An insurance broker explains workers’ compensation insurance and gives tips on what to look out for.
Workers’ compensation, also known as ‘employers indemnity insurance’, is a policy that allows for employers to insure against the costs from an injury or fatality to employees that occurs in the workplace. In Western Australia this is a compulsory insurance and is governed by an Act of Parliament, the Workers’ Compensation and Injury Management Act 1981 (the Act).
Who is covered by the insurance ?
Ultimately if you are a business that engages an employee on a casual basis for one hour per month, then you are obliged to have workers’ compensation insurance. In addition to covering casual, part time or full time employees, there may be a requirement to cover working directors and contractors in the business.
Some home and contents insurance policies as well as domestic and commercial strata insurance policies may allow for a provision to cover casual employees or contractors engaged in the maintenance and up-keep of properties. The need to insure personal staff including nannies, cleaners, ironing service, gardener and pool cleaner should also be considered.
In 2011, the Act was amended for workers over the age of 65 who are now entitled to the same benefits as other injured workers. The reason for this change is that the State Government wanted to ensure that work places do not discriminate on the basis of age and it also encourages older workers to stay employed.
How is the insurance premium calculated?
There is a formula for how workers’ compensation premiums are calculated. Each year, premiums are reviewed. Then, based on historic data, a rate is determined and applied to each industry. For example, trades people that work in the construction industry may have rates between 3 and 8%, however, white collar businesses are likely to have rates under 1%. The company’s annual wages are applied against the industry rate to determine the premium.
In addition to the standard premium, there maybe loadings or discounts applied depending on the company’s track record with claims and the overall loss-ratio usually taken over a five year period. Some larger firms can be entitled to rebates if they can reduce claim costs, which is usually done by implementing improved risk management techniques.
Make sure your insurance advisor/broker is kept up to date with all your OH&S and injury management documents and procedures. Having access to these may assist your broker to negotiate a competitive premium with your insurance company.
I have a workers’ compensation policy, what else should I look out for ?
A few things to look out for could include:
- Make sure that your business activities fall into the correct industry code.
- Include the correct wages. For example, superannuation and payments made under workers’ compensation claims entitlements should not be included.
- Insurers can audit your wages book so it’s always best to declare correct wage payment levels to avoid being forced to back-pay premiums.
- Look out for conditions in contracts that may inadvertently place your company at more risk in the event of an employee injury. These would be more likely if you do work in the mining or oil and gas sectors. Contract conditions should be reviewed by your legal advisor and then determine what provision your insurance company can make to cover these conditions.
- Other workers’ compensation policy requirements should be considered if employees travel overseas, work off-shore for long periods of time or have an exposure to industrial diseases such as asbestos.
There seems to be a lot to manage, who can help ?
A numbers resources can be found on the Work Cover WA website including further information on who to cover and how to manage a claim. WorkSafe WA also provides a number of guides that can be useful for businesses of any size.
Most insurance companies will also have resources and training programs to assist companies and key staff fulfill their obligations to employees. These can be beneficial in reducing the likelihood of a claim, managing an on going claim, getting the employee rehabilitated and back to their position as quickly as possible and the requirements under the Act.
A good insurance broker can manage the above for you, advise you on best practices and ensure your business has adequate and appropriate insurance cover.
The paramount benefit of the workers’ compensation insurance system is the payment for medical treatment to injured staff that includes practical rehabilitation to return back to meaningful employment. Without workers’ compensation insurance, not only could a business be in breach of the law, but it has the potential to cost them thousands of dollars.
Written by Daniel Brockway
NOTE – These comments are general in nature and should not be taken as professional advice, nor should you rely on them. CircuitWest accepts no responsibility for the completeness or accuracy of any of the information contained in this document. You should seek professional advice suitable to your circumstances.