Consequences for employers who fail to include eligible
independent contractors in their workers' compensation
Some employers may not realise that they have an obligation to
provide workers compensation insurance cover to sole trader
contractors by including payments made to such contractors in the
assessable wages figure used by WorkCover Queensland to calculate
their annual premiums. The consequences of failing to do so can be
severe, with WorkCover granted substantial discretionary powers
under the Workers' Compensation and Rehabilitation Act
2003 (Qld) (Act) to assess premiums by
default and impose additional penalties on non-compliant
The Act requires employers to provide all "workers"
engaged by the employer with workers' compensation insurance
cover. The definition of "worker" extends beyond mere
employees to include all sole trader contractors engaged by the
employer, unless the contractor:
Has a personal services business determination in effect under
the Income Tax Assessment Act 1997; or
Satisfies the following criteria:
the contractor is paid to achieve a specified result or
the contractor supplies all plant, equipment and tools of trade
necessary to perform the contracted work; and
the contractor is liable for the cost of rectifying any defect
in the work they perform.
It can be difficult to demonstrate that a sole trader contractor
has been engaged to achieve a specified result or outcome. As all
three criteria must be met in order to exempt such contractors,
many employers are unknowingly under declaring the assessable wages
used by WorkCover to calculate their annual insurance premium.
As the entity responsible for providing workers'
compensation insurance to the majority of private sector employers
in Queensland, as well as ensuring employers complying with their
obligations under the Act, WorkCover has the power to audit
employers to determine whether they have sufficient cover. These
audits may be random, or form part of a campaign targeted at
specific industries (for example, building and construction and
Employers are required to cooperate with WorkCover by providing
access to relevant financial records and documentation. A failure
to provide requested information can result in WorkCover imposing a
default assessment on the employer, estimating the assessable wages
figure, and therefore the premium payable by the employer, upon
whatever information has been made available to WorkCover.
If WorkCover concludes that the assessable wages paid by the
employer for the financial year upon which the audit is based are
more than the wages originally declared by the employer, WorkCover
Require the employer to pay an additional premium for the
audited financial year;
Use the assessable wages figure calculated for the audited year
as the correct figure for the following three financial years,
which may require the employer to pay additional premiums in
respect of each of these years also; and
Impose a maximum penalty of 100% of the value of the additional
premiums payable by the employer, effectively doubling the size of
the debt owed to WorkCover.
The Department of Justice and Attorney General is currently
conducting a wide ranging review of the workers' compensation
scheme under the Act, which will examine the current approach to
calculating insurance premiums, as well as WorkCover's powers
to impose default assessments and penalties on employers.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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