Workers compensation provides protection to workers and their employers in the event of a work related injury or disease. Through the workers compensation system, injured workers may have an entitlement to weekly payments, lump sums for permanent impairment, payment of medical bills and intensive rehabilitation assistance. All employers in NSW (except exempt employers) are required by law to have a workers compensation insurance policy; especially if they pay more than $7500 in wages per annum, employ an apprentice or trainee, or are part of a group for premium purposes. The policy must cover all workers, at all times.
Some people are ‘deemed’ to be workers for workers compensation purposes. Deemed workers (outworkers, taxi drivers and some contractors) must also be covered by a workers compensation policy.
The NSW Workers Compensation Scheme is funded through the premiums paid by employers and provides medical and financial support to injured workers. The premium paid will depend on the:
• industry in which you operate
• amount of wages paid to your workers
• costs of any claims made by your injured workers and
• dust diseases levy.
In the event of a workplace injury or disease, a workers compensation insurance policy will ensure that an employer is covered for the costs of all benefits due to the injured worker. Injured workers may have an entitlement through the workers compensation system to:
• weekly payments
• lump sum payments for permanent impairment (and pain and suffering where applicable)
• certain personal items (eg. clothing and spectacles, if damaged in a work-related accident)
• payment of medical and hospital expenses and
• rehabilitation assistance
Calculating premiums
An employer’s premium is calculated twice during each policy period. The initial premium (called the premium estimate) is calculated at the beginning of the policy period. It is based on an estimate of wages that an employer is likely to pay during the policy period. The final premium (called the hindsight premium) is calculated at the end of the policy period. It is calculated using the actual amount of wages paid by the employer during the policy period.
If the hindsight premium is higher than the initial premium, the employer will need to pay the difference to their Scheme Agent. If the hindsight premium is lower than the initial premium, the employer’s Scheme Agent will repay or credit the employer any overpayment.
Basic tariff premium
An employer’s basic tariff premium is calculated by multiplying their wages by the WorkCover Industry Classification (WIC) rate of the applicable industry class. Where the employer has a multi-tariff policy, this formula is repeated for each applicable industry class, and the outcomes added together to produce the total basic tariff premium.
For a small number of industry classes, basic tariff premium rates are expressed as a per capita rate (eg. professional sport) or a per plate rate (eg. taxis and hire cars).
The minimum premium is $175, even if the calculation produces a lower amount.
Employer categories
Small employers – Have a basic tariff premium of $10,000 or less or annual wages less than or equal to $300,000. Small employers do not have their premiums experience adjusted.
Medium employers – Have a basic tariff premium of more than $10,000 and less than or equal to $500,000 and annual wages of more than $300,000. Medium employers have their premiums experience adjusted.
Large employers – Have a basic tariff premium of more than $500,000. Large employers have their premiums experience adjusted.
An employer’s category will be assessed for the experience adjustment threshold at both the start and end of the policy year.
Here at The Quinn Group our experienced team of lawyers and accountants can assist you with calculating your business’s workers compensation insurance costs as well as answering your employment law queries. For more information submit an online enquiry or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.
