If you’re a small business owner who employs one or more workers in Australia, you’re required by law to ensure they are covered by workers' compensation insurance. This is also known as WorkCover or “workers' comp.”
What this means is if one of your employees suffers from any work-related injury or illness, they are able to claim:
- Monetary benefits
- Costs for medical and hospital expenses
- Rehabilitation services
- Any damaged personal items
Regardless of industry or location, it is compulsory for all workers' to be covered by workers' compensation insurance. Failure to provide this coverage will result in heavy fines and penalties.
Workers' compensation: what you need to know
Workers' compensation insurance is governed by a national body known as Safe Work Australia. However, each state has its own legislation, and it’s important to make sure you know what is and isn’t covered in your state’s scheme. In this post we’ll explore:
- The importance of workers' compensation insurance.
- Workers' compensation vs. income protection.
- Workers' compensation for contractors and sole traders.
Let’s review each of these elements to help you figure out the ins and outs of workers' comp.
1. Why is workers' compensation insurance important?
As a business owner, it’s your responsibility to ensure that anyone in your employment is provided with a safe workplace environment.
Safe Work Australia has outlined a detailed policy of Work, Health & Safety laws that assist in managing hazards and risks across all industries, including:
- Accommodation and food services
- Administrative and support services
- Agricultural, forestry and fishing
- Arts and recreation services
- Education and training
- Financial and insurance services
- Healthcare and social assistance
- Information media and telecommunications
- Personal care and other services
- Public administration and safety
- Rental, hiring and real estate services
- Retail Trade
- Transport, postal and warehousing
- Wholesale trade
Each of these industries have their own unique hazards and risks. As an employer, you must not just minimise these risks, but provide support in the case of any work-related injury or illness.
Common causes of injury for food service workers are lifting and balancing heavy objects and trips/slips.
A restaurant worker could suffer a severe burn by being splattered with hot grease or water.
Should any of these accidents happen on-site, workers' compensation insurance will make sure the injured employee receives financial assistance for their medical bills, rehabilitation and loss of income due to time off work.
Workers' comp is state-legislated in Australia, so each state runs the scheme differently. Make sure you educate yourself on how your state oversees their workers' compensation and injury management as well as how premiums are calculated. You’ll also want to find an insurer that offers the right level of workers' compensation insurance and can clarify any questions you may have.
Check your state’s regulations here.
2. Workers' compensation v.s income protection
The key difference between workers' compensation insurance and income protection insurance is that workers' compensation is provided and paid for by an employer and only applies to illness or injury that can be attributed to the workplace.
Income protection insurance is purchased by the employee and covers illness or injury either on or off the job.
Essentially, income protection insurance offers an extra layer of cover to give you peace of mind. So no matter what happens at work, home or anywhere else, you will be safeguarded.
Income protection insurance provides replacement income of up to 75% so that a worker can maintain their way of life if they are forced to take an extended time off work during illness and injury.
The cost of income protection insurance varies depending on an individual’s situation and all premiums are tax deductible. Workers looking to purchase income protection insurance on top of the workers' compensation insurance they receive from their employer should shop around for the best deal.
3. Workers' compensation for contractors and sole traders
When it comes to hiring contractors to perform services for your business, the lines are a little more blurred on whether or not you’re required to provide workers' compensation insurance.
Unlike employees, contractors are hired to do a set task or tasks based on contractual terms outlined and agreed upon by both the contractor and business owner. In Australia, workers' compensation laws vary between each state and territory, so it’s extremely important that you know your entitlements and whether or not you are covered.
If you’re a contractor and aren’t covered, then it’s a good idea to purchase income protection insurance so that you and your family are protected.
Sole traders in Australia aren’t able to cover themselves as an employee with workers' compensation insurance. Essentially this means that you’ll need to consider other options to protect your own personal well-being. It’s best to cover yourself for accident, illness or death through a private insurer so you and your family are safe.
Know your obligations
Workers' compensation insurance is a compulsory form of insurance that is required by law to be provided to all workers' throughout Australia.
While every state has different rules and policies in place, workers' comp is designed to cover a sick or injured worker with entitlements such as weekly benefits, medical and hospital expenses, rehab services or a lump sum payment for permanent impairment.
As an employer, sole trader or contractor, it’s important to ensure that you are covered in case of any unexpected illness, injury or even death. This includes:
- Doing the appropriate research to decide what options are best suited for you, such as income protection insurance
- Know your entitlements and what the process is for making a claim
- Stay updated to any policy changes in your state
As with any business or personal expense, shop around and find an insurer that suits you and your situation. Then relax knowing you and your business are covered.