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).

 

What does workers compensation cover?

Workers’ compensation typically covers:

  • physical injuries, such as fractures or sprains

  • psychological injuries, such as work‑related anxiety or stress (subject to legal thresholds)

  • diseases contracted because of employment

  • aggravation or recurrence of existing conditions caused by work

  • some injuries during work travel, depending on the state or territory. 

Coverage rules differ between jurisdictions, particularly for psychological injuries, which may exclude conditions arising from reasonable management action.

 

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 and wilful misconduct.

 

What payment 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 can be downloaded here.

 

What about workers compensation and leave entitlements?

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?

Because workers’ compensation laws differ between states and territories, employers should refer to their local workers’ compensation authority and seek professional advice where claims, leave entitlements or disputes arise.

If you have an employee eligible for workers’ compensation or are unsure about your obligations, seeking advice from an employment or workplace relations specialist such as Australian Business Lawyers & Advisors (ABLA) can help you manage risk and ensure compliance.