The purpose of COIDA is to ensure that employees who suffer from work-related injuries or diseases receive medical treatment, rehabilitation, and financial support. The Act places the responsibility on employers to provide compensation to their employees in case of such incidents.

Under COIDA, employers are required to register with the Compensation Fund, a government body that administers the compensation system. Employers contribute to the fund based on the total annual earnings of their employees. These contributions are used to provide compensation and benefits to injured or affected workers.