In WA it is optional to cover working directors for workers’ compensation.

Working directors are only covered by the workers’ compensation scheme if each director is named on the insurance policy and the remuneration of each director is declared to insurers at policy inception and renewal.

To be covered for workers’ compensation a working director must:

  • be a director of a private (Pty Ltd) company
  • undertake work for the business and receive earnings as a director that are in substance for personal manual labour or services
  • be named on the workers’ compensation policy
  • declare estimated remuneration at inception of the policy
  • declare actual remuneration at the end of each policy period (renewal)
To be considered a ‘working director’, a company director must work in the business and do more than undertake director duties. A working director is a person:

  • who executes work for or on behalf of the company, and
  • whose earnings as a director of the company, by whatever means, are in substance for their personal labour or services

Only working directors of a proprietary limited (Pty Ltd) company can be covered by workers’ compensation
For the purpose of determining who is a working director, the terms ‘company’ and ‘director’ are defined in the Corporations Act 2001 (Cth).

Exclusions
The following are excluded from coverage as a ‘working director’:

  • Non-working directors
  • Public company directors
  • Sole traders and partnerships
  • Unincorporated business owners
A statement of each working director’s remuneration is used by the insurer to determine an appropriate insurance premium and calculate weekly compensation payments for a working director with an incapacity for work.

The following steps must be taken by the working director’s company:

  1. The company applies to one of the approved insurers and names each working director to be covered by the policy
  2. A statement is provided to the insurer specifying each working director’s estimated remuneration payable over the insurance policy period.
  3. At the end of the policy period a statement is provided to the insurer specifying each working director’s actual remuneration as a director paid over the previous insurance policy period.
 Remember: Name and declare the earnings of each working director at policy inception (estimate of earnings) and renewal (actual earnings).
X Do not aggregate the earnings of multiple working directors or combine the earnings of working directors as part of the general remuneration of other workers covered by the policy.
Working directors named on a company’s workers’ compensation policy can make a claim and receive compensation for weekly payments, medical treatment and related services like any other worker.

For more information please visit www.workcover.wa.gov.au/employers

Weekly payments: first 13 weeks

The method for calculating weekly compensation payments varies depending upon whether a statement of the working director’s actual earnings was provided to the insurer for the previous insurance policy period.

The statement of actual earnings of the working director provided to the insurer at the end of a policy period (when an insurance policy is renewed) is the default mechanism for calculating the base rate of weekly compensation for working directors for the first 13 weeks of incapacity.

Where a statement of actual earnings is provided the amount declared in the statement applies regardless of the earnings received by the director immediately prior to any injury.

Where a statement of actual earnings for working directors is not provided to the insurer the weekly compensation rate of working directors is determined in the following way:

  1. If the person was a working director for less than one year, by averaging the earnings paid to the director for the relevant period ending on the day before the injury occurred.
  2. If the person has not been paid any earnings before the injury occurs, the average of the estimate of the director’s earnings provided by the company to the insurer.
  3. Otherwise, by averaging the earnings paid to the director by the company over a one year period ending the day before the injury occurred.

The amount that is produced by applying the relevant method above to the circumstances of the individual working director will determine the amount of weekly compensation payable for the first 13 weeks of incapacity.

There is a cap on weekly compensation payments which applies to all workers, including working directors. The cap is indexed annually – see prescribed amount.

Weekly payments: from week 14

From week 14 the amount of weekly compensation will step down to 85% of the base rate calculated for the first 13 weeks of incapacity.

There is a cap on weekly compensation payments which applies to all workers, including working directors. The cap is indexed annually – see prescribed amount.

The following examples illustrate how weekly compensation is calculated for working directors in different circumstances.

Scenario 1 – Company statement of estimated earnings of working director is $80,000. At the end of the policy period the company declares the amount of the working director’s earnings is $100,000. Three months after the last statement of actual earnings the working director is incapacitated for work.

Weekly compensation is based on the annual amount of $100,000 last declared as the actual earnings of the working director.

Scenario 2 – Company provides statement of estimated or actual earnings to insurer with nil remuneration declared for working director.

No weekly compensation is payable as the company has declared the working director receives no earnings.

Scenario 3 – Working director working for company less than one year. Statement of working director’s estimated earnings of $80,000 provided to insurer but no statement of actual earnings. At time of injury no remuneration received.

Weekly compensation based on the estimated earnings of $80,000 p/a declared by the company to the insurer at beginning of policy period.

Scenario 4 – Working director working for company less than one year. Statement of working director’s estimated earnings of $80,000 provided to insurer but no statement of actual earnings. At time of injury working director’s weekly earnings averaged $1,000 p/w over 3 month period.

Weekly compensation based on average earnings of $1,000 pw.

Definitions and deeming provision: section 10A

Insurance and remuneration declaration requirements: sections 160(2a) &(2b) and 160A

Calculation of weekly payments: schedule 1 Clause 11 ‘Amount B’ paragraph (a) & subclauses 11(2a), (2c), (3) and (4)