Do you need workers' compensation insurance?

Do you need workers' compensation insurance?

Workers’ Compensation is a compulsory insurance required by all employers, regardless of their business location in Australia. This insurance provides compensation to employees if they suffer a work related injury or disease. Definition of employee can also vary from full-time, part-time or casual workers. Benefits can include weekly living payments, rehabilitation services, coverage of medical and hospital bills, and lump sum payments for permanent injuries. The policy coverage varies in different states and per individual but in essence, Workers’ Compensation Insurance is required when you have employees.

Do contractors or sole traders need Workers’ Compensation Insurance?

Whilst an employer is legally obliged to provide Workers’ Compensation Insurance for their workers, contractors themselves don’t necessarily need this type of insurance. It all comes down to the definition of ‘worker’, because if a contractor hires someone to perform paid work for their business, then that person hired is deemed a ‘worker’ and the contractor is required to provide Workers’ Compensation Insurance.

For example, if a builder hires an electrician or plumber to work on their site or a painter hires someone to paint a customer’s home, then the builder and the painter need to take out Workers’ Compensation Insurance for these workers. Any person who works under a contract of service is considered to be a ‘worker’, even if they have an ABN or pay their own tax. It’s important to remember that only an individual can be considered as a ‘worker’.

Sole traders, on the other hand, can’t cover themselves with Workers’ Compensation Insurance. Instead, they need a policy that covers them for death, disability, illness, accident or sickness, and compensates them for their lost revenue while they recover. However, if they employee workers, they also need Workers’ Compensation Insurance. To make sure you have the right insurance for yourself and your business, speak to an Adviser.

What happens if you don’t take out Workers’ Compensation Insurance – when you should?

WorkCover (also known as Worksafe in VIC, ACT, TAS, QLD & WA) will make sure that the employee receives all benefits that are required under Workers’ Compensation Insurance, however they may also penalise the employer. These penalties are outlined in section 452 of the Workplace Injury Rehabilitation and Compensation Act 2013, and the employer may be liable for the total costs of any claims made by the worker.

If an employer doesn’t have Workers’ Compensation Insurance, an employee who needs to make a claim can still apply for workers compensation benefits through the relevant State Workers Compensation Authority, who will manage their claim and investigate the employer. To the uninsured employer, the financial costs of not insuring their employees can be devastating. Weekly compensation and medical benefits, common law damages, penalties for not insuring can easily add up to more than a million dollars, leaving small businesses financially crippled. The financial costs of an uninsured workers claim far outweighs the costs of paying premiums over the long term.

To decide whether Workers Compensation is required for your business, talk to an insurance specialist today.

General Advice Warning

The information provided is to be regarded as general advice. Whilst we may have collected risk information, your personal objectives, needs or financial situations were not taken into account when preparing this information. We recommend that you consider the suitability of this general advice, in respect of your objectives, financial situation and needs before acting on it. You should obtain and consider the relevant product disclosure statement before making any decision to purchase this financial product.

Workers’ Compensation

While some occupations and industries have a higher risk of workplace incidents and/or fatalities than others, Workers’ Compensation is compulsory for all Australian employers. It provides financial compensation to workers if they suffer a work-related injury or illness.

Workers’ Compensation

What is Worker’s Compensation Insurance?

Workers’ Compensation Insurance is compulsory for most employers in Australia. It provides cover for your business against the financial costs for weekly compensation or a lump sum benefit in the case of permanent disability.

Every business and industry has occupational and safety hazards that can result in injury to employees and contractors. Some workplaces have a higher risk of work-related incidents than others, but no matter the size of your business, or the industry or state/territory it’s in, you’re required by law to have Workers' Compensation Insurance.

Why is Workers' Compensation Insurance important?

As an employer, Workers' Compensation Insurance is statutory obligatory. This insurance is designed to reimburse the business against weekly wages or lump sums costs if an employee is injured at work.

Workers’ Compensation rules vary between states and territories, so it’s important to check the relevant regulator for exact requirements for your location and industry, and seek professional insurance advice when making your decision.

Working Directors. Check if you have to include yourself as a working director, as this depends on the state/territory. We also recommend that working directors consider Personal Accident Insurance which has additional benefits not covered under Workers’ Compensation.
Contractors. If you employ contractors, some states and territories also require that these people, called ‘deemed workers’, are insured for Workers' Compensation.
Sole Traders. As a sole trader, it’s unlikely you can get Workers' Compensation Insurance. However, if you can’t work, you’ll still need ongoing income to pay your regular bills, so you should consider Personal Accident, Life, and Sickness Insurance in case you have an accident or permanent disability.

What does Workers' Compensation Insurance cover?

In cases of a work-related illness or injury, Workers' Compensation can reimburse the business for weekly wages, as well as pay the cost of hospital, medical, and rehabilitation expenses.

Examples of work-related injuries include:

soft-tissue injuries from lifting in warehousing or packing
cuts, lacerations, and needlestick injuries in medical and allied health
slips and trips in the retailing or consulting industries
hearing damage, dust diseases or asbestosis in the construction industry
fatal incidents such as electrocution, poisoning, falls and being struck by a machine.

There are also exclusions for illness or injuries that happen outside the scope of employment, like driving to or from work
.
We’re ready to assist you in arranging Worker’s Compensation Insurance that meets the statutory requirements in your state or territory.

Frequently Asked Questions

How much does worker’s compensation insurance cost?

Each state and territory calculates premiums differently. In principle, the annual premium is based on the industry rate, total amount of gross wages paid, and your business’ claims history.

Does your business need worker’s compensation insurance?

If you have employees, then each state and territory requires that you have Worker’s Compensation Insurance in place before you start operating the business. Employees can be full-time or part-time, and may also include contractors or deemed workers, piece-meal workers and apprentices.

What types of injuries or illnesses are covered by worker’s comp?

Workers’ Comp covers any injury or illness directly caused at or by the type of work. For example, a needlestick injury may cause hepatitis in a nurse, a scaffolding collapse may cause permanent injuries, quarry workers could develop tinnitus (ringing in the ears) due to excessive workplace noise, or a warehouse worker could injure their back when packing shelves.

Who is exempt from worker’s compensation?

Workers’ Compensation Insurance covers employees and deemed workers. Business owners or sole traders, as well as independent contractors, usually aren’t insured under Workers' Compensation. If you’re not insured, we recommend that you consider buying Personal Accident Insurance.