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Claims calculations

Understanding for a Practical Arrangement on Payments to the Victims of the Rana Plaza Accident and their Families and Dependents for Losses

Method of calculating claims awards under the Arrangement

The method of calculating claims awards under the multi-stakeholder Arrangement for the Rana Plaza victims and their families and dependents is designed in accordance with ILO Employment Injury Benefits Convention No. 121. Its objective is to provide life-time benefits to Rana Plaza workers who are disabled as a result of the accident as well as to surviving dependents and family members of deceased workers. The design ensures monetary payments in a transparent and equitable manner according to the victims’ losses and needs respectively, as well as access to medical and related care for injured workers in need.

Parameters for payments:

The parameters that guide the calculation of monetary payments have been determined by the Coordination Committee and are guided by the general framework of Convention No. 121.

1. Calculation for loss of income 

The amount of the payments made in respect of the losses suffered will be calculated on the basis of the earnings of the victims. 

Reference wage: Wages that will be used to calculate the payments will be based on the 2013 Workers Classification Wage Structure, which was brought into law in October 2013. Wages earned by Rana Plaza workers at the time of collapse will be adjusted to reflect this structure. For example, for a worker at minimum wage of 3,000 takas per month at the date of accident, the wage that will be used to calculate the amount of the payment will be 5,300 takas, the current wage level.

Replacement rate: This is the percentage of the wage that will be paid out to the beneficiaries. For Rana Plaza victims, their families and their dependents it was agreed to use the following replacement rates:

  • Totally disabled worker: receives 60 % of the reference wage payable for his or her lifetime
  • Partially disabled worker:    receives a percentage of the amount above calculated for a totally disabled worker, the percentage being equal to the degree of disability of the worker.
  • Surviving dependent(s) of a deceased or missing worker: for as long as they are dependent, receive 60% of the current wage payable in the case of 3 eligible dependents or more; 55% of the current wage in the case of  2 eligible dependents, and 50% in the case of only 1 eligible dependent. Payments will be divided between each eligible dependent.

2. Definition of eligible dependent:

Dependent” is defined in accordance with the Bangladesh Labour Act 2006 as:
    (a) a widow, minor child, unmarried daughter, or a widowed mother; and
    (b) if wholly or partly dependant on the earnings of the worker at the time of his/her death, a widower, father or widowed mother, a daughter if unmarried or widowed, a minor brother, an unmarried or widowed sister, a widowed daughter-in-law, a minor child of a deceased son, a minor child of a deceased daughter where no father of the child is alive or, where no parent of the worker is alive, a paternal grandparent and illegitimate son or illegitimate unmarried daughter.

A minor is defined as a child below age 18.

3. Economic assumptions:

Economic assumptions used to calculate the present value of monthly benefits are:

  • Discount rate: 8.1% per year
  • Indexation of the monthly benefits: 6.0% per year

4. Length of payments:

Payments will be calculated to take into account the life expectancy of the beneficiaries (with the exception of minor dependents, where payments will be calculated until 18). The system uses UN mortality table which predict the observed life expectancy at birth in Bangladesh for males and females.   It also assumes improvement in mortality over time.

Payments will be made in a number of installments, as agreed by the Coordination Committee.

5. Health care and related benefits:

The Arrangement also addresses health care needs of victims injured in the accident.  A medical assessment by qualified doctors exercising independent professional judgment will project the necessary care that such victims need to attain pre-injury health condition or maximum recovery.  The scheme will ensure that those with injuries have access to needed treatment and related benefits, such as hospital care, doctors, drugs, physiotherapy, prosthetic appliances, and services to permanently disabled needing help for daily activities.  Follow up is organized through local and international service providers active in Bangladesh.