The following frequently asked questions will provide you with information to help you with your workers’ compensation insurance requirements.Workers' compensation policies
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 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. 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.
If you are uninsured, you are also liable to pay fines of up to $5000 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.
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.
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.
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.
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
- piece workers
- working directors (companies now have an option as to whether working directors who have some ownership of the company and are ‘workers’ under the Act are to be insured)
- 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.Primary definition
This covers any person who works under a contract of service or apprenticeship. 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.
Some people who work on a contract or sub-contract basis may be covered under this part of the definition, including 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
- work unsupervised
- 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.
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 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 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 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.
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.
However, if the principal has to pay the claim, the principal can 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.
Employers and contractors should note:
- 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.
- 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’.
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.Can non-working directors or public company directors be covered?
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.
Employers operating in the Western Australian workers’ compensation scheme are required to hold insurance cover for all of their workers, regardless of their age.
The Workers’ Compensation and Injury Management Act 1981 was amended in October 2011 to remove all age based restrictions on entitlements.
The changes apply prospectively to injuries occurring after 1 October 2011. The changes to the Act mean injured workers aged 65 years and older are able to access workers’ compensation on the same terms as all other injured workers.
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:
- The arrangement was entered into on or after 14 November 2005.
- 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:
- before the arrangement was made, the worker was the employer’s worker (under the Act) and provided substantially similar services; or
- 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.
- 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.
The work is directly a part or process in the trade or business of the other employer.Penalties for non-compliance
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 legislation 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.
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.
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.
To support the Code WorkCover WA has also issued the Injury Management: A Guide for Employers publication (available in the Employer publications section) 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.
Financial penalties apply to employers who do not comply with the obligations set out in the Code.
If you require further information, contact WorkCover WA’s Advice and Assistance on 1300 794 744.
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.
When discharging obligations on your behalf, your insurer should involve you in decisions that are made.
If you wish to dismiss a worker receiving compensation 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 dismissal
- 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.
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.
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 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.
See the FAQs page within the Resolving a dispute section for more information about resolving a dispute.