The following frequently asked questions will provide you with information to help you with your workers’ compensation insurance requirements. Please click on the links below.
- Do I need workers' compensation insurance and what is it?
- What if I don’t have a workers’ compensation policy?
- How do I take out a workers’ compensation policy?
- Who do I need to cover on my workers’ compensation policy?
- Do I need to cover sub-contractors on my policy?
- Do I need to cover family members on my policy?
- Can I cover myself for workers’ compensation insurance?
- Will the changes affect my current policy that covers me as a working director?
- Can the insurer dispute whether a person is a working director of the company?
- What is an avoidance arrangement?
- Am I required to provide injury management at my workplace?
- What is an injury management system?
- Is it compulsory for me to have an injury management system at my workplace?
- Can I get help setting up my injury management systems?
- I am unable to maintain an injured worker's employment due to the current economic climate. Am I allowed to terminate their employment, and if so, what do I have to do?
- What if I am unable to pay an injured worker's weekly compensation payments?
|1) Do I need workers' compensation insurance and what is it? |
Workers’ compensation insurance covers your workers when they are working for your trade or business, and/or while acting under your instructions.
Workers’ compensation protects you and your business from financial claims when a worker sustains a work related injury or disease. It provides injured workers with weekly payments to cover loss of earning capacity and payment of reasonable medical and vocational rehabilitation expenses, where necessary, to help them remain in or return to gainful employment.
In special circumstances, where a worker would otherwise not be able to return to work, and where they meet other essential criteria, they may be eligible to receive specialised retraining. In some circumstances, workers may be entitled to lump sum settlements.
Specific provisions in relation to claims that involve a journey are contained within the Workers’ Compensation and Injury Management Act 1981 (the Act). Workers will normally not be treated as having suffered personal injury by accident arising out of or in the course of their employment if they suffer an injury during a journey between their place of residence and place of employment or vice versa.
|2) What if I don’t have a workers’ compensation policy? |
If you don’t have workers’ compensation insurance, your company will be liable for the cost of the statutory benefits under the legislation if one of your workers has a work related injury or industrial disease. This could cost in excess of $600,000, plus legal costs involved in court action, and you may also be liable for the cost of any action taken at common law.
If you are uninsured, you are also liable to pay fines of up to $5,000 per worker, as well as an amount equal to any avoided premiums going back five years. If you continue to be uninsured after the date of your conviction, you will commit a separate and further offence for every week you do so.
|3) How do I take out a workers’ compensation policy? |
You can obtain insurance cover from any of the insurers approved by the Minister to underwrite workers' compensation insurance.Recommended premium rates for workers' compensation are reviewed and published annually by WorkCover WA. These are set out in a Government Gazette, which is available from the State Law Publisher.
Depending upon your risk profile (i.e. previous claims experience and the extent of risk associated with their particular industry), insurers may discount the recommended premium rates by any amount, or surcharge up to a maximum of 75 per cent of the recommended premium rate for individual employers.
With approval from WorkCover WA, approved insurers may surcharge beyond 75 per cent of the recommended premium rate, dependent upon the claims experience and risk associated with the operation of an employer’s business.
Workers’ compensation legislation in Western Australia encourages a degree of self-responsibility, so you are encouraged to obtain alternative quotes when taking out cover or renewing your policy.
A declaration of estimated gross wages for the period of the policy (usually 12 months) will be needed so your insurer can calculate your premium based on the estimate.
When the policy expires, you must submit a statement of actual gross wages paid in the past period. If you do not, or your statement is false, you may leave yourself liable for prosecution. Following the submission of your actual gross wages, an adjustment on your premium may need to be made, depending on whether the actuals were more or less than the estimate you first provided.
If you wish to renew your policy with the same insurer you need to submit (on the same declaration) an estimate of gross wages to be paid the following year.
|4) Who do I need to cover on my workers’ compensation policy? |
You must provide workers' compensation for anyone you employ who the legislation defines as a 'worker', including cover for claims at common law. For more information, see the Covering your workers page.
Workers’ compensation law states that employers must have workers’ compensation coverage for anyone who is defined in the legislation as a ‘worker’.
Definition of a worker
The legislation provides a very broad definition of a ‘worker’. It covers:
full-time workers on a wage or salary;
part-time, casual and seasonal workers;
workers on commission;
working directors (companies now have an option as to whether working directors who have some ownership of the company and are ‘workers’ under the legislation are to be insured under the workers’ compensation system)
contractors and sub-contractors may also be defined as ‘workers’, depending on the circumstances of their working arrangement.
The definition of ‘worker’ may be broken up into two main parts: Primary and Extended.
This covers any person who works under a contract of service or apprenticeship with you. The contract may be expressed or implied, oral or written. A large part of the workforce is covered under this part of the definition, including workers who:
work for salary or wages;
work set hours of work;
may be fired by the employer;
work for only one employer
are supervised and controlled.
This covers any person who works under a contract for service. Many people who work on a contract or sub-contract basis may be covered under this part of the definition, and it may cover workers who:
are paid on piece rates, hourly rates or per job;
work for the employer on a ‘one-off’ or per job basis;
do not have set hours of work;
work for more than one employer;
pay 20 per cent prescribed payments (sub-contractor’s tax)
A worker may also include any person who is covered by an industrial award or agreement.
|5) Do I need to cover sub-contractors on my policy? |
A contractor or sub-contractor may be defined as a ‘worker’ if the contractor/sub-contractor is engaged by another person to do work for the purpose of the other person’s trade or business, and the contractor/sub-contractor is paid in substance for his/her personal manual labour or services. For more information, see the Contractors and sub-contractors page.
Example: A farmer’s normal trade or business is farming. Activities which are part of that business include seeding, fencing, shearing, and repairing equipment (e.g. fences). A shearing shed worker, who may sometimes be referred to as a sub-contractor, is paid in substance for his/her work as a wool classer or shearer or shed-hand.
The sub-contractor may use his/her own hand tools, but this is not significant in determining what he/she is paid. In each case, if the sub-contractor does not supply materials and does not employ any workers, he/she may be defined as being paid in substance for his/her personal manual labour or services and be defined as a ‘worker’.
If the contractor/sub-contractor supplies materials and/or employs workers, then there is doubt whether he/she would be a ‘worker’ under the legislation, but every case is looked at on its merits.
Cover for the contractor's workers
Under section 175 of the legislation, if a person (the ‘principal’) contracts with another person (the ‘contractor’) to perform work which is for the purpose of the principal’s normal trade or business, then both the principal and the contractor are jointly and severally liable to pay compensation in accordance with the legislation for the contractor’s workers. The principal has no liability unless the injury occurs on premises the principal has undertaken to execute the work, or which are otherwise under his / her control or management.
If the contractor in turn sub-contracts the work to a sub-contractor, then all parties, including the principal, the contractor and the sub-contractor, are liable to cover any workers the sub-contractor may employ.
If one of the contractor’s workers has an injury at work, they can make a claim for compensation on either the principal or the contractor. However, if the principal does have to pay the claim in the first instance, the principal can sue and recover the full cost of the claim from the contractor.
It is therefore in the interest of the principal to ensure the contractor holds a current workers’ compensation policy. It is worth noting that while both parties in this situation are liable to declare the wages of the contractor’s workers, suitable arrangements may be made with an insurance company for the striking of an appropriate premium.
Key points to consider
You cannot contract out of your liability under the legislation by making a worker sign an agreement that says they are not entitled to claim worker’s compensation.
A personal sickness and accident policy cannot be substituted for a workers’ compensation policy.
Many sub-contractors work as teams and believe no cover is required. If one of the team members has the right to hire and fire and supervises the others, then there may be an employer/worker relationship and the team leader would be required to take out a workers’ compensation policy to cover the other members of the team.
|6) Do I need to cover family members on my policy? |
Yes. See the Family members page for more information.
|7) Can I cover myself for workers’ compensation insurance? |
Generally, individual workers cannot cover themselves for workers’ compensation, even if they are self employed and have an ABN. An exception is when an individual is a working director of a company and then it is optional whether they choose to be covered for workers’ compensation insurance.
I'm a working director, do I need to take out a policy?
A working director (in relation to a company) means a director who executes work for or on behalf of the company, and whose earnings as a company director by whatever means, are in substance for personal manual labour or services. It is optional for a working director’s company to cover their directors for workers’ compensation.
From 14 November 2005, changes to the workers' compensation legislation provided greater certainty for companies which actively choose to cover working directors for workers’ compensation. The changes provide a definition of ‘working director’ that supersedes the definition of ‘worker’ contained in section 5 of the legislation. The changes also provide a mechanism for resolving disputes as to whether a working director is a ‘worker’ under the legislation before a policy of insurance is issued.
Changes to the legislation mean that all employers are required to insure their workers for workers’ compensation, regardless of whether they enter into an ‘avoidance arrangement’ to minimise their statutory obligations.
What process does a working director go through to obtain insurance?
The director’s company applies for insurance on the basis that their director is a ‘working director’ as defined in the legislation.
The company provides information to the insurer concerning the working director’s remuneration when issuing or renewing the insurance policy.
Once the policy is in effect, the working director is deemed a worker under the legislation.
Contact an approved insurer if you would like to seek workers’ compensation cover for ‘working directors’.
|8) Will the 14 November 2005 changes affect my current policy that covers me as a working director? |
If you wish to cover your working directors named on your current policy from 14 November 2005, contact your insurer to discuss what additional information is required to ensure continuity of coverage under the new legislation. Your insurer may need to amend your existing policy or issue a new policy as directors are deemed workers only in the circumstances described in the new section 10A of the Act (which is effective from 14 November 2005).
Essentially, for a director to be covered, a company must have applied to an approved insurance office under section 160(2) of the Act on the basis that a 'working director' of the company is a worker. The changes include a new definition of working director, so it is recommended that if existing policies are to be modified, companies provide a declaration that their director(s) identified in the current policy meets the definition of working director. Provide details relating to the director's remuneration to the insurer.
|9) Can the insurer dispute whether a person is a working director of the company? |
There is a mechanism for determining disputes as to whether a director is a ‘working director’ prior to the policy of insurance being issued. You or your insurer may lodge an application with the Conciliation and Arbitration Services (CAS).
Once a policy has been issued, an insurer cannot decline to indemnify you on the basis that the working director is not a ‘worker’ or the company is not the employer of the working director.
However, liability can be declined should the information provided by the company, in respect of the director when applying for the policy or contract of insurance, be false or misleading in a material particular and the decision of the insurer to issue the policy was materially affected by that misrepresentation.
What if I have a claim prior to 14 November 2005?
If you or your employee suffered a compensable injury prior to 14 November 2005 and were entitled to receive compensation under the legislation there is a provision that protects your right to workers’ compensation after 14 November 2005.
Can non-working directors or public company directors be covered?
Non-working directors are excluded. A director registered under the Corporations Act 2001 of the Commonwealth must be a working director, as defined by the Act.
Public company directors are also excluded. Only a company, as a separate legal entity, may apply to insure a working director and the definition of company, contained in section 10A of the Act, excludes public companies from obtaining cover for its directors.
|10) What is an avoidance arrangement? |
The new workers’ compensation laws (from 14 November 2005) prohibit certain employers from requiring individuals to incorporate (set up their own company) as a condition of getting a contract for work.
Prior to this, in many cases, workers continued to work exclusively or substantially for the company that previously employed them, while performing the work as a sole director of their own company. This left these workers, who were fundamentally employees, without any workers’ compensation cover.
The term ‘avoidance arrangement’ applies only in the following circumstances:
1. The arrangement was entered into on or after 14 November 2005.
2. The work is done under an arrangement designed to enable an employer to benefit from a worker’s services without liabilities and duties as the worker’s employer under the legislation; specifically if:
(a) before the arrangement was made, the worker was the employer’s worker (under the Act) and provided substantially similar services; or
(b) before the arrangement was made, the employer intimated that he or she would not engage the worker under contractual arrangements that would make the worker the employer’s worker under the Act.
3. While the arrangement is in effect, the worker does work principally for the employer on behalf of a company of which the worker is an employee or director.
4. The work is directly a part or process in the trade or business of the other employer.
Employers who allow a worker to do work for them under such ‘avoidance arrangements’ may be fined a maximum of $5,000.
If a worker is injured while working for an employer under an avoidance arrangement, the employer will be liable to pay workers' compensation entitlements in accordance with the legisilation and meet return to work obligations.
It is an offence for an employer (or the employer’s insurer) to receive any money or indemnity from the worker (or the worker's company) in respect of any compensation liability the employer has to pay compensation; penalty: $2,000.
Examples of avoidance arrangements
1. Worker previously employed - AG Engineering enters into a new contract with a welder who was previously employed under a contract of service by the company to weld steel roofing frames.
Under the new arrangement, the welder provides substantially similar services as she did when working for AG Engineering, but provides those services on behalf of a separate company as a director or employee, working principally for AG Engineering. The work done is also directly part of the business of AG Engineering, that is, metal fabrication.
If an injury occurs, AG Engineering will be liable to pay the welder compensation and meet return to work obligations, if required.
2. Worker not previously employed - Morrissey Cleaners calls for tenders from incorporated companies to provide cleaning services to its clients. Morrissey Cleaners intimates that it is not responsible for workers’ compensation under the contractual arrangement for any company winning the tender for the contract.
An applicant, Mr Brookes, forms a company named PB Pty Ltd, registers himself as the director and PB Pty Ltd wins the contract. While the contract is in effect Mr Brookes does work principally for Morrissey Cleaners – work that is directly a part of the business of Morrissey Cleaners, that is, industrial cleaning.
If an injury occurs, Morrissey Cleaners will be liable to pay Mr Brookes compensation and meet return to work obligations, if required.
|11) Am I required to provide injury management at my workplace? |
Helping Western Australian employers meet their injury management obligations is crucial to making sure all workplaces have an environment that protects and supports injured workers. WorkCover WA offers extensive support to employers across the State in developing injury management systems to help get injured workers back to work.
The information in this section will help you design your injury management system, and includes frequently asked questions, along with templates, codes of practice and other information. If you require further information, please contact WorkCover WA's Advice and Assistance Unit.
- What is an injury management system?
- Is it compulsory for me to institute an injury management system at my workplace?
- Can I get help setting up my injury management systems?
|12) What is an injury management system? |
Injury management is “the management of workers’ injuries in a manner that is directed at enabling injured workers to return to work” (Section 5 of the legislation). It is the responsibility of employers and injured workers to cooperate in this process, where it is medically supported. An injury management system describes the steps you need to take when a workplace injury occurs.
Under workers’ compensation law, you must establish an injury management system in your workplace. WorkCover WA has issued a Code of Practice (Injury Management) 2005 (the Code). The Code explains your legal responsibilities.
To support the Code WorkCover WA has also issued the Injury Management: A Guide for Employers (PDF - 980kb) publication which provides information to assist employers to understand their legal obligations, provides guidance on developing an injury management system and contains a three step approach to effective injury management.
13) Is it compulsory for me to have an injury management system at my workplace?
Yes. There is a general requirement in the legislation for you to establish an injury management system.
Requirements for the establishment, content and implementation of an injury management system are set out in the Code. Where there is a requirement in the Code that an employer “has to” do something that relates to an injury management system, it is mandatory.
Financial penalties apply to employers who do not comply with the obligations set out in the Code.
|14) Can I get help setting up my injury management systems? |
Your insurer is required to make you aware of your obligations under section 155B and 155C (1) and (3) of the legislation. These sections relate to establishing and implementing injury management systems and return to work programs in accordance with the Code. Your insurer has an important role in assisting you with early intervention when a work injury occurs and with the establishment of appropriate return to work programs.
Under section 155D(3) of the legislation, the obligation for you to establish and implement return to work programs may be discharged by your insurer, provided you send your insurer a request to do so. If your insurer establishes and implements return to work programs on your behalf, they must comply with the Code where you would be obliged to do so.
Insurers determine liability for workers’ compensation claims lodged by injured workers and must process claims in accordance with the legislation. They are encouraged to communicate with their insured employers to provide information regarding claims management and to confirm that appropriate return to work activities have commenced when a worker has been injured at work.
Make arrangements to regularly meet your insurer with the injured worker, or set up another means of regular communication. This can help identify and resolve problems that could interfere with an early return to work.
When discharging obligations on your behalf, your insurer should involve you in decisions that are made.
15) I am unable to maintain an injured worker's employment due to the current economic climate. Am I allowed to terminate their employment, and if so, what do I have to do?
|No, unless it is not reasonably practicable to put the worker back to their pre-injury employment or find them alternative work.|
If this is the case, you must:
- complete a 'notice of intention to dismiss' (Form 15G) and provide 28 days notice to the worker;
- attach a letter to the Form 15G and forward to WorkCover WA explaining;
- the terms of the redundancy
- the current medical certification of the worker and
- whether the worker is still in receipt of weekly payments
Once WorkCover WA receives the 15G Form, WorkCover WA will determine if any further information is required. A compliance officer may contact you to discuss the details of the termination.
Will the worker still be able to access their workers' compensation benefits?
Yes, the worker is still entitled to receive statutory weekly payments and medical and related benefits.
16) What if I am unable to pay an injured worker's weekly compensation payments?
|Once a claim is accepted, the legislation requires you to pay the weekly compensation payments to the injured worker as if they were still at work, on the same pay day and in the same way as you paid their wages prior to their injury or illness.|
If you feel that you may be unable to pay an injured worker's weekly compensation payments in this manner, you should contact your insurer as soon as possible to discuss what options are available. If you cannot resolve this matter with your insurer, contact WorkCover WA's Advice and Assistance Unit on 1300 794 744.
Make sure you keep a record of the date and time you contacted the injured worker, your insurer and WorkCover WA on this matter.