If your business employs workers, it’s highly likely that you’ll need to organize workers compensation. Here’s what you need to know.
If you operate a business in Australia and employ staff, you are obligated to provide workers compensation — a compulsory statutory form of insurance that all employers in every state and territory in Australia. Workers compensation provides employees with protection should they suffer a work-related injury.
Any Australian business that employs or hires workers on any basis, including part-time, casual, and full-time, must organize workers compensation for every single worker.
If an employee suffers a workplace injury or disease, the workers compensation scheme is designed to assist the employee by covering medical and hospital expenses, rehabilitation services, provide weekly benefits, cover a limited range of personal items, or provide a lump-sum payment in the case of permanent impairment.
Workers compensation schemes vary depending on the way the state government regulates the scheme in each state. Each state administers the workers compensation scheme in a different way, with insurers providing different services and performing different roles.
Understanding your workers compensation obligations as an employer is critical, but can be complicated.
What is Workers Compensation?
Workers compensation is essential to the longevity of your business and the security of your employees. Through workers compensation, the Australian Government ensures that employees are able to receive first aid, file compensation claims if necessary, and take advantage of various return-to-work rehabilitation services and initiatives.
Workers compensation isn’t only beneficial to your employees — it also protects the finances of your business. A business that meets workers compensation obligations doesn’t need to pay for the compensation of employees as company expenses. Not meeting your workers compensation obligations as an employer can also have significant consequences and can result in significant fines.
Workers Compensation Rules and Exceptions
The specific rules of workers insurance schemes vary depending on the state or territory they operate in. In Western Australia, Tasmania, Northern Territory and ACT, insurers function as scheme agents on behalf of the Government. In Queensland, however, the workers compensation scheme is operated by the state.
Most business owners with full time employees must follow mandatory workers compensation rules. There are a number of exceptions to the rule that all employees must be covered by workers compensation, however.
A business owner cannot have workers compensation insurance in the case that they are the sole trader or employee of the company. In this scenario, the business owner is required to obtain insurance themselves.
There are several other scenarios in which a business owner may not be required to secure workers compensation coverage.
Are Contractors “Workers” Under Workers Compensation Rules?
A common point of confusion for Australian business owners is determining whether contractors are classified as workers under compensation policies. In some cases, a contractor may be designated as a worker under the Workers Compensation and Injury Management Act 1981 (the Act).
- Whether or not a contractor is classified as a worker depends on multiple factors, which includes:
- Whether the contractor works for one employer, or contracts with multiple employers
- Whether the contractor delegates work to others
- Whether the contractor employs staff
A business that engages the services of a self-employed business owner or a contractor with an Australian Business Number can still be held responsible for liabilities associated with work-related injuries.
When engaging contractors, it’s essential to determine whether they are considered an employee under the Workers Compensation and Injury Management Act and ensure appropriate cover is secured.
Are Working Directors Covered by Workers Compensation?
In order for a working director to be covered by a working compensation policy, the director must be deemed a working director under the Workers Compensation and Injury Management Act — in this case, a “working director” is a director that is engaged to work for or on behalf of a company. The earnings of a director in the scope of this definition must be in substance for personal manual labor or services.
The company employing a working director is obligated to apply to an approved workers compensation insurer and cover their working directors. This step is important — if not taken, working directors will not be covered for any injury claims that may be made by the working director on the company, potentially rendering the company liable.
It’s important to note that it is not mandatory for Australian companies to cover working directors under a workers compensation policy. Similarly, non-working directors or public company directors cannot be covered under workers compensation policies.
Your Workers Cover Obligations as an Employer
- The specific legal obligations of an employer regarding workers and accident compensation is mandated by state legislation. Similarities across all states for employer obligations include:
- Employers must provide a safe workplace and minimize any risks of employee accidents, injuries, or work-related illnesses
- Provide employees with any necessary support and assistance in the event that an employee suffers from a work-related injury or illness
- Secure insurance with an approved insurer that covers the employer’s full liability for any damages and workers compensation
- Facilitate the return of the employee to work if necessary, depending on the severity of the employee’s work-related injury or illness
- If an employee at your business suffers from a work-related injury or illness, you are obligated as an employee to accurately and adequately assess the ability of your employee to return to work. This includes:
- Assessing the nature, extent, and severity of the employee’s injury or illness
- Determining the expected time frame in which the employee’s injury or illness will resolve
- Assess the impact of the injury or illness on the ability of the employee to safely perform the requirements of their role at the same level of function exhibited prior to the illness or injury
- Identify any limitations that may prevent the employee from safely performing any other duties
- Taking into account any legal considerations that must be satisfied for an accurate capacity assessment
How to Set Up Workers Compensation for your Australian Business
- If you’re operating a business in Australia and are obligated to set up workers compensation for your employees, you’ll need to follow the relevant procedure for the state or territory your business operates in:
- Australian Capital Territory: WorkSafe ACT
- New South Wales: State Insurance Regulatory Authority (NSW)
- Northern Territory: NT WorkSafe
- Queensland: WorkCover Queensland
- South Australia: ReturnToWork SA
- Tasmania: WorkCover Tasmania
- Victoria: WorkSafe Victoria
- Western Australia: WorkCover WA
There are a number of other considerations that must be taken into account when managing your workers compensation obligations. The Fair Work Act (Section 130) dictates that any employee that is absent from work and is receiving workers compensation is not entitled to take or accrue unpaid or paid leave, unless specific commonwealth, state, or territory workers compensation laws explicitly approves leave accrual.
Superannuation and accident pay must also be taken into consideration. Employers must determine whether they must fulfil superannuation or payment obligations to casual employees, which are dependent on whether they are specifically provided in an award.
Some specific modern awards contain provisions that require employees to make superannuation contributions within the period in which an employee is absent due to a work-related illness or injury. Similarly, some modern awards prescribe accident pay — it’s important to understand these requirements if applicable and fulfil them.
Understanding your workers compensation obligations as an employer is essential to both the health of your employees and your business. Workers compensation cannot be overlooked by any Australian business that employs workers — regardless of the manner in which these employees work.
If you are unsure of your workers compensation obligations to your employees, or cannot determine whether you must provide workers compensation, reach out to Fullstack today for comprehensive guidance.