How Much Is Workers’ Compensation Insurance?

If you’re an Australian employer, you’re legally required to hold workers’ compensation insurance so you can cover expenses if one of your employees has a work-related injury or illness.

• Each state and territory in Australia regulates and manages its own workers compensation scheme. The laws, requirements and premiums payable vary from state to state. Businesses with employees located across multiple states need insurance in each location.
• There are also three national schemes co-ordinating workers’ comp insurance for Australian government employees, Australians in the maritime industry working on trading ships, and members of the Australian Defence Force.

It’s in governments’ interests to keep workers’ comp insurance affordable as this mandatory business expense can influence business growth, and therefore economic prosperity.

Although premiums seem to be steadily rising, a few major schemes are operating at a loss. It makes sense when you consider that the number of serious claims has increased by over 20% in the last decade and claims are becoming more expensive, driven by factors including a 97% surge in mental health conditions compared to 10 years ago, an increase in the periods of time employees miss work, and inflationary pressure on healthcare prices.

There are valid concerns about the financial sustainability of schemes without considerable premium hikes in the near-term. In 2023, the Victorian scheme raised its premium rate from 1.27% to 1.8%—an increase of more than 40% that was widely criticised by business groups. The Victorian Chamber of Commerce said the increase reflected a “broken” and “unsustainable” system and called for reforms.

Obtaining Workers’ Compensation Insurance

In some states you can obtain a quote from any broker, or apply directly through a select number of available insurers.

In NSW, you can obtain insurance through icare, unless you’re in an industry with a mandated specialist insurer. For example, Coal Mines Insurance is responsible for administering the workers’ compensation scheme for coal mining industry workers in NSW. In Queensland, South Australia and Victoria, businesses must be insured through government-owned organisations: WorkCover Queensland; ReturnToWork SA; and WorkSafe Victoria.

To provide a quote, the broker or insurer will need to know:

• The industry your business operates in.
• The total amount you pay annually in wages.
• How many employees, contractors and subcontractors you engage.

Large companies can also apply to become self-insured—where you manage all claims and meet all liabilities for payments directly. There may be fees associated with making an application.

Which Businesses Need Workers’ Compensation Insurance?

The main exemption to having a policy is that you don’t employ anyone. Unless you’re a sole trader or partnership, you’ll likely need to take out workers’ compensation insurance.

• If you operate as a company, working directors are usually considered employees and will need to be insured.
• People engaged through a contract or a sub-contractor arrangement can also be deemed employees for insurance purposes.

In NSW and Victoria, you won’t need workers’ compensation insurance if you employ people but pay less than $7,500 in wages annually and have no apprentices.

Some industries need insurance regardless of whether they pay wages. In NSW this includes employers in the taxi, hire car and thoroughbred racing industries as well as employers of certain sports professionals.

Workers can make a claim to recoup lost wages due to needing time off to recover; to pay for medical bills, rehab or at-home support services; or to seek a lump-sum payment in the case of permanent impairment. The families of workers who lose their lives at work can also claim to receive financial support and compensation.

Depending on the location, type of claim and injury involved, employees will need to meet varying criteria and evidence requirements to make a successful claim. Generally, employees will need a qualified medical practitioner to assess their capacity before claiming.

In addition to holding insurance, as an employer you should provide information to your team about how to make a claim if they’re injured.

You’ll also need to record injuries and report details to your insurer promptly. Employers are also obligated to adjust recovering employees’ work conditions and engage with them and their medical providers to create a plan to help them return to work safely.

Your insurance premium is based on your industry and how much you pay in wages to your employees, but the specific calculations vary state to state. So, smaller businesses with fewer staff may pay lower premiums, but it depends on how well-paid your staff are, the riskiness of your industry, and the costs incurred in previous claims.

The average premium rate, as a percentage of annual remuneration, across key states includes:

• 1.89% in Tasmania, a small decrease from 1.9% in 2023-24
• 1.85% in South Australia, unchanged from 2023-24
• 1.8% in Victoria, unchanged from 2023-24
• 1.728% in New South Wales (icare) after an 8% increase from 2023-24 rates
• 1.732% in Western Australia, an increase from 1.727% in 2023-24
• 1.343% in Queensland, up from 1.29% in 2023-24

What does remuneration mean in relation to workers compensation? It includes salary, sick leave, holiday pay, employer superannuation contributions including the levy, fringe benefits and trust distributions.

Premium discounts may apply if you:

• Pay your premiums upfront.
• Haven’t had any claims made against you in the past.
• Employ an apprentice.
• Demonstrate effective risk management and return to work practices.