Workers Compensation

What is Workers Compensation?
Workers compensation insurance
Employer's Obligations
Termination of employment
Related links: Workers compensation authorities

What is workers compensation?

Workers compensation is a statutory, no-fault system of compensation for work-related injuries. It is compulsory for the employer to take out workers' compensation insurance.

'Injury' means any physical or mental injury and includes any disease contracted in the course of employment. It also includes the recurrence or aggravation of any existing injury or disease and, in some jurisdictions, includes injuries while travelling to and from work. The definition of injury usually includes ‘psychological injury’, such as work-related stress.

The definition of 'worker' is very broad. It covers not only full-time workers on a wage or salary but also those who are part-time, casual or seasonal; workers on commission; piece workers and working directors. In many situations, contractors and sub-contractors also may be defined as 'workers', depending on the circumstances of their working arrangement.

‘In the course of employment’

‘In the course of employment’ can include travelling to or from work (this differs in legislation around the country), working at locations away from the employer’s premises (including working at home) and may, depending on the circumstances of the case, include events that are incidental to employment, such as lunchtime sporting events.

No fault system

Workers compensation is a ‘no fault’ system, which means that the employee will be compensated whether or not the employer’s conduct was negligent or careless, and in most cases whether or not the employee’s conduct contributed to the injury or illness. Employers cannot restrict or remove employees’ entitlements to workers compensation, for example by adding exclusion provisions to individual employment contracts.

Legislation

Apart from federal public service employees and some sectors of the maritime industry, workers compensation is covered by State and Territory legislation. See the Legislation page for links to Acts.

Enforcement

The State and Territory workers compensation authorities employ inspectors who have the power to visit workplaces and check for compliance with workers compensation requirements, as well as to investigate accidents that result in claims. Penalties for non-compliance can apply.

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Workpers compensation insurance

Every employer must take out a workers compensation insurance policy to cover all its employees.

Benefits

Under this policy, employees who suffer an illness or injury in the course of their employment will receive the following benefits:

  • payment for lost remuneration (not necessarily all lost remuneration) while they are unable to work
  • payment of medical and related expenses that are relevant to the illness or injury.

Premiums

Premiums are set by insurers, based on a percentage of the employer’s payroll cost. Employers who compile a record of frequent and/or costly claims are usually required to pay higher premiums than others, as are those in industries determined to be less safe.

Reducing premiums

Note that it is important to remember that workers compensation is affected by the employer’s work health and safety duties to provide a safe and healthy workplace for employees and to minimise the risks of injury and illness.

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Employer's obligations

These differ to some extent from state to state. However, as a guide, apart from arranging insurance cover, employers have the following types of workers compensation obligations:

  • to retain copies of workers compensation (and occupational health and safety) legislation at the workplace, and in some cases display it;
  • to keep time and wages records so that compensation benefits can be calculated;
  • to maintain a record at the workplace of details of accidents and injuries to employees;
  • to process all claims made by employees — an employer CANNOT refuse to allow an employee to make a claim and must advise the employee of his/her right to make a claim and the process it involves;
  • to notify the insurer promptly of an injury to an employee and submit a claim form if the employee makes a claim — note that if the injury is significant (eg the employee is likely to be off work for at least a week), there is usually a shorter time period for notifying the employer;
  • to submit the required documents with the claim form, such as medical certificates, hospital/medical accounts and evidence of expenses already paid by the employee;
  • when new employees commence work, to seek information from them about any pre-existing conditions that might affect OHS responsibilities and potential workers compensation claims;
  • to provide compensation payments directly to the injured employee for the initial period of absence from work (typically the first 10 days) — these payments are equivalent to the employer’s insurance policy ‘excess’. Note that you must still notify the insurer of a claim even if in practice the employer is meeting the full cost of it;
  • to arrange rehabilitation programs for injured/ill employees to assist them to return to their usual work as soon as possible. This requirement involves preparing an injury management plan for the employee and nominating a rehabilitation provider to coordinate the program. This would be done in consultation with the insurer;
  • to keep the insurer informed of all relevant details.

The legislation sets out various maximum amounts and time limits for payment of benefits, for example according to the type of injury or illness. Further, as noted, the above list is an indicative guide — employees should seek specific legal and insurance advice about their particular circumstances and obligations.

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Termination of employment

If an injured worker cannot return to work, it is possible to terminate his/her employment provided that certain conditions (for example relating to expiry of time limits and medical evidence) are met.

Note, however, legal complications as to damages and rights to reinstatement can arise. It is strongly recommended that legal advice and advice from your insurer be sought before terminating employment in these circumstances.

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Related links: Workers compensation authorities