Who is (or is not) covered under my Worker’s Compensation Insurance Policy?

Whilst we have heard the familiar term “Compo” when discussing Worker’s Compensation, many of us do not fully understand what it means and how it applies to different types of workers. For example, does a Sole Trader working as a consultant for our business need their own Worker’s Compensation Insurance? Or is someone working on our site as a volunteer covered by our Worker’s Compensation Insurance? Are contractors classified as employees when they have been working in our business for a long time?

Worker’s Compensation is a payment to workers if they are injured at work or become sick due to their work. This includes payments to workers to cover:

  • Wages while they are not fit to work
  • Any medical expenses and/or compensation payments for impairment
  • Any rehabilitation costs incurred including retraining and education assistance

Who IS covered under a Workers Compensation Insurance Policy?

Manual handling is the leading cause of injury in the workplace

Most employers in NSW are legally required to get a Worker’s Compensation Insurance to protect them from the costs of workers compensation claims. The insurance requirements vary in different states, and the State Insurance Regulatory Authority (SIRA) is the governing body for NSW.

The NSW Legislation1 states that if an Employer A temporarily hires the services of Employee B under a contract of service, then Employee B is then classified as a worker. Employee B should then be covered under Employer A’s Workers Compensation Insurance Policy. It is important to note that the contract can be expressed or implied, and it can be in writing or an oral one.

The following guide from the legislation defines that a ’Worker’ is a person who:

  • Is directed by the employer regarding the work to be performed (including the time and manner in which it is to be done)
  • Is required to actually carry out the work
  • Is paid on a time basis
  • Has the tools and materials supplied by the Employer
  • Works exclusively for a single employer

Who is NOT covered under a Workers Compensation Insurance Policy?

Legally an employer is not required to provide Workers Compensation Insurance for contractors or sole traders. 

A ‘Contractor’ or ‘Sole trader’ is a person who:

  • Is engaged to carry out particular tasks using their own skills and judgement
  • Employs others, delegates or sub-contracts work to others
  • Is paid on the basis of a quotation for the work
  • Supplies their own tools, materials and equipment
  • Conducts a business under their own name or a business name (such as using an ABN)
Employers need to be proactive to ensure the safety of their workers

Employers need to be proactive to ensure the safety of their workers

Whether a Contractor is covered under the Employer’s Worker Compensation Policy would depend on the work relationship and interactions between the two parties, and may need to be decided by legal entities. Generally, Sole Traders cannot take out Workers Insurance to cover themselves and should obtain a personal accident and illness insurance policy, or an income protection insurance. A Sole Trader having people working for them will need to obtain a Workers Compensation Insurance for the employees.

Are Volunteers covered under a Worker Compensation Policy?

Volunteers and other unpaid work experience are not ‘workers’ under the Workers Compensation Act 1987 and thus employers do not need to cover them with their workers’ insurance policy. However, some type of volunteers such as Volunteer Bushfire Brigade may be covered under special workers compensation schemes.

All employers still have a ‘duty of care’ to provide a safe working environment for all their workers, including volunteers. It is up to you as a responsible employer, to make sure that workers do not get injured and thus do not need to make a claim on Workers Compensation Insurance. At the end of the day, we should look after our employees, who have looked after our business so well.