen’s Compensation Act, 1923—amended and now known as the Employees’ Compensation (EC) Act—provides statutory compensation to employees for work-related injury, illness, disablement, or death. It covers full-time, part-time, temporary, and casual workers engaged in eligible employments.
Short answer: No, ESI or private health/accident insurance is not a legal substitute for EC coverage.
ESI may provide social security benefits where applicable; private mediclaim/PA helps with medical costs. But EC compensation liabilities under law persist unless specifically covered and compliant. Employers remain responsible for statutory compensation.
Who’s Generally Covered?
- Non-permanent railway employees outside administrative offices
- Aircraft crew (captains and members)
- Labour engaged abroad as listed in Schedule II (48 classes)
- Workers at construction sites, mines, docks, factories and other notified premises
- Drivers, mechanics, helpers and others working with vehicles
Illustrative list; coverage depends on the Act’s definitions, Schedules and judicial interpretation.
Employees’ Compensation (EC)
- Legal liability on employer for work injuries
- Covers death/disablement as per statute
- Compensation = % of wages × statutory factors
- EC policy transfers this liability to insurer
ESI (where applicable)
- Social security for eligible insured persons
- Provides medical, sickness, disability benefits
- Does not automatically extinguish EC liabilities for non-ESI employments
- Coverage tied to wage thresholds & contributions
Private Mediclaim/PA
- Pays hospitalization/accident expenses
- Beneficial but not a statutory substitute
- Doesn’t cover legal compensation liability as per EC Act
- Best used alongside EC policy
What an EC Policy Covers
- Death arising out of and in the course of employment
- Permanent total/partial disability
- Temporary disability (wage-loss benefits)
- Medical expenses (as per policy terms)
- Contract/temporary workers can be included
A single EC policy helps meet legal obligations, manage cashflow risk, and support employee welfare.
Employer’s Liability — Key Points
- In eligible employments, employers are legally obliged to compensate for work injuries.
- Non-compliance risks court action and penalties.
- EC policy transfers liability (as per policy terms) and protects business continuity.
- Supports employee relations by enabling timely financial relief.
2017 Amendment (Employees’ Compensation Act)
Section 17A: Employers must inform employees in writing and electronically of their rights to compensation at the time of employment, in English/Hindi/official local language understood by the employee.
Penalty Enhancement: Failure to inform attracts a penalty of not less than ₹50,000 and up to ₹1,00,000 (earlier max ₹5,000).
Karma Management’s Employee Protection Approach
- Private mediclaim + personal accident cover for 200+ employees (company-paid premium)
- Coverage extends to spouse and two children under the package
- Employees under ESI are excluded; once out of threshold, they’re added to the policy
- New joiners added, exits removed; sum insured aligned to role and grade
HR/Compliance Checklist (Practical)
- Map ESI applicability; track wage thresholds & contributions
- Purchase/maintain EC (WC) policy for covered jobs/sites
- Ensure Section 17A communication at onboarding
- Maintain incident/accident registers & investigation SOPs
- Keep payroll/wage records ready for compensation calculation
- Train supervisors on reporting timelines & documentation
- Layer mediclaim/PA for medical cost protection
- Review contractor policies; ensure contract labour is covered
Need help aligning EC, ESI and private covers? Karma Management helps design compliant risk cover stacks, draft Section 17A notices, and audit contractor coverage.
Contact: marketing@karmamgmt.com
© Karma Management Global Consulting Solutions Pvt. Ltd.
```
Share This News