Workers Compensation Basics - what are they?

If a business employs or hires workers on a regular, casual or contract basis, they are considered to be an employer and must have a workers compensation insurance policy.

Employers no longer need a workers compensation insurance policy for workers if they pay, or expect to pay $7,500 or less in annual wages. This includes private households However, a workers compensation insurance is still required if you engage an apprentice or trainee, or are a member of a Group for workers compensation purposes regardless of the amount of wages paid.

EMPLOYER CATEGORIES

Small employers

Have a basic tariff premium of $10,000 or less or annual wages equal to or less than $300,000. Small employers do not have their premiums experience adjusted.

Medium employers

Have a basic tariff premium of more than $10,000 and equal to or less than $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.

2T RULE

For employers with a basic tariff premium:

• less than $50,000, the total premium cannot exceed one and half times the basic tariff premium
• is equal to or greater than $50,000 and less than $150,000, the total premium cannot exceed two times the basic tariff premium
• is equal to or greater than $150,000 and less than $300,000 the total premium cannot exceed two and a half times the basic tariff premium.

**Basic Tariff Premium is the wages x the industry rate. If this is greater than $10,000, then claims experience will impact.

WAGES

‘Wages’ includes total gross earnings (before tax deductions) and some payments that are not generally thought of as wages.

It includes:

• salary / wages
• overtime, shift and other allowances
• over-award payments
• bonuses, commissions
• payments to working directors (including directors’ fees)
• payments to pieceworkers
• payments for sick leave, public holidays and the associated leave loadings
• value of any substitutes for cash
• employer superannuation contributions (including the superannuation guarantee levy)
• grossed-up value of fringe benefits
• long service leave payments (including lump sum payments instead of long service leave)
• termination payments (lump sum payments in respect of annual leave, long service leave, sick leave and related leave loadings)
• trust distributions to workers where the distribution is in lieu of wages for work done for the trust.

It does not include:

• directors' fees paid to non-working directors
• compensation under the Workers Compensation Act 1987
• any GST component in a payment to a worker

EXCESS

Claims excess payment is $500 or the equivalent of one week of the injured worker’s weekly compensation. It is waived for all employers if the injury is notified within five days of the employer becoming aware of the injury.

PREMIUMS

Workers compensation insurance premiums are based on a number of things, including:

• the industry in which the employer operates
• the amount of wages the employer pays to its workers
• the costs of any claims made by their workers (for employers with a basic tariff premium greater than $10,000 and with wages greater than $300,000)
• the dust diseases levy.

The basic premium is a percentage of your payroll. Insurers assign all employers with an industry classification based on the description of their trade or business which employers provide on their insurance proposal. The insurer uses the official classification listing published by WorkCover in the Insurance Premiums Order.

At the beginning of each insurance period (known as the "term"), you must provide your insurer with an estimate of the wages that you'll pay in the next 12 months. Your insurer will calculate the premium on the basis of that estimate.

At the end of the insurance period, you must provide your insurer with a declaration of the actual wages you paid during the year. The insurer will calculate a "final" or "actual" premium based on the actual wages paid. If this is different to the estimated premium already paid, there will be an adjustment payment or refund. The actuals must be submitted 2 months from date of renewal.

INSTALMENTS

Premium can be made by instalments depending on the amount of the premium that is to be paid. Premiums under $175 are not provided with any discount or instalment benefits.

If you would like to discuss your workers compensation requirements, please contact Andy in our office on 8858 0008 or by email to awells@taggartgroup.com.au.

Disclaimer: information provided by Employers Mutual NSW Limited,Agent for the NSW WorkCover Scheme. You can obtain further details by visiting the Employers Mutual website at www.employersmutual.com.au, or contacting our office. Information provided and current at March 2010.