If you’re not sure how much cover you need, you might start with a low-cost policy with the minimum level of cover. This way, you would be insured in the event of a claim and the premium could be recalculated later if something was to happen.
If your small business employs workers, including contractors or sub-contractors, it’s compulsory for you to have workers’ compensation insurance. Here’s what you need to know to protect your business from hefty fines or other serious consequences.
No matter how careful you are, work-related injuries and illnesses can happen. If your business employs workers, you have a responsibility – and a legal obligation – to look after them.
As a small business owner, you need to both:
- follow WA’s Work Health and Safety laws, and
- protect your workers with worker’s compensation insurance to assist with loss of wages, time away from work and work-related medical expenses if they are injured at work or become sick because of their work.
We detail some of the things you need to know about workers comp insurance in WA, and give examples of scenarios in which workers compensation can make a difference.
How much will insurance cost?
The insurance premiums you need to pay will depend on your industry and the number of employees you have. These are costs you should budget for every year.
To avoid unexpected costs, you should have a workers’ compensation policy in place to protect your business if something happened to one of your employees at work. The penalty in WA for not maintaining an insurance policy for every worker is up to $5,000 per worker, plus additional fines.
Here are two scenarios for a business without and then with workers’ compensation insurance.
Rose’s business: Does not have workers’ compensation insurance
Rose operates a food truck employing three casual team members. Even though all health and safety protocols are followed, an accident occurs when a worker slips on some spilled oil, leading to injury. The worker needs medical treatment and time away from work to rehabilitate, meaning they lose income.
Because Rose doesn’t have workers’ compensation to cover her staff:
- The injured worker can access the same entitlements as an employee covered by workers’ compensation – but Rose’s small business is responsible for accepting or rejecting the claim and meeting all of the Return to Work obligations required by legislation. Compared to an experienced insurer, this takes a considerable amount of time and effort for Rose, who also needs to manage her day-to-day business activities.
- Rose’s business may be liable to cover the entire cost of her employee’s claim.
- Her business may also be subject to a fine of up to $5,000 per worker for not meeting obligations under the Workers’ Compensation and Injury Management Act 1981.
- WorkCover WA penalties can also include the cost of the insurance premium avoided, for up to five years. This money is paid into WorkCover’s General Fund for administration of the scheme.
- In some cases, injured workers are entitled to lump sum payments. A lump sum payment could be more than $1million, which could involve either statutory or common law through the courts, depending on the nature of the injury or impairment.
For more details, including the consequences of not having insurance, take a look at WorkCover WA’s Uninsured workers’ compensation claims fact sheet.
In short, this situation can get messy for Rose. If there is an uninsured claim on the General Fund, a business is not likely to avoid prosecution – and the medical costs, wages, penalties and other related costs can really add up – not to mention the stress and time involved in administering the claim.
Hamid’s business: Has Worker’s Compensation insurance
Hamid owns a training organisation employing seven full time staff members. Despite all health and safety protocols being followed, one of his workers is injured moving some desks. As in the first example, the worker needs medical treatment and time away from work to rehabilitate which results in the loss of income.
In this case, with workers’ compensation insurance in place for all employees:
- Hamid makes a call to his insurer, who then manages and assesses the claim on the business owner’s behalf.
- If the claim is valid and meets the necessary criteria, the insurer manages the entire process, including paying for medical expenses, authorising income and reimbursing Hamid’s small business.
- The insurer develops a Return to Work Program, based on the worker’s capacity to work and the medical advice received. As part of this service, the insurer can provide their expertise and advice to Hamid and his manager to help manage the worker’s return to work.
In this situation, Hamid can continue to focus on running his business (and not run the risk of penalties) while the insurer takes care of the claim, and his worker is supported to get well and return to work.
What about contractors and sub-contractors?
Under the Workers’ Compensation and Injury Management Act 1981, the definition of ‘worker’ can include contractors and sub-contractors – it depends on various factors in the working relationship. Contractors can be jointly or individually liable for a claim or it may be your responsibility, so it’s important to know how this insurance needs to apply in your business.
Next steps for your business
If you don’t already have workers’ compensation in place, it’s time to speak with an insurance broker to find the right cover for your business and industry. You may even be able to package together other insurances you have for your business for the best value.
Generally, your insurance premiums will be calculated from industry-based premium rates applied to your workers’ declared gross wages.