Amount and Calculation of Compensation — Labour Law II Notes

Amount and Calculation of Compensation

Two workers lose an arm in the same machine on the same day — one aged 25, one aged 55. They do not get the same money. The Code deliberately pays the younger worker more, and the reason reveals how the whole formula thinks.

How the money is worked out

Compensation is not at large — it is a formula fixed by Section 76 read with the Sixth Schedule of the Code. Three inputs drive it: the nature of the injury (death / total / partial), the worker’s monthly wages, and his age (through a “relevant factor” set out in the Sixth Schedule; the injury-percentage list for partial disablement is the Fourth Schedule).

Death — 50% of the monthly wages × the relevant factor for the worker’s age, subject to a minimum floor; plus funeral expenses.
Permanent total disablement — 60% of monthly wages × the relevant factor, subject to a minimum floor.
Permanent partial disablement — a proportion of the total-disablement amount, matching the percentage loss of earning capacity for that injury in the Fourth Schedule.
Temporary disablement — a half-monthly payment while the disablement lasts.

The relevant factor falls as age rises — that is why the younger worker gets more: he has more working years ahead, so a larger multiplier. Monthly wages above a notified ceiling are capped for the calculation.

Section 76, Code on Social Security 2020 (amount of compensation, in brief): compensation for death is “an amount equal to fifty per cent. of the monthly wages of the deceased … multiplied by the relevant factor”, and for permanent total disablement “sixty per cent. … multiplied by the relevant factor”, subject to the prescribed minimum.

In Simple Terms: Pick the injury type → take the right percentage of monthly wages → multiply by the age factor from the Sixth Schedule → check it is not below the floor. Younger worker, bigger factor, more money.

🧩 WORKED EXAMPLE — reading the formula

Facts. A worker aged 25 dies in a workplace accident; monthly wages are within the ceiling.

Rule. Death compensation = 50% of monthly wages × the relevant factor for age 25 (Sixth Schedule), subject to the statutory minimum, plus funeral expenses.

Apply. Take half the monthly wage, multiply by the (high) factor for a 25-year-old, compare with the floor and pay the higher.

Conclusion. State the formula and the inputs; you are not expected to recite the exact factor, only to show you know how the figure is built.

flowchart TD
    ROOT["Amount of compensation (s.76, Sixth Schedule)"]:::root
    ROOT --> D["Death<br/>50% wages x relevant factor + funeral"]:::leaf
    ROOT --> TT["Permanent total<br/>60% wages x relevant factor"]:::leaf
    ROOT --> PP["Permanent partial<br/>proportion of total by % loss"]:::leaf
    ROOT --> TMP["Temporary<br/>half-monthly payments"]:::leaf
    classDef root fill:#FFF8DC,stroke:#000,stroke-width:1px,color:#000;
    classDef leaf fill:#E6F3FF,stroke:#1E3A8A,color:#000;
    linkStyle default stroke:#888,stroke-width:1px;

Case Laws

Pratap Narain Singh Deo v Srinivas Sabata (1976) — compensation falls due from the date of the accident, not the date of settlement or award; interest runs on default.

📄 Full notes + Question Bank (₹199) — every topic in depth, model answers to all past KSLU questions, in one printable PDF. Get the bundle · 10 Solved Problems · All Labour Law II topics