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Managing people

An employer’s guide to workers compensation

Workers compensation covers employees in the case of any work-related injuries, but the laws can be tricky to navigate.

In Australia, all employers have to take out workers compensation insurance in order to cover employees in case they are injured at work. Although workers compensation is incredibly important and helps protect employees and employers, it can be confusing for employers – particularly because the definition and legislation varies from state to state.

While there can be differences, some of the basic principles are the same across the nation in line with the Workers Compensation Act 1987. If you’re an employer, here’s what you need to know about workers compensation and how it works in Australia.

What is workers compensation? 

Employers have a legal obligation to maintain a safe workplace and protect employees from injury, whether it’s a physical or mental health injury. According to the work health and safety (WHS) laws, if any work-related accident or injury happens while an employee is at work, employees should have access to first aid and workers compensation, as well as rehabilitation to help them return to work. 

Workers compensation is a type of insurance that ensures employees don’t experience any financial issues because of an accident or injury that happens while performing their duties at work. This includes compensation for injuries that occur during or as a result of an employee’s course of employment, or injuries that arise because of activities that are required or organised by a workplace (such as work-related events like Christmas parties, or travel for work).

Workers compensation covers:

  • physical injury
  • mental health injury
  • diseases that an employee may have contracted during their employment
  • injuries while travelling for work (in some states)
  • recurrence of an existing disease or condition as a result of work
  • aggravations of an existing disease or condition as a result of work.

Who can receive workers compensation?

Workers compensation is designed to cover a broad range of employees, including full-time and part-time employees, pieceworkers, workers who are on commission, and working directors. Workers compensation also covers casual and seasonal employees, and in some cases, may also cover contractors and subcontractors.

As an employer, it’s important to keep in mind that in most cases, workers compensation is a ‘no-fault’ type of compensation. This means an employee is entitled to compensation even if they didn’t act in line with company procedures or procedures, although this may not apply in some cases of serious misconduct.

What is included in workers compensation?

Compensation typically includes weekly payments to employees to cover any income they may have lost as a result of their work-related injury, as well as medical costs related to the injury. 

Whether it’s workers compensation insurance in New South Wales or Queensland, employers need to take out workers compensation with an authorised insurer in Australia, which is generally a state or territory-based insurance fund.

The amount an employee receives as part of workers compensation can differ from state to state, and the individual State Insurance Regulatory Authority (SIRA)  generally issues guidelines for payments throughout the year. The most recent benefits guide released by SIRA New South Wales was released in April 2021 and can be downloaded here.

What about workers compensation and leave?

In line with the Fair Work Act, if an employee isn’t able to work and is receiving worker’s compensation, they aren’t entitled to take or accrue leave. This includes paid or unpaid leave, however, this can differ from state to state.

For example, the Workers Compensation Act in New South Wales allows workers to take annual leave and long service leave while they’re receiving worker’s compensation. Employees can also accrue annual leave as long as it’s permitted by compensation law. In Victoria, employees don’t accrue annual leave but can take any accrued annual leave while receiving workers compensation.

In Queensland and Western Australia, employees continue to accrue annual leave and can take annual leave while receiving workers compensation. This is the same for employees in South Australia unless an employee isn’t able to work for 52 weeks or more. On the other hand, in Tasmania, Northern Territory and Australian Capital Territory, employees don’t accrue annual leave while they’re receiving workers compensation. Employees in Northern Territory and Australian Capital Territory also can’t take accrued annual leave during this period, while employees in Tasmania can take accrued annual leave but don’t receive workers compensation at the same time.

When it comes to public holidays, employees generally don’t receive payment unless otherwise stated in the Commonwealth, state or territory legislation. Similarly, accruing and taking long service leave differs from state to state.

Where can employers go for more information?

Navigating workers compensation can be complex and challenging for employers, especially because there are Commonwealth, federal, and state/territory laws to take into consideration.

As an employer, it’s best to familiarise yourself with the relevant laws that govern your state or territory, whether it’s workers compensation legislation in New South Wales, workers compensation in Queensland, or workers compensation in Western Australia. has resources to help employers understand workers compensation legislation in each state or territory.

If you have an employee eligible to receive workers compensation, it may be beneficial to seek legal advice from Australian Business Lawyers & Advisors (ABLA). As Australia’s leading workplace and employment law firm, ABLA can provide you with expertise focused on business outcomes.


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