The Language of Compensation

Introduction

• Natural disasters, such as floods, cyclones and torrential rains, have become frequent and have caused colossal destruction to life and property in India.
• It is but natural for victims to make a genuine case for compensation for the losses that they would have incurred due to a natural calamity.
• However, there have been two distinct words—“demand” and “appeal”—that were often used while making the claim for compensation.
• Interestingly, the leaders from the opposition and from the farmers’ movement seem to have used the word demand in their campaign for compensation.
• However, “demand,” if used with a singular reference to compensation for the loss occurring from the natural calamity, is likely to bring into sharp focus the tension between itself and the idea of compensation.
• However, the condition that makes “demand” commensurable with the claim for compensation is the domain of social relations based on the conception of private property that provides the grounds for compensation to acquire the value of the entitlement.
• Thus, in a juridical sense, private ownership, for example, inland, forms the basis of the agreement between the farmers and the crop insurance company.
• In the event of the loss of crop, the affected farmer is entitled to compensation. They can legally demand compensation.
• Thus, compensation as an entitlement can be defended against the violator of the agreement. The violator essentially becomes a wrongdoer.
• In the theoretical sense, there could be a situation where a farmer, due to certain compulsions, may end up violating the contract. But in the context of the agreement between the crop insurance company and the farmer, it is the former who is the violator.
• In actual practice, what we see is that it is the insurance companies that seem to share the dubious distinction of being a regular wrongdoer.
• Hence, in the recent case, the disaster-affected farmers can make a demand for compensation to the insurance company and to the state should the company fail to comply with the agreement, which is why one often hears the farmers’ outcry against the companies either inordinately delaying or totally refusing to pay the compensation to farmers.

Importance of Compensation from employee’s viewpoint

Compensation is one of the most important aspects of running a business that can make or break a business. Having a good compensation plan can help organizations to flourish and compete in their respective markets.

Some of the benefits of providing the right compensation package to your employees are:

• Attracts top talent
• Increases employee motivation at the workplace
• Boosts employee loyalty
• Increases productivity and profitability
• Improves job satisfaction and employee engagement
• Helps in retaining top employee
• Helps stay in compliance with the Federal and State government agencies

Sectors associated with compensation

1. The Civil Liability For Nuclear Damage Act, 2010
2. GST Compensation
3. Labour Laws Reforms And Compensation
4. Compensating Disaster Victims
5. Act-On Compensation For Natural Damage (Natural Damage Compensation Act)
6. Compensation To Farmers For Losses Due To Natural Calamities

Compensation to Farmers for losses due to natural calamities

• The State Government is primarily responsible for providing necessary relief measures in the wake of natural calamities.
• SDRF: For undertaking relief measures, funds are available with the State Government in the form of State Disaster Response Fund (SDRF).
• NDRF: Additional financial assistance, over and above SDRF, is considered from National Disaster Response Fund (NDRF) for natural calamities of severe nature and is approved on the basis of Memorandum received from the State Government, in accordance with established procedures.
• The Department of Agriculture, Cooperation and Farmers Welfare are concerned with providing relief under NDRF to farmers who have lost their crops due to drought, hailstorm, pest attack and cold wave/frost.
• The Government of India has evolved several schemes/programmes to address the need for drought mitigation and other requirements of the farmers under Rashtriya Krishi Vikas Yojana (RKVY), Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), besides implementation of Pradhan Mantri Fasal Bima Yojana (PMFBY) and National Agriculture Market Scheme (e-NAM), etc. for protecting farmers’ interests.
• The States have been given flexibility under RKVY to plan region-specific interventions for the farmers.

Act on compensation for natural damage (Natural Damage Compensation Act)

• The purpose of the State natural damage compensation scheme is to provide compensation following a natural disaster so that those affected can carry on their activities.
• Compensation will not be provided if it is possible to take out insurance against the damage through an ordinary insurance scheme, or if the claimant actually receives an insurance payment for the damage.
• Compensation is provided for natural damage directly caused by a natural disaster, such as a landslide/avalanche, storm, flood, storm surge, earthquake or volcanic eruption.
• In special cases, full or partial compensation may be provided for damage which is an obvious consequence of the natural disaster, even if the causality requirement in the first subsection has not been met.
• Full or partial compensation may also be provided for damage directly caused by precipitation or ice drift when special circumstances so indicate.
• Compensation shall be determined based on the cost of necessary measures to return the damaged object to the same condition as immediately prior to the time of damage.
• If the restoration cost significantly exceeds the value in use or restoration cannot be carried out for other reasons, the loss of value the damage has caused shall be compensated.
• Lost moveable property shall be compensated with the replacement value at the time of loss.

Labour Laws Reforms and Compensation

• That the archaic labour laws in India need to be amended is beyond debate.
• They have protected only a tiny section of the labour force, facilitated rent-seeking, and have laid the ground for the casualisation of the labour force.
• The phenomenon of the missing middle in manufacturing, and the substitution of capital for labour in a capital deficient and labour abundant economy.
• Estimates vary but there are over 200 state laws and close to 50 central laws. And yet there is no set definition of “labour laws” in the country.
• The main objectives of the Factories Act, for instance, are to ensure safety measures on factory premises and promote health and welfare of workers.
• The Shops and Commercial Establishments Act, on the other hand, aims to regulate hours of work, payment, overtime, weekly day off with pay, other holidays with pay, annual leave, employment of children and young persons, and employment of women.
• Major Challenges:
  • Organised sector is stringently regulated while the unorganized sector is virtually free from any outside control and regulation with little or no job security.
  • Wages are ‘too high’ in the organised sector and ‘too low’, even below the subsistence level in the unorganised sector. This dualistic set up sug­gests how far the Indian labour market is seg­mented.
  • Social security to organised labour force in India is provided through a variety of legisla­tive measures.
  • Work­ers of small unorganised sector, as well as in­formal sectors, remain outside the purview of these arrangements.
  • Multiplicity of Archaic Labour Laws: Labour is a concurrent subject and more than 40 Central laws more than 100 state laws govern the subject.
  • Trade Union Act, 1926 provide that any seven employees could form a union.
  • Multiplicity of trade unions hampers dispute resolution.
  • In­ter-union rivalry and political rivalries are con­sidered to be the major impediments to have a sound industrial relation system in India.
  • Rigid Laws: Job security in India is so rigid that workers of large private sector employing over 100 work­ers cannot be fired without government’s per­mission.
  • 71% of men above 15 years are a part of the workforce as compared to just 22 percent women- Gender Inequality
  • Due to unskilled labour force, employer resort to contract employment to fire them if they are not good.
• Reason Behind the Changes in Labour Laws:
  • States have begun easing labour laws to attract investment and encourage industrial activity.
  • To protect the existing employees, and to provide employment to workers who have migrated back to their respective states.
  • Bring about transparency in the administrative procedures and convert the challenges of a distressed economy into opportunities.
  • To increase the revenue of states which have fallen due to closure of industrial units during Covid-19 lockdown
  • Labour reform has been a demand of Industries for a long time. The changes became necessary as investors were stuck in a web of laws and red-tapism.

Roles of Government in Compensating Disaster Victims

• First explored are the nature of disasters – societal and individual, natural and manmade – and the place of both tort law and private insurance in providing compensation for disaster victims.
• Five possible roles of government with respect to individual victim compensation are examined:
  • Facilitating the Receipt of Private Compensation for the Consequences of a Disaster;
  • Assuring Insurance Availability for Disaster Victims When the Market Fails to Do So
  • Providing Victim Compensation Either When Government Should Have Prevented the Disaster or When It Is the Sort of Disaster We Aspire to Have Government Prevent
  • Providing Victim Compensation as an Alternative to Tort Recovery; and
  • Providing Victim Assistance to Overwhelmed Communities for Reasons of Altruism and National Solidarity.
• Individual-level: At the individual level, even if no one else is directly impacted, a loss may be disastrous.
  • For example, if an otherwise healthy young person with no dependents falls down the stairs and becomes a quadriplegic, that person will be widely understood to have suffered a catastrophic loss.
  • The victim will almost surely incur enormous harm – a dramatic change in personal lifestyle, huge medical and related expenses, and, very likely, a sharp reduction in earnings potential.
• Society level: At the society level, a disaster is generally understood as an event that causes large losses to a substantial number of people.
• Under the federal disaster relief program, which is largely run by the Federal Emergency Management Agency (FEMA), a “major disaster” is said to have occurred when the President, in response to a request from a state governor, declares it so.

How victims can be compensated at time of natural or man-made disasters?

• Both man-made and natural disasters very frequently affect the life of citizens in our country.
• Global warming and climate change have accelerated the pace with which natural disasters strike different parts of India. Floods caused by very heavy rains have become a common phenomenon during last 10-14 years.
• Our country frequently faces man-made disasters such as terror attack, fire in industrial and residential buildings, collapsing of bridges, road and railway accidents etc.

Victim compensation:

• In all such situations either human life is lost or ability of the citizens to carry on normal life is impaired.
• The government responds by announcing ex-gratia payment to the family of the victims.
• Usually, the announcements are prompted by political considerations without reference to the ability of the exchequer to dispense the taxpayers’ money for such relief.
• It is high time the authorities devise a scientific Victim Compensation Programme (VCP) which would take care of the victims in letter and spirit and at the same time the treasury is not adversely affected.
• The remedy lies in introducing VCP through insurance which is a scientific tool for the purpose.
• Insurance provides a systematic method of funding VCP without adversely affecting the finances of any organisation responsible to provide relief.
• If the government doles out relief it does it at the cost of some planned development activities.
• The compensations need to be linked to the magnitude of loss and should not be decided by political or regional considerations.
• The events should be classified for compensations to be paid by the donors, local bodies, state government, central government and the international aid agencies.
• But the most ideal scenario would be to provide insurance cover to the citizens for each kind of disaster.

Group cover:

• Insurance could be provided on the basis of group cover to the entire population which may be funded by the government or jointly by individuals and the government.
• For fundraising even a cess on income tax or GST may be thought of.
• If disaster strikes, people should be compensated as per the pre-determined compensation structure.
• If such insurance schemes are managed by the insurers they would pay the compensation out of funds maintained by them on the basis of pre-determined compensation structure.
• The government agencies would intervene to ensure timely settlement of such claim. Such an arrangement would eliminate the practice of making announcements for compensations for political considerations.
• The premium paid to the insurance companies every year would lead to a scientific build-up of funds with the insurers and would not cause a sudden dent to the government treasuries even when the disaster is of very high magnitude involving a very large number of people and property.
• The insurers will never suffer from the problem of shortage of funds because the insurers enjoy protection from reinsurers who are global behemoths.

Conclusion

It is common complain on the part of the victims that the announced compensation has not reached them at all. The scientific arrangement can rule out all such situations which undermine the credibility of the government or highlight the carelessness of our system.