Workers Compensation in Australia
Employment Law: 07 March 2025
Workers Compensation protects both employers and employees when a worker is injured or falls ill due to their job. Covering medical costs, lost wages, and rehabilitation, Workers Compensation schemes are managed separately by each state and territory.
Understanding your obligations as an employer under Workers Compensation law is crucial. This guide covers what is Workers Compensation Insurance, what injuries and illnesses are covered under the scheme, and the legal obligations and risks for employers.
What is Workers Compensation Insurance?
Workers Compensation is a scheme whereby employers in Australia are required to take out insurance to cover both them and their employees in the event that an employee is injured at work, or becomes sick due to their work. Workers Compensation covers medical costs, rehabilitation, and lost wages.
Each of the state and territory governments have their own body that handle Workers Compensation claims, and each goes under a different name (WorkCover Queensland, WorkCover WA, WorkSafe Victoria (previously WorkCover Victoria), NT WorkSafe, WorkSafe Tasmania, WorkSafe ACT, icare NSW (used to be WorkCover NSW), and ReturnToWorkSA.)
Why is Workers Compensation Insurance compulsory for employers in Australia?
There are a range of reasons why Workers Compensation Insurance is a requirement for employers in Australia.
Employer Liability is Reduced
An employee becoming injured at work, or sick as a result of work, is not something an employer can predict, and few businesses prepare in advance for the potential costs of a compensation payout (with the exception of self-insured employers). Without insurance, employers are left to pay out-of-pocket expenses, which could financially cripple their business.
It Protects Workers
Workers Compensation Insurance means workers are protected for workplace illness and injury, regardless of whether or not their employer has the funds to pay them out. It covers their medical and rehabilitation costs, and compensates them for lost wages.
Promotes Workplace Safety
A company’s safety record influences the premiums an employer pays for Workers Compensation Insurance. Employers have the opportunity to reduce their premiums if they take appropriate measures to ensure their workplace is safe for employees. (For strategies to reduce your Workers Compensation Insurance premium, contact Aitken Partners.)
Reduces Strain on Public Services
Were it not for Workers Compensation Insurance, public welfare and healthcare systems would have to provide the support to workers injured at work or ill due to work, and this would significantly strain already-stretched public resources.
How much is Workers Compensation Insurance in Australia?
The premiums an employer will pay for Workers Compensation Insurance will vary by state and territory. In addition, factors such as an employer’s claims history, the industry risk classification, and the total wages paid to the employee, will affect the premium.
What is covered under Workers Compensation Insurance?
There are a range of work-related illnesses and injuries that may be covered by Workers Compensation. These include:
Physical Injuries
Lacerations, burns and cuts
Trips, falls and slips
Dislocations, sprains and fractures
Hearing loss from prolonged exposure to loud noise
Repetitive strain injuries (RSI) from lifting or using certain tools repetitively
Occupational Illness & Disease
Skin conditions (e.g., dermatitis from chemicals)
Respiratory diseases (e.g., silicosis resulting from dust exposure, or asbestosis)
Infections contracted at work (e.g., exposure to harmful biological agents)
Psychological Injuries
Stress and burnout related to work
PTSD, anxiety or depressing resulting from workplace harassment, bullying or trauma
Psychological conditions caused by excessive workload or unsafe work environments
Aggravation of Pre-existing Conditions
Generally pre-existing conditions aren’t covered by workers compensation, however if an activity at work worsens an existing medical condition, then Workers Compensation may cover it.
Proving an Injury or Illness is Work-Related
Employees are required to prove that their illness or injury was caused by their work, if they intend to claim workers’ compensation. Note that individual states and territories will have unique claims processes, but generally speaking, they all require medical evidence, witness statements and workplace reports.
For employees to support their claim for workers compensation, they need to:
Notify their employer of the illness of injury
There is a set timeframe in which an employee may report an illness or injury, however generally it is best that they report as soon as possible. They also need to complete a Workers Compensation claim form.
Provide medical evidence
Employees need to obtain a medical certificate from a doctor or specialist stating that the illness or injury is work-related. Independent medical assessments may be required to support their claim.
Gain supporting material: witness statements and workplace records
CCTV footage, incident reports, and emails detailing workplace hazards should be provided. In addition, statements from witnesses (usually colleagues) can confirm the incident or that there are hazardous work conditions.
Provide expert reports & documentation
For RSI claims, ergonomic assessments may be required. And for mental health claims, psychological evaluations from a specialist will be required.
Legal Considerations for Employers
A range of legal issues may arise in relation to Workers Compensation Insurance. These include:
Failure to have Workers Compensation Insurance
Employers in all states and territories are legally required to have this insurance. Non-compliance may result in penalties and fines, personal liability to cover the compensation for an injured worker, and even criminal charges.
Claims Processing Delays
Employers are required to process worker compensation claims within a prompt timeframe. If the process is delayed, legal penalties may apply under the state worker’s compensation laws, and employees may take the matter to a worker’s compensation tribunal.
Claims and Liability Disputes
Employers may dispute or deny an employee’s claim on the basis that there is insufficient proof that the injury or illness originated at work. In this situation, the employee may need to prove that the injury or illness was not pre-existing, and was not a result of something that occurred in their personal time. Claims related to psychological injury, such as in circumstances where an employee is claiming injury due to bullying, harassment or stress, are particularly tricky areas.
Legal costs may apply if an employer wrongfully denies an employee’s claim, and the employee challenges the denial through a tribunal or court.
A qualified employment lawyer can assist an employer with investigations into false workers compensation claims.
Underreporting Employee Wages (Premium Fraud)
Some employers, in an effort to minimise insurance premiums, misclassify workers or falsely report lower wages (workers compensation premiums are based on total wages paid, and on industry risk levels).
A range of consequences apply to misinforming insurance companies in this way. Workers compensation bodies in the states and territories, and insurance companies, may audit businesses, and if false reporting is discovered, issue backdated premium payments. In addition, employers found to deliberately misreport may be liable for fraud-related penalties and fines. In some cases, they may face criminal charges.
That’s why it’s so important for businesses to seek legal advice on strategies to reduce WorkCover insurance premiums in a way that doesn’t leave them open to litigation.
Claims Related to Retaliation or Unfair Dismissal
If an employee makes a Workers Compensation claim, their employer cannot disadvantage or fire them. If this occurs, the employee may take measures that include:
Taking legal action against their employer for discrimination or retaliation
Seek compensation for damages and lost wages
If terminated, may file an unfair dismissal claim under the Fair Work Act 2009.
OHS Law Obligations
Under Work Health and Safety laws, employers must provide a safe work environment. Employers may be investigated by the local Workers Compensation body if an employee is injured because of work conditions that are unsafe. The legal consequences of a breach of workplace safety laws could include fines, lawsuits from injured employees, or criminal charges in situations where negligence has led to serious injury or death.
Key Takeaway
Employers must ensure their workplace is safe for employees, must comply with workers compensation laws, and must handle claims fairly. Failure to do so may result in fines, lawsuits, or even criminal charges. Maintaining proper insurance coverage, accurate records, and a fair claims process helps protect both businesses and workers.
Support for employers
For advice on workplace compensation, contact Aitken Partners. We advise:
Self-insured employers on claims management strategies
Employers on strategies to reduce WorkCover insurance premiums, and
Employers insured under the WorkCover scheme on how to best manage WorkCover.
We can also conduct workplace investigations into false WorkCover claims, as well as other employment law support.
Contact Aitken Partners on +61 3 8600 6000 or chat with us online.