Anyone who employs staff needs to carry Workers Compensation Insurance for their employees
An exempt employer is one that has annual wages of less than $7,500 gross – Employers who pay $7,500 or less in annual wages are not required to hold a policy of insurance unless they employ an apprentice or trainee, or are part of a group for premium purposes.
Not having this insurance in place can lead to large fines in addition to having to payout on any claim(s) from your own funds. If a worker while being employed by you has an accident and say injures their back and cannot work again they will be looking for compensation no matter how great a mate they may be.
In the event of a workplace injury or disease, you may be liable to provide the following benefits for a worker (if you do not hold a policy):
- weekly benefits
- medical and hospital expenses
- rehabilitation services
- certain personal items (e.g. clothing, spectacles, if damaged in a work-related accident)
- a lump sum payment for permanent impairment.
Please note that wages includes total gross earnings (before tax deductions) and some payments that are not generally thought of as wages, including :
- 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 (allowances subject to fringe benefits tax are counted at the grossed-up value, that is the value of the benefit multiplied by the relevant Australian Tax Office fringe benefit formula).
Note: non-profit organisations, public benevolent institutions (PBIs) and charities should continue to declare worker benefits that aren’t subject to fringe benefits tax at the net value. Once the worker benefits exceed the Australian Tax Office fringe benefit threshold, the employer must declare the benefit at the grossed-up value.
- 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.
- Salary sacrifice Superannuation payments
- Amounts paid as part of a salary package – whether paid directly or indirectly
- Payments to some contractors and/or subcontractors
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.