What is workers compensation insurance in Australia?

Workers compensation insurance is compulsory for Australian employers. It helps cover wages, medical treatment and rehabilitation if a worker is injured or becomes ill because of work. Each state and territory has its own scheme, regulator and rules.

If you employ workers, including full-time, part-time, casual, apprentice or trainee workers, you generally need workers compensation insurance in the state or territory where they work. The system is no-fault: a worker does not need to prove you were negligent. They only need to show the injury or illness is connected to their work. Safe Work Australia confirms that employers must have insurance to cover their workers if they get sick or injured because of work.

Workers compensation can help pay for medical treatment, a portion of lost wages while the worker recovers, rehabilitation to support return to work, and lump sum payments for permanent impairment. It supports both sides: the worker gets financial support without needing to sue, and the employer avoids carrying the full cost of a workplace injury claim.

At a glance

• Workers compensation insurance is compulsory for employers in every Australian state and territory
• Each state has its own scheme, regulator, and rules
• It can help pay for wages, medical treatment and rehabilitation after a work-related injury or illness
• Workers do not usually need to prove employer negligence to make a claim
• Premiums are based on wages, industry classification, and claims history
• Sole traders are not covered for their own injuries under workers compensation
• Some contractors may be treated as workers depending on state rules
• upcover arranges workers compensation insurance for eligible Australian employers.

Is workers compensation compulsory in Australia?

Yes. Every state and territory requires employers to hold workers compensation insurance. In most cases, the obligation starts once you employ workers. Some details, including registration timing and worker definitions, vary by state and territory.

The Fair Work Ombudsman states that employers in each state or territory have to take out workers compensation insurance. Safe Work Australia confirms the same obligation at the national level.

Most states require cover before or within days of hiring your first employee. In Queensland, there is no wages threshold: registration with WorkCover Queensland is required from the first worker regardless of what you pay them. Penalties for operating without cover vary by state but can be significant. Depending on the jurisdiction, this can include fines, backdated premiums, and liability for uninsured claim costs.

Who needs workers compensation insurance?

Employers with staff

Any business that employs workers needs workers compensation insurance. Full-time, part-time, and casual employees are all covered under the relevant state scheme.

Apprentices and trainees

Apprentices and trainees are treated as workers in most states. Cover is required from their first day, not after a probation period or minimum hours threshold.

Contractors

Some contractors are "deemed workers" for workers compensation purposes. This happens when the contractor is engaged primarily for their personal labour rather than to deliver a specific result or supply goods. The rules vary by state and contract structure. If a contractor holds their own workers compensation policy, they are generally covered under their own arrangement. Keep a copy of their Certificate of Currency on file.

Sole traders

Sole traders are not employees of their own business. Workers compensation does not cover a sole trader's own injury or illness.

If you are a sole trader and want income support after a work-related injury, check personal accident and sickness insurance instead. That cover is designed for self-employed workers who do not have access to workers compensation for themselves.

How workers compensation works in Australia

Workers compensation is state-based. The rules, regulator, claims process, and premium calculation depend on where your workers are based.

State and territory schemes

• NSW: regulated by SIRA, with icare acting as the Nominal Insurer
• Victoria: managed by WorkSafe Victoria
• Queensland: managed by WorkCover Queensland
• Western Australia: regulated by WorkCover WA, with approved private insurers
• South Australia: managed by ReturnToWorkSA
• Tasmania: regulated by the WorkCover Tasmania Board
• ACT: regulated by WorkSafe ACT, with private insurers
• Northern Territory: managed by NT WorkSafe

Check the relevant state or territory authority for current rules before arranging cover. For a national overview, see Safe Work Australia's workers compensation page.

What does workers compensation cover?

Workers compensation may help cover costs linked to work-related injury or illness, subject to the rules of the relevant state scheme.

Weekly wages

A worker unable to perform their usual duties may receive a portion of their pre-injury earnings. Most schemes pay a higher percentage in the first weeks and step down over time. The exact percentages and duration vary by state.

Medical and hospital expenses

Depending on the scheme and claim, this may include GP visits, specialist consultations, surgery, physiotherapy, medication and hospital stays.

Rehabilitation

Physical and occupational rehabilitation to help the worker recover and return to work safely. All schemes focus on supporting return to work as early as medically appropriate.

Permanent impairment

Lump sum payments for workers who sustain a permanent impairment from a workplace injury. The amount depends on the degree of impairment assessed under the relevant state's guidelines.

Death benefits

If a worker dies because of a workplace injury or illness, lump sum and periodic payments to dependants may be available under most schemes.

What a claim looks like in practice

A warehouse worker injures their back lifting stock. Workers compensation may help pay for medical treatment, physiotherapy and part of their wages while they recover. The employer reports the injury and supports the return-to-work plan.

How much does workers compensation cost?

Workers compensation premiums are based on three things: your total wages bill, your industry classification, and your claims history. Higher-risk industries pay higher rates. Office-based and professional services work sits at the lower end. Construction, transport, and manufacturing sit higher.

Indicative cost by industry type

For a business paying $300,000 in annual wages:

• Office-based work (accounting, consulting, IT) at around 0.3% to 0.5%: roughly $900 to $1,500 per year.
• Retail and hospitality at around 1% to 2%: roughly $3,000 to $6,000 per year.
• Construction and trades at around 3% to 8%: roughly $9,000 to $24,000 per year.
• Transport and logistics at around 2% to 5%: roughly $6,000 to $15,000 per year.

These figures are indicative only. Actual premiums depend on your state scheme, industry code, wages, claims history, and any experience rating that applies.

What affects your premium

Your industry classification is the biggest factor. Within your industry, employers with fewer claims and strong return-to-work outcomes may pay less over time. Most schemes require an estimated wages declaration at the start of the policy year, followed by a final declaration at year-end for adjustment.

What happens if you do not have workers compensation?

Operating without workers compensation can lead to serious consequences. Depending on the state or territory, this can include fines, backdated premium assessments, and liability for uninsured claim costs.

If a worker is injured and you are uninsured, you may need to fund the entire claim from your own resources: medical costs, lost wages, rehabilitation, and any compensation awarded. Workplace injury claims can become expensive quickly, and the business or business owner may be personally exposed.

Not having cover can also affect your ability to win contracts, pass audits, or satisfy client and contractor obligations. Many head contractors and commercial clients require proof of workers compensation before engaging subcontractors or service providers.

Workers compensation vs other business insurance

Workers compensation covers workplace injury and illness for employees. It does not cover everything. Employers liability insurance covers common law claims where employer negligence is alleged. Some workers compensation policies include this as an extension.

Personal accident and sickness insurance covers the individual, usually a sole trader or contractor. If you are self-employed without staff, personal accident is the cover to check instead.

Management liability insurance covers employment-related claims such as unfair dismissal, discrimination, and harassment. Some employers arrange both workers compensation and management liability because they deal with different risks.

How to arrange workers compensation insurance

To arrange workers compensation, you typically need your ABN, business name, state or territory where your workers are based, number of workers, estimated annual wages, industry classification, and claims history. In some states, you register directly with the state scheme (icare in NSW, WorkCover in QLD). In others, you choose from approved private insurers or arrange cover through a broker.

upcover arranges workers compensation insurance for eligible Australian employers. If your business also needs management liability, public liability, or business pack insurance, upcover can help arrange multiple covers in one place.

About upcover

upcover is a digital-first insurance broker helping Australian small businesses arrange the right insurance online. upcover arranges workers compensation insurance for eligible Australian employers, with access to 80+ insurance partners.

• 70,000+ businesses covered across Australia.
• 4.9/5 customer rating.
• Instant Certificate of Currency on policy confirmation, where available for the relevant policy.

upcover is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078.

Arrange workers compensation insurance through upcover

Frequently asked questions

Is workers compensation insurance compulsory in Australia?

Yes. Employers in every Australian state and territory generally need workers compensation insurance if they employ workers. The rules, regulators, and premium structures differ by state.

Who needs workers compensation insurance?

Businesses with employees need workers compensation. Full-time, part-time, casual, apprentice, and trainee workers are all covered. Some contractors are treated as workers depending on state rules and contract structure.

Do sole traders need workers compensation?

Sole traders do not need workers compensation for themselves because they are not employees of their own business. If a sole trader employs other workers, those workers need to be covered. For personal injury cover, sole traders should check personal accident and sickness insurance.

What does workers compensation cover?

Workers compensation may help cover weekly wages while the worker recovers, medical and hospital expenses, rehabilitation, lump sum payments for permanent impairment, and death benefits for dependents.

How much does workers compensation cost?

Premiums are based on total wages, industry classification, state scheme, and claims history. As a rough guide, office-based businesses may pay around 0.3% to 0.5% of wages, while construction and trades may pay 3% to 8%. For a business with $300,000 in annual wages, that can range from around $900 to $24,000 per year depending on industry and state.

What happens if I do not have workers compensation?

Depending on the state or territory, you may face fines, backdated premiums, and liability for uninsured claim costs. If a worker is injured while you are uninsured, you may need to fund the claim from your own resources.

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_{The information in this article is general in nature and provided for informational purposes only. It does not constitute personal insurance, legal, employment, or business advice. Workers compensation rules, premiums, schemes, benefits, and penalties vary by state and territory and can change. Always confirm current requirements with the relevant state or territory workers compensation authority, a registered accountant, or a qualified adviser before acting. All insurance products arranged through upcover are subject to the terms, conditions, limits and exclusions contained in the relevant policy wording and Product Disclosure Statement. Before deciding whether a particular insurance product is right for you, please read the relevant PDS and consider your personal circumstances. upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078. upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.}