What Does Workers Compensation Insurance Cover?

No matter where you’re employed, it is very important that you understand the particulars of workers compensation insurance. In Australia, all employers (with the exception of exempt employers) are legally required to have a workers compensation insurance policy.

What is an employer?

By definition, an “…employer is a business (including an individual) that employs or hires workers on a full-time, part-time or casual basis, under an oral or written contract of service or apprenticeship.”

Who is a worker?

Sometimes it is not completely clear whether a person is in fact a worker. Deemed workers are considered or ‘deemed’ as workers for the purpose of workers compensation and examples of deemed workers include:

1. taxi drivers,
2. outworkers
3. salespeople, canvassers and collectors
4. some contractors
5. rural workers
6. boxers, wrestlers, referees and entertainers.

All deemed workers need to be covered by a workers compensation policy, at all times.

Distinguishing workers and contractors

Typically, a standard employment relationship involves workers and employers. For matters relating to workers compensation, a worker is someone who works within a contract of service, a training contract or has entered into such a contract with you as the employer. This applies whether the work involves manual labour, clerical work or any other type of work and whether it is an implied or expressed contract. Similarly, the relationship exists regardless of whether a written or oral contract exists.

To recognise the difference between a contractor and an employer, a range of subjective factors need to be considered in total. This means that you need to consider all factors when deciding the employment status of a person.

For example, you would expect that a contractor would:

1. Perform a defined task using their own skill and judgement
2. As necessary, employ other people, delegate and sub-let work
3. Receive payment as per the quotation provided for the job
4. Provide all their own tools and materials
5. Have an independent business in their own name or under the name of a business or firm
6. Be subject to PAYG tax arrangements.

In contrast, a worker is someone who you pay wages or commission, no matter how many hours they work each week. You could expect a worker to:

1. Take your direction regarding the work needed to be done and the time and manner in which it is completed
2. Complete the work as part of their job
3. Receive payment according to the time spent doing the work
4. Be supplied (by you as the employer) with the materials and tools that they need
5. Work only and exclusively for you.

A person’s status for tax purposes has no bearing on their status as worker for purposes of workers compensation.

What is covered by workers compensation insurance?

Laws pertaining to workers compensation cover only injuries or illnesses related to a person’s work. However, an injury or illness is covered by workers compensation as long as it is job-related; this does not mean that it needs to have happened in the workplace. Even when injury or illness is sustained by one of your workers travelling on business, carrying out a work-related errand or attending a business event, they are covered.

Examples of covered injuries and illnesses:

1. Accidents which are sudden in nature (such as falling from scaffolding)
2. Injuries that occur over time (such as computer-related repetitive stress injuries)
3. Illnesses resulting from exposure to chemicals, pollution or radiation.

Workers compensation does not cover everything:

It’s important to understand that there are injuries and illnesses which are not covered by workers compensation insurance. These include:

1. Injuries resulting from a worker being intoxicated or under the influence of drugs
2. Injuries which are inflicted by the individual
3. Injuries that result from a fight initiated by an employee
4. Injuries related to criminal activity
5. Injuries claimed after the employment of an individual is terminated
6. Injuries suffered by the employee while they are off the job.

Why does an insurance policy need to be in place?

Workers are provided with regular benefits as well as support to cover medical, hospital and rehabilitation expenses when an appropriate insurance policy is in place and an injury or disease results from activities in the workplace. Workers compensation insurance will also cover your workers for some personal items (such as clothing or glasses that have been damaged in an accident relating to work) and enable a lump sum payment to be made to the worker if their impairment is permanent.

The workers compensation system is intended for the benefit of all:

One of the most important features of the workers compensation system is that it creates a compromise and balance between you as an employer and your employees. Essentially, your employees receive benefits that do not depend on ascertaining fault and you are afforded protection from lawsuits brought about by injured employers seeking payment for pain, suffering or mental anguish.