Who needs a policy?
If you hire anyone in NSW, you'll probably need a Workers Compensation insurance policy. The law says that most employers in NSW need to have a Workers Compensation policy. Some small businesses don’t need one - these are known as exempt employers.
Find out what a Workers Compensation policy covers
Types of employers
You’re an employer if you pay or hire anyone to work for you. This can be full time, part time or casually, under a verbal or written contract.
Exempt employers
You don't need a policy if you meet all of the following criteria:
- pay $7,500 or less in wages in a financial year
- don't hire an apprentice or trainee
- are not a member of a group of businesses (being in a group of businesses can affect the price of your premium)
Even if you're exempt, you must still act if someone is injured while working for you. This includes contacting icare Workers Compensation on 13 44 22 about any work-related injuries. Claims made against an exempt employer will be charged a $175 administration fee.
If your situation changes, get in touch with icare to check if you now need a Workers Compensation policy.
Small employers
If your business has an average performance premium of $30,000 or less per year, you’re a small employer.
As a small employer:
- Your premium won't change by the number of claims you make
- You could get a discount known as the Safe Employer Reward, if you haven’t had any weekly benefits claims in the last three years and your policy is up to date.
Medium to large employers
If your business has an average performance premium of over $30,000 each year, you’re a medium to large employer.
As a medium to large employer:
- Your premium is experience-rated, which means it is affected by your claims history
- If you have a good safety and recovery record, you might pay a lower premium over time
- Your claims performance rate (CPR) is compared to other NSW businesses. If your claims performance is better than the average, you'll pay a lower premium.
Loss Prevention and Recovery (LPR)
- As a large business, you can choose to move to a LPR product to better reflect your risk profile.
Types of workers
Some people are 'deemed' to be workers for Workers Compensation insurance purposes.
Any documents you use to support excluding a contractor's wages in your declared wages must be kept for five years.
Identifying 'deemed' workers
'Deemed' workers include, but are not limited to:
- outworkers
- salespeople, canvassers, and collectors
- contractors under labour hire service arrangements
- rural workers
- boxers, wrestlers, referees and entertainers.
See Schedule 1 of the Workplace Injury Management and Workers Compensation Act 1998 for a list.
Contractors
As an employer, you're responsible for protecting your business and workers. To do this, you need to know whether someone is a worker or contractor. If you're unsure, the State Insurance Regulatory Authority (SIRA) has a tool to help you with this.
Legally, contractors or subcontractors can be counted as workers even if you don’t hire them directly.
Differences between a worker and contractor
A contractor is more likely to:
- be hired to carry out a particular task using their own skills, materials and tools
- hire others, delegate or sub-let work to another
- be paid on a quote
- run a business in their own name or a business name
A worker is more likely to:
- be directed by their employer
- need to carry out the work rather than sub-contract
- be paid by the hour or week
- have tools and materials provided by the employer
- work exclusively for a single employer
- have PAYG tax arrangements
Sole traders and proprietorships
If you're a sole trader, proprietor or member of a partnership, you can’t cover yourself with Workers Compensation insurance. You don’t need a Workers Compensation insurance policy if you have no employees.
Instead, you could go for a personal accident and illness policy, or income protection.
Examples:
Barry the electrical contractor
Barry runs an electrical contracting business. Barry is a sole trader with no workers. Barry doesn’t need to take out a Workers Compensation insurance policy as he has no workers and is a sole trader.
Steve and Jason the tilers
Steve and Jason are tilers who run their business as a partnership and hire an apprentice. They need to take out Workers Compensation to cover the apprentice, but the policy doesn’t cover Steve and Jason.
Trusts and trustees
If you're paid by a trust, or have tax or super taken out from it, you're counted as a worker and need Workers Compensation insurance. This means that if you're injured at work while working for the trust, you can claim Workers Compensation.
What counts as wages
- Payments from the trust that are made instead of wages are still counted as wages when calculating the cost of Workers Compensation premiums.
- Payments from the trust to anyone who doesn't work for it are not counted as wages. This means that these individuals can't claim Workers Compensation in the event of an injury.
Find out how payments are made and declared to ensure you’re doing the right thing.
Volunteers
Volunteers and unpaid work experience students aren't counted as workers under Workers Compensation law. This means you don't need Workers Compensation to cover them, but you still need to make sure they have a safe working environment. You can also consider taking out Personal Accident - Volunteer insurance to cover your volunteers and unpaid employees.