Do you have a Workcover policy? When was the last time you reviewed this? Are you actually covered adequately?

As a business owner, one of the most important assets of your business is your employees. Some of them may be disguised as contractors, but most will fall clearly into the employee bucket.

What happens in the event of a workplace incident causing injury?

According to Workcover Queensland, if an injured worker approaches them to make a claim, the claim will almost automatically be accepted and processed. If the employer is found to hold no insurance or inadequate insurance, Workcover will pursue the costs for the claim directly from the under/uninsured employer. Depending on the extent of the injury, in some instances, employers have been liable for in excess of $1 million in costs and penalties.

Given the fact that Workcover is starting to ramp up their audit activities and have been singling out businesses across the South East, it is pertinent to review who should be included in your policy, and how to correctly calculate your cover.

Who should be covered?

The bottom line – if you employ one or more people, you need a Workcover policy. You might be surprised to learn that even a homeowner engaging a babysitter is required to hold a Workcover policy (more on that later).

By definition, any individual under a contract of employment that is subject to PAYG withholding should be included under your Workcover policy. This includes sales people engaged on a commission only basis and contractors employed under labour hire agreements.

It is important to note that Workcover looks at the substance of the arrangement, not the form. This means it is the reality of the arrangement and not simply the contract that will determine whether someone is an employee or a contractor.

For example, a massage therapist is engaged as a contractor under a written contract. Under the contract, the therapist can sub contract their 'jobs' to someone else at their discretion. The therapist can set their own hours of work and bring all of their own equipment. On the face of it, the therapist would be considered a contractor. However, the reality is, the therapist can only 'switch shifts' with someone else from the pool of therapists, works similar hours every week, and all equipment is provided on site by the 'employer'. A room is allocated to the therapist to conduct massages, and the therapist always works in that same location. Even though the contract shows all the necessary factors for the therapist being classified as a contractor, the reality of the arrangement (how the therapist actually works) means the therapist is actually an employee, and the employer does have an obligation to cover this employee under their Workcover policy.

When considering whether one of your workers is an employee or not, there are some specific exceptions, the main ones being:

  • Directors, trustees (of the trading trust), partners operation in partnership
  • Workers employed under a "work for the dole" scheme

If you think you may have other individuals that fall under an exception, please discuss with us to confirm.

It is important to note that apprentices now attract a discount – you still declare them (and their wages) on your policy, but the policy premium will be discounted to essentially include them for 'free'.

What is included in wages?

It will be important to determine the correct calculation of wages as this is something Workcover are reviewing and reassessing regularly. Workcover has started cross checking records against the ATO and OSR to confirm reported wages against the wages totals declared for Workcover purposes. Where there is a difference, you can expect an additional bill from Workcover to address the shortfall.

So, what is actually included?

  • PAYG wages and salaries (gross)
  • Superannuation amounts – this includes ALL super payments, even salary sacrifice amounts
  • Overtime, allowances, leave payments, bonuses, commissions are all included
  • Any benefits with a monetary value – think FBT here. If you have an FBT calculation prepared, you may have to include these values in your wages figures for Workcover purposes as well. These include: income protection insurance policies, board and lodging and other amounts subject to FBT. The correct amount to include is the grossed up benefit value
  • Payment to contractors that are really employees (for Workcover purposes. See discussion above when determining the appropriate classification of workers)
  • Profit sharing amounts – this includes payments that are made to employees that are a direct share of profits, e.g. profit distributions, dividend payments, shares issued, etc.
  • Payments made under employee share schemes are also caught

What is excluded?

  • Lump sum payments on termination
  • Compensation payments paid by Workcover
  • Unused leave
  • Payments to directors, partners and trustees, even if these people are working in the business, regardless of the type of payment (not including payments to shareholders or beneficiaries)

Directors are always excluded from Workcover, so this means directors are not covered under any Workcover policy. If you would like to look at alternative insurance arrangements for directors, we can put you in touch with the appropriate people.

Should I have a basic policy?

Workcover offers a $200 minimum premium policy as a very basic level of cover to ensure you at least have some coverage. This can be useful where you engage seasonal workers, or part time admin staff. A base policy is better than no policy!

What about interstate workers?

There are some specific situations where you may require policies in other states. If you have staff working in other states (even for short periods of time) it is worth checking whether your current Queensland policy will cover them. If not, you may need an additional policy in the state where your employee will be working.

Household Workers Policy

As a final note – do you engage babysitters or local high schoolers to mow your lawn? Under the Workcover Act, these kids are considered employees of your household, and you are liable for any injuries or incidents that may occur while they are under your direction. Workcover offers a 'household workers policy' to cover these conditions. This policy is $50 for 2 years, and will give you peace of mind when engaging workers for your household.

Where to from here?

We would recommend the following:

  1. Review the substance of any contractor arrangements to ensure they are truly contractors and not deemed as employees
  2. Review your employee list to ensure directors, trustees and/or partners are not included
  3. Review your employee list to identify any apprentices (a 100% discount applies to apprentices from 1 July 2017)
  4. Review your wage calculations to ensure all appropriate cash based benefits are being included in determining your Workcover premiums
  5. Consider household staff and whether you require a household workers policy