Employers Liability Insurance in Australia Explained

In Australia, employers liability insurance usually means workers compensation insurance. It is the cover an employer holds for workers injured or made ill by their work. Safe Work Australia says employers must have insurance to cover their workers in case they get sick or injured because of work. Each state and territory runs its own scheme, so the rules depend on where your workers are based.

The term can also appear in contracts, tenders and policy wordings with a narrower meaning, so it helps to read the exact wording. This article explains what employers liability insurance means in Australia, how it differs between states and what it does not cover.

Cover depends on the policy and insurer you choose. Check the policy wording and its terms and conditions for what is and isn't included.

Employers liability insurance in Australia at a glance

Is employers liability the same as workers compensation?

Employers liability insurance and workers compensation insurance usually mean the same thing in Australia. Workers compensation insurance is designed to cover the costs of a worker's work-related injury or illness, subject to the scheme and policy terms. Those costs may include weekly payments, medical costs and rehabilitation.

The confusion often comes from overseas usage. In Great Britain, the Health and Safety Executive explains that employers must insure against liability for injury or disease to employees. That product is called employers' liability insurance, which is why the term turns up in contracts and templates written for international businesses.

Three ways the term is used in Australia

Australian contracts and policy wordings use "employers liability" in three main ways. Reading the clause in full shows which one applies.

• Workers compensation insurance: the statutory cover for workers' work-related injury or illness, arranged under the scheme where your workers are based. This is the usual meaning.
• Common law damages cover: cover for a claim where an injured worker sues the employer for negligence. In some states this sits inside the workers compensation policy. Some business policies may also include an employers liability extension for certain worker injury claims that fall outside workers compensation, subject to the policy wording.
• Employment practices liability: a separate product for claims about how employees were treated, such as unfair dismissal. It is commonly part of management liability insurance.

If a contract asks for "employers liability" with no further detail, whether workers compensation insurance satisfies it depends on the contract. An upcover representative or a broker can talk through the wording with you.

What does employers liability insurance cover in Australia?

Employers liability insurance, arranged as workers compensation, is designed to cover payments an employer must make when a worker is injured or dies because of their work. What is payable is set by the state or territory Act, the insurer and the policy wording.

Cover may include:

• Statutory injury payments: compensation you are liable to pay under your state or territory Act. It applies to a worker's injury arising from employment during the policy period.
• Damages for worker injury: damages you may be liable to pay for a worker's injury or death. This applies where the worker can recover damages under the Act, subject to limits and conditions.
• Death related payments: compensation or other payments required if a worker dies because of their employment during the policy period.
• Approved claim costs: reasonable costs incurred with the insurer's written consent, which may include approved defence costs.
• Other payments under the Act: other payments you are liable to make for a work injury or death where the Act requires them.

For the injured worker, benefits commonly include weekly payments while they cannot work, medical and rehabilitation costs and lump sums in some serious cases. The period of insurance matters because the policy in force when the injury happens is generally the one that responds. Cover is subject to the policy terms, conditions and exclusions.

For a fuller explanation of benefits and claims, see upcover's guide to what workers compensation insurance is in Australia.

Who needs employer liability insurance in Australia?

Employers need employer liability insurance, in the form of workers compensation, where their workers fall within the relevant state or territory scheme. Safe Work Australia notes there is a scheme for each state and territory and three Commonwealth schemes. Exemptions, deadlines and wage thresholds differ between them.

In NSW, icare says an employer paying $7,500 or less in annual wages may be exempt. That exemption does not apply to employers of apprentices or trainees, or members of a group. In South Australia, ReturnToWorkSA says you must register for cover within 14 days of employing.

For a state-by-state answer on whether cover is compulsory, see is workers compensation insurance compulsory in Australia.

Are contractors and working directors covered?

Contractors may count as workers for workers compensation purposes, depending on the scheme and the working arrangement. In NSW, icare explains that some people engaged through contracts or subcontracting arrangements are "deemed" workers. The label on the contract does not settle the question on its own.

Working directors are treated differently between states. In NSW, icare says working directors of a corporation are considered employees of the corporation. Elsewhere, check with your state or territory regulator before assuming a director, partner or sole trader is or is not a worker.

How does employers indemnity insurance work in each state?

Employers indemnity insurance is a term used in Western Australia, where WorkCover WA describes workers compensation policies as employer indemnity policies. Each state and territory runs its own scheme. Your obligations, insurer and claims process depend on where your workers are based, and the table sets out what each regulator says.

In Western Australia, WorkCover WA's information sheet on employer indemnity policies explains that the policy covers an employer's liability to pay compensation or damages. How common law claims are handled in other states differs, and Safe Work Australia's comparison of workers' compensation arrangements sets out the differences. Rules and thresholds change, so check the regulator's current page.

What happens if an employer does not have workers compensation?

Penalties for not holding workers compensation insurance are set by each state and territory. Two regulators publish clear examples.

• NSW: SIRA says you could face a "double avoided penalty", a fine of twice the insurance premium you avoided paying. If a worker is injured or becomes ill while you are uninsured, you could go to prison.
• Queensland: WorkCover Queensland says it can recover unpaid premium plus a penalty equal to 100% of the unpaid premium. Where it has paid for a worker's injury while the employer was uninsured, it can also recover that amount plus a 50% penalty.

Accurate wage declarations matter because premiums are generally based on wages. For more on how pricing works, see upcover's guide to workers compensation insurance cost in Australia.

What does employers liability insurance not cover?

Employers liability insurance, in the form of workers compensation, is designed for injury and illness to workers. It is not designed for the business owner's own injury where the owner is not a worker, or for claims about how employees were treated.

Exclusions commonly include, but are not limited to:

• damages for injury to someone who is not a worker, such as a customer or visitor
• punitive damages claims
• claims brought overseas
• injury that happens outside Australia, unless the scheme or policy says otherwise
• employment disputes such as unfair dismissal, discrimination or harassment claims
• injury to a business owner who does not count as a worker under the scheme

Important: This list is not exhaustive. Exclusions vary between insurers. Always refer to the policy wording and its terms and conditions for the exclusions that apply to you.

Other insurance employers commonly consider

Several other covers sit alongside workers compensation and respond to different risks.

• Personal accident and sickness insurance: designed to help replace income if a business owner cannot work through injury or illness, subject to the policy terms. upcover arranges personal accident and sickness insurance, and its guide compares group personal accident and workers compensation.
• Employment practices liability insurance: designed to cover claims from employees about how they were treated at work, such as unfair dismissal, discrimination or harassment. See what employment practices liability insurance is.
• Management liability insurance: designed to help protect a business and its directors, officers and managers against claims about how the business is run. It commonly combines directors and officers liability, employment practices liability and statutory liability.
• Directors and officers insurance: designed to help protect directors and officers personally against claims about decisions made in that role. See directors and officers insurance and upcover's guide to employer liability for company directors.
• Public liability insurance: designed to cover claims if someone is injured or their property is damaged in connection with your business. An example is a customer slipping in your shop. Injury to your own workers generally sits with workers compensation. See what public liability insurance is.

How upcover can help

upcover arranges workers compensation insurance for eligible Australian employers. upcover works with 80+ insurance partners and can arrange quotes from a range of insurers.

• 70,000+ businesses covered
• 4.9/5 customer rating
• Certificate of currency available once your policy is confirmed

An upcover representative or a broker can talk through how your state scheme applies to your business. You can get a workers compensation insurance quote through upcover.

Frequently asked questions

What is employers liability insurance in Australia?

Employers liability insurance in Australia usually refers to workers compensation insurance. It is designed to cover the costs of a worker's work-related injury or illness under the relevant state or territory scheme. Contracts sometimes use the term more narrowly, so check the exact wording.

Is employers liability insurance compulsory in Australia?

Workers compensation insurance is required where workers fall within the relevant state or territory scheme, according to Safe Work Australia. Exemptions and thresholds differ by state. Check your regulator's page for the rules where your workers are based.

What is employers indemnity insurance?

Employers indemnity insurance is a term used in Western Australia for a workers compensation policy. WorkCover WA's information sheet on employer indemnity policies explains that the policy covers an employer's liability to pay compensation or damages. Other states use different names for their workers compensation policies.

Is workplace liability insurance the same as workers compensation?

Workplace liability insurance is not a defined product name in Australia. People commonly use it to mean workers compensation, which is designed for worker injuries. Others mean public liability insurance, which is designed for injury to customers and visitors.

Do I need workers compensation and public liability insurance?

Workers compensation and public liability insurance respond to different people. Workers compensation is designed for your workers' work-related injuries and is required where they fall within the relevant scheme. Public liability is designed for injury or property damage to others and is commonly asked for by clients and landlords.

Does employers liability cover unfair dismissal claims?

Unfair dismissal, discrimination and harassment claims fall outside workers compensation. Employment practices liability insurance is designed to respond to those claims. It is commonly arranged as part of a management liability policy.

What insurance do small business employers commonly arrange?

Small business employers commonly arrange workers compensation for their staff and public liability insurance for customers and visitors. Some also consider personal accident and sickness or management liability insurance. An upcover representative or a broker can talk through which covers apply to your business.

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_{The information in this article is general information only and does not take into account your objectives, financial situation or needs. Workers compensation rules, exemptions, penalties and scheme arrangements differ between states and territories and can change, so check with the relevant workers compensation regulator. Before deciding whether a product is right for you, read the policy wording and its terms and conditions.  upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.}