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Workers compensation (or workers comp) is a government initiative that provides workers with benefits if they become ill or incapacitated as a result of their job. It’s essentially a disability insurance program, providing benefits in terms of cash and/or healthcare to workers who are injured or ill as a consequence of their work.
In this post, we’ll look at workers compensation basics, including what’s covered, and how to make a claim.
What is workers compensation?
Workers compensation is a form of employer insurance that pays benefits to employees who are injured or disabled because of their work. Once an employee accepts workers compensation benefits, they no longer have the right to sue their employer. As part of their compensation an employer may cover a worker’s salary and cover their medical costs. Workers compensation is not the same as disability insurance or unemployment benefits.
Workers compensation is compulsory for all employers in every state of Australia, including companies that hire part-time or casual workers, whether under an oral or written contract. Compensation can cover:
Weekly benefits (by using adirect debit payment processing provider like GoCardless, payments can be made automatically on set dates, with the employer notified by email when payment is due)
Medical and hospital expenses
Lump sum payments for permanent impairments (GoCardless can also be used to receiveone-off payments directly from an employer’s bank account, safely and quickly)
Purpose of workers compensation
The purpose of workers compensation is to provide benefits to employees injured in the course of their duties, in exchange for the surrender of their right to sue the employer for carelessness. The compensation protects workers and employers from work-related accidents, sicknesses or even death.
It’s a requirement by law that employers have sufficient insurance to cover costs for employees who become ill because of their work. If an employer fails to have enough cover, they could be liable for the costs themselves and be subject to fines and penalties.
How is workers compensation calculated?
Workers compensation is based on the type of work an employee does, how much an employee is paid as well as other factors, including claims history. Every business has a different element of risk, so premiums are based on the industry. Essentially, the industry classification rate is multiplied by how much a business pays in wages. This is known as average performance premium.
For smaller employers, the premium remains unaffected by claims costs if an employee becomes injured. For medium to large sized employers, premiums are ‘experience-rated’, i.e., the premium will be impacted by claims performance.
How to make a workers compensation claim
If you need to make a workers compensation claim, there are several steps you need to take:
Get immediate medical treatment and ask your doctor for a signed workers compensation medical certificate.
Inform your employer about your injury or illness.
Your employer must inform you of your right to make a claim within 14 days of your injury (and must inform their insurer within 3 days).
Get a workers compensation claim form from your employer or online.
Complete the form and give it to your employer with your medical certificate in person or by post.
The employer then forwards your claim to the insurer and must start making payments immediately. Setting up a payment scheme is easy to do using GoCardless, and payments can be made on a recurring basis via direct debit. GoCardless also integrates with the most popular accountingsoftware including Xero, making set up even easier.
The insurer will provide both employee and employer with information regarding their rights, roles, and responsibilities while the workers compensation process is ongoing.
Accidents can happen at work, even if all the correct health and safety procedures are in place. This is when workers compensation comes into play, enabling injured employees to get medical support and recoup other financial losses.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.