Worker's compensation Frequently asked Questions

FAQs On Employees’ Compensation Scheme (ECS) and Answers

Frequently Asked Questions (FAQs) On Employees’ Compensation Scheme (ECS) and Answers

 

What is Employee compensation Act (ECA)?

Employees’ Compensation Act is the law, which establishes a Social Insurance Scheme designed to provide compensation to employees who suffer from occupational diseases, sustain injuries or disability from accident at a workplace or in the course of employment,  whether at the usual place of work or outside of it. It also provides compensation to the next-of-kin of an employee who dies at work or in the course of work.

 

What is the Nigeria Social Insurance Trust Fund (NSITF)?

The Nigeria Social Insurance Trust Fund (NSITF) was established vide Decree No. 73 of 1993 to succeed the defunct National Provident Fund (NPF), which had been in operation since 1961.

Prior to the enactment of the Pension Reform Act in 2004, NSITF provided a Defined Benefit Scheme through Social Insurance method for employees in the Organized Private Sector. The Scheme covered contingencies of Old Age, Invalidity, Survivor and Emigration (for contributing members relocating permanently outside Nigeria)

The success of the defunct NSITF Scheme measured vide the huge pension assets transferred to Trustfund Pensions Pic – (the Pension Fund Administrator (PFA) set up by NSITF to cater for contributors to the defunct Scheme) pertinently positioned the Fund for the responsibility of implementing the Employees’ Compensation Act (ECA), 2010.

In particular, Part 1 Section 2, sub-section (2) of the Employees’ Compensation Act, 2010 mandates NSITF Management Board to implement the Act as well as the funds created under Section 56 of the Act.

 

What is social Insurance?

Social Insurance is a method of Social Protection provision, which is financed by contributions made by both employers and employees while in employment, sustained through the pooling of risks and finances a d benefits prescribed in the law.

 

How can Social Insurance and commercial Insurance services be compared?

Commercial Insurance Services are applicable to individuals, companies and agencies that can pay the required premium, whereas Social Insurance is non – profit oriented and serves individuals who may not be able to pay.

 

What is the goal of Employees’ Compensation Act (ECA)?

The goal of Employees’ Compensation Act is to establish an Employees’ Compensation that is a solvent compensation fund, which the interest of both employees and employer and also to provide for a fair and adequate assessment of employers’ risk rating and ensure appropriate contribution is paid.

To provide a claims procedure that is simple, fast and less cumbersome for the injured persons, or their dependants in case of death and also to promote the enforcement of occupational safety and health standards in the workplace.

 

Who is an employee, under the Employees’ Compensation Act?

Answer: An employee is a person employed by an employer under oral or written contract of employment whether on a continuous, part-time, temporary, apprenticeship or casual basis and includes a domestic servant who is not a member of the family of the employer including any person employed in the Federal, State and local Governments, and any of the government agencies and in the formal and informal sectors of the economy.

 

Who are the stakeholders under the Employee Compensation Act?

The Stakeholders are the three tiers of government (Federal, State and Local Governments), employers and employees in the formal and informal sectors.

 

Which Agency of Government manages the Employee Compensation Scheme?

The Act in Section 2(2) stipulates that the Scheme shall be managed by Nigeria Social Insurance Trust Fund (NSITF). This is in line with section 71 (2) of the PRA, 2004 and the provisions of the NSITF Act,  1993, which statutorily empowered NSITF to manage all social security  insurance schemes other than pension. The two-pronged mandate suggests that Social Security Schemes (ILO Convention 102) come under the purview of NSITF.

Employee Compensation Act is a Work Injury Scheme under the ILO Convention NO.102 of 1952. (Convention on Minimum Standards of Social Security)

 

How is the Employee Compensation Act managed worldwide?

Employees’ Compensation Act as a Social Insurance Scheme is managed by Public Agencies to ensure sustainability and in line with ILO standards.

However, some countries run an admixture of publicly and privately managed Employees’ Compensation Schemes. Recent developments indicate that even in countries where this is the case, there is a shift back to wholly publicly managed Employees’ Compensation Scheme.

 

Comparatively, which system has fared better, publicly managed or an admixture of public and privately managed Scheme?

Empirical evidence show that publicly managed Scheme is much more widespread, reaching the grass roots and has fared better in both developed countries and developing economies because of the wider outreach and social conscience of Government.

 

Is there anything in the Act to suggest that the funds will not be mismanaged if NSITF is to be in custody of the funds and operate the Scheme?

The tripartite nature of the Management Board (Labour represented by NLC, Employers represented by NECA and Government represented by Representatives from Ministries of Labour and Finance and Central Bank of Nigeria) is one guarantee.

The setting up of an Independent Investment Committee on which various private bodies and government Agencies are to serve is another.

The statutory restriction of the Board to ensure investment in only safe ventures e.g. Bonds, Bills Debentures, Real Estate (Social Housing etc), and other Securities issued or guaranteed by the Federal Government and CBN.

Furthermore, NSITF is statute bound by Nigeria Fiscal Responsibility Act to transfer certain percentage of its funds or funds not in immediate use into Federal Government Treasury.

 

Does the discretion given to the Board of NSITF to decide on a reasonable assessment of an employer, who for any reason was not assessed, portend any danger for employers?

No, it does not. Besides the fact, that such discretion is an exception rather than the rule, the tripartite composition of the Board (which includes NECA, as employers’ representative) cannot give room for any such envisaged abuse.

 

Does the Employees’ Compensation Act apply to all persons who fall within the definition of “employee” generally?

Yes, the Employees’ Compensation Act covers all persons captured in the definition of ‘employee’ in the enabling Act. Only members of the Armed Forces of the Federal Republic of Nigeria are exempted. [Section 2(1) & (3) of the Act].

 

Are self – employed persons covered under the Employees’ Compensation Act?

The Scheme defines; “employee” to include those employed in both formal and informal sectors of the economy, hence self-employed persons is covered.

 

Does the Act cover casual workers?

Yes, casual workers are covered under the Act; the definition of an “employee” in Section 73 of the Act captures them.

 

Does the employee have to contribute to the Employees’ Compensation Scheme (ECS) before he can enjoy the benefits under the Scheme?

No, employees’ contribution under the Scheme is prohibited by the Act.

 

How will the ECS be funded?

The ECS will be funded by employers’ contribution.

 

What will be employers’ rate of contribution?

The employers’ rate of contribution is 1% of total payroll, consisting of total emoluments.

Would it be fair for all categories of employers to pay the same rate of premium, in view of the fact that risks in the work will, vary?

At take – off all liable employers would pay the same premium of 1% of total payroll for the first two years. Thereafter, the Employees’ Compensation Act provides for risk assessment with a view to categorizing contributions on the level of risk to which workers are exposed. This implies that some employers would pay lower than 1 , while others would pay exactly

On the long run, there is provision for merit rating for those employers known for high level of safety in the work place with the result that their rate of contribution would be much lower.

 

Are there sanctions for non-payment of contribution?

Yes, there are. An employer who fails to pay contributions as at when due, or neglects to comply fully with the provisions of the Act commits an offence and shall be liable on conviction to the following penalties.

  1. Imprisonment for a term not exceeding one year or fine of not less than N100,000, or both imprisonment and fine for an individual.
  2. A fine of not less than N1, 000,000 for a body corporate and in addition, each director, manager or officer of the body corporate shall be deemed to have committed the offence and shall be liable on conviction to imprisonment for a term not exceeding one year or a fine of N100,000 or both such imprisonment and fine; and
  3. A penalty in an amount equal to 10 of the unpaid contribution.

 

Will the proposed Scheme impose any additional financial burden on the employer?

No. It will not. Rather, the new Scheme will create employee compensation fund from which adequate compensation shall be paid to the employee entitled thereto or their dependants without having to revert to the employer for funds at the point of injury, death, disability or disease arising out of or in the course of employment (which may be a period of bad business climate for the employer).

 

Does contribution by an employer under the Act qualify as tax, since it is compulsory?

No, employer’s contribution under the Act does not qualify as tax, because the contribution has direct beneficiaries – the employees who may suffer injuries or diseases in the course of their work, who are in turn motivated to be more productive with the attendant benefits to the employer.

 

Does the provision of the Employees’ Compensation Act preclude an employer from taking insurance policies like group life, or other insurable contingencies for her employees?

Answer: No, there is no such provision in the Act. Indeed, the provisions in the Act are supposed to be the minimum cover any employer can give to her serving employees.

 

In what way is the Employees’ Compensation Act (ECA)  different from the repealed Workmen’s Compensation Act (WCA)?

The Employees’ Compensation Act is different from the Workmen’s Compensation Act in the following ways:

(i) The Employees’ Compensation Act offers not only better and adequate compensation to employees or their dependants for any injury, death, disability or disease arising out of or in the course of employment but also ensures that such employees are further assisted by counseling and rehabilitation to resume work and in the case of permanent injury, assist the injured worker to by artificial members. Such is not available under the repealed Workmen’s Compensation Act.

(ii)           The Employees’ Compensation Act provides for speedy and adequate compensation,  resolution of disputes without recourse to the courts as obtained  under the repealed WCA in which most categories of  compensations had to be resolved by the law courts.

(iii)          While the repealed WCA provided for lumpsum payment to the  dependants of the deceased worker, Employees’ Compensation Act provides for monthly  or periodic payment for life.

(iv)         Mainly, large organized employers take insurance cover for their employees, others do not. Even when the insurance is taken, disputes take a long time to resolve, thereby subjecting the  injured worker to untold hardship under the repealed WCA. But, the Employees’ Compensation Act is for all categories of employers, including self- employed persons.

(v)          The Employees’ Compensation Act provides a “no fault scheme.” It is a Social Insurance Scheme whose primary objective is to provide a fair and speedy process of payment of compensation and other services to victims of employment injury or disease.

(vi)         The Employees’ Compensation Act negates the insurance principle of “no premium no cover” in that it provides cover for registered employees even. When their employers have not paid their premium, the onus is on the Employees’ Compensation Act managers to pursue defaulting employers for payment of such outstanding premiums.

 

What does the Employees’ Compensation Act provide in terms of compensation, which the repealed WCA did not?

The Employees’ Compensation Act provides for cash and non-cash benefit components such as;

(i)            Vocational rehabilitation for any injured employee to assist them in getting back to work, even if it has to be another kind of job suitable for his/her condition (Section 16 (i)

(ii)           Counselling services to dependants of the affected worker, while the worker is being rehabilitated (Section 16 (2) in addition to the cash lump sum compensation.

(iii)          Medical, surgical, hospital, nursing and other care or apparatus, including artificial members that are necessary at the time of injury and thereafter are supplied. (Section 26 (1).

(iv)         Daily allowance to the injured employee where necessary for daily sustenance (Section 26 (2)

(v)          Replacement and repair of artificial appliances that may be needed by an injured employee

(vi)         Engagement of independent specialists and settlement of medical bills at the Fund’s expense (Section 26 (3).

 

What does the Pension Reform Act, 2004 (PRA, 2004) say about insurance generally and work injury specifically?

Section 9 (3) of the PRA, 2004 mandates employers to buy life insurance policy for their employees, in the value of at least three times  the employee’s annual total emolument. Such employee’s entitlement under the life insurance policy is paid to his/her survivors as pension benefits (S.5 (1 )), upon his or her death.

However, the life insurance policy does not cover injury and diseases suffered at work or in the  course of employment. Thus, work injury is a short – term contingency appropriately situated within the purview of Social Security services, other than pension.

 

Are there differences between pension and employees’ compensation benefits?

Yes, there are.

  1. i) The Employees’ Compensation Scheme takes care of the worker while at work; whereas the pension takes care of the worker after work (i.e. in retirement)
  2. ii) The compensation is targeted at treating the resultant injury sustained in the course of work; while pension is to take care of other social responsibilities of the worker on retirement or disengagement from work.

 

Is there any conflict between the Pension Reform Act, 2004 and this Employees’ Compensation Act?

No, there is none. The PRA has no provision for the worker while in service, except at retirement. Whereas, the Employees’ Compensation Act provides for the worker’s welfare while still at work.

 

Benefits of the Employees’ Compensation Act

How does an injured employee or deceased employee’s dependant file a claim under the Employees’ Compensation Act?

Answer: An injured employee or deceased employee’s dependant must file a claim for compensation by completing an application form prescribed by the Board of the NSITF.

 

Can an injured employee file a claim for compensation under the Employees’ Compensation Act as well as sue his employer in the civil courts for damages arising from the injury?

Answer: No, an injured employee who chooses to sue his employer in the civil courts for damages arising from the injury cannot file claim under the Employees’ Compensation Act, at the same time. Indeed, one of the objectives of Employees’ Compensation Act is to avoid costly settlement of claims.

 

When must an injured employee/deceased employee’s dependent file a claim if he wishes to seek compensation under the Employees’ Compensation Act?

Answer: An injured employee or deceased employee’s dependant must file a claim for compensation within one year from the date of injury or disability or death, except in special circumstances approved by the

Board of NSITF, the claim may be filed within 3 years from that date.

 

How does an employer report an accident or injury or death under the Employees’ Compensation Act?

Answer: An employer is obliged to report an accident, injury or death occurring to an employee in such form and manner as prescribed by the Board, i. e. by completing appropriate statutory Forms designed for that purpose.

 

Is there any penalty for failure of an employer to report accident or injury/death?

Yes, there is penalty. Any employer who fails to make a report as required by the Act commits an offence, punishable under the Act.

 

Does an insured person under Employees’ Compensation Act get benefit if he/she temporarily relocates outside Nigeria under the same employment, for conference/seminar or posting?

Answer: As long as the employment is still running and the employer is paying Contributions, he can get benefit, payable at Naira rate.

 

If an employee is injured on a public holiday, or weekend, is he entitled to benefit under the Employees’ Compensation Act?

Answer: Yes, provided the injury occurred in the course of work underemployment.

 

What would Government benefit from the Employees’ Compensation Act?

Governments at the three tiers (Federal, State and Local) stand to benefit the following:

  1. The Employees’ Compensation Act gives force to the welfarist provisions of the Constitution in Chapter 2.
  2. The status of Nigeria will improve in the League of Nations (being a member of I LO) that care for her workers in the workplace.

iii. A pool of investible funds for socio-economic development shall be created.

  1. Industrial peace would be promoted, thus economic development would be enhanced.
  2. Other favourable spin-off effects, like creation of employment, high productivity, (etc) would be enhanced.
  3. Improved quality of life through prompt response to health challenges at the workplace.

 

What would employers benefit from the Employees’ Compensation Act?

Answer: Under the Employees’ Compensation Act, it is a win-win situation for the stakeholders. In particular, the employer stands to gain directly or indirectly from the implementation of the Scheme in the following ways:

  1. It will relieve the employer of the heavy burden of solely taking care of the injured worker.
  2. Maintains payment of compensation to the injured worker even after ceasation of business by the employer
  3. Payment to the injured worker is made regularly without recourse to the employer, no matter the amount of liability.
  4. Increased productivity from the workforce.

 

What would employees benefit from the Employees’ Compensation Act?

Answer: Employees under this Worker Friendly Scheme would benefit as follows:

Prompt payment of compensation

  1. The missing gap in the PRA which covers only post-work benefit would be filled

iii.            The flaw in the prescribed insurance policy under PRA (failure to cover work injury, but death only) would be redressed

  1. Claims procedure is simplified and assured
  2. Cause of injury or who is at fault is irrelevant in making c1aims- “No Fault Scheme”

vii.          Short and long term follow up and rehabilitation are guaranteed

viii.         The employee do not contribute to the Scheme, only the employer contributes.

How will the society benefit from the ECS?

Answer: The society at large will enjoy social harmony, peace and socio-economic development devoid of crisis and crimes.

 

Under the Employees’ Compensation Act, is the employer obliged to bear solely the medical cost incurred by an employee?

Answer: No, the Employees’ Compensation Act provides for a pool of funds from which such costs are met, protecting the employer from the burden of bearing such costs solely.

In what ways does the pooling of risks affect the employer?

Answer: By pooling of risks, the employer is sure that if any major injury occurs to any of his/her employees; the business will not have to close down because of inability to pay huge employee’s compensation and/or settle medical bills i.e. the employer’s business is indirectly sustained.

 

What happens in a situation where the employer has not contributed the sum required to treat the injured worker?

Answer: The Employees’ Compensation Act has an in-built mechanism in its investment strategies that will take responsibility for employers in such situation but the Employees’ Compensation Act managers will be obliged to get the employer to comply and bring their contributions up – to – date.

 

How does risk pooling affect the worker?

Answer: The worker does not suffer by waiting for his or her compensation and medical bills, which may be unaffordable by the employer.

 

Does an employee who records no accident or disease throughout his/her working life qualify for any form of rebate or refund at the point of retirement?

Answer: No, an employee does not have any refund to collect from the Scheme. The Scheme is meant to cater to the employee while in active service. Only a Pension Scheme has such a provision.

 

Is there any special benefit for a complying employer who makes no claim at the end of a period, say one or more years?

Answer: Yes, an employer who records a zero claim within a particular year/period may be compensated with lower rate of contributions in succeeding year/period, after appropriate employer assessment process involving the application of merit rating, experience account and risk factor prevalence in the work environment must have qualified the employer for same.

 

What is the obligation of the employer under the Employees’ Compensation Act?

  1. Commitment to Employees’ Welfare

Answer: The employer is obliged to report every injury arising out of or in the course of employment to the NSITF Board and the nearest National Council for Occupational Safety and Health in their States within 7 days of its occurrence. The employer shall also report every disabling occupational disease, or claim for or allegation of an occupational disease.

 

What is the obligation of the employee under the Employees’ Compensation Act?

Answer: The employee is obliged to inform the employer within 7 days, after the occurrence of an injury or disability or occupational disease arising out of or in the course of work. In the case of death, the dependant will inform the employer appropriately.

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