Understanding Workers’ Compensation Insurance in Australia

Protecting Your People and Your Business

Workers’ Compensation Insurance sits at the heart of looking after your employees and protecting your business when something goes wrong at work. If a worker is injured or becomes ill due of their employment, this cover responds to their medical treatment, rehabilitation and lost income in accordance with the legislation of the relevant state or territory scheme. It is not just good practice; for any employer of a worker in Australia, it is a legal requirement.

As workers’ compensation is compulsory and the insurer indemnifies the employer for statutory liability, an accepted claim itself does not directly impact your cash flow – that is what the policy is for. The true business impact comes from other areas: claims experience drives future premiums, poorly managed claims extend time off work and disrupt operations, and any gap in cover – such as unnamed entity, a misclassified contractor, an undeclared working director – can leave the employer personally liable for the cost of the claim, where the fines in WA are up to $10,000 per uninsured worker. Well-structured cover and active injury management protect the business on all three fronts.

As a Perth-based brokerage working with organisations across Australia, Interlink Insurance Brokers helps businesses understand their obligations under each state scheme, and particularly under Western Australia’s Workers’ Compensation and Injury Management Act 2023, which commenced on 1 July 2024 and replaced the 1981 Act.

What Workers’ Compensation Insurance Actually Covers

The core purpose of workers’ compensation is to support employees who suffer a work-related injury or illness; whether at the usual workplace, at a Third-Party site, or while travelling in genuine connection with work. Certain occupational diseases and aggravations of pre-existing conditions may also be covered, subject to the legislation in each jurisdiction. In WA, the 2023 Act also introduced presumptive cover for prescribed firefighter diseases and for dust diseases such as silicosis, mesothelioma and pneumoconiosis, meaning eligibility is presumed and the employer bears the burden of rebutting it.

While details vary between states and territories in Australia, an approved claim will typically respond to some or all of the following:

• Reasonable medical and hospital expenses
  
• Rehabilitation services such as physiotherapy, occupational therapy and psychological support
  
• Workplace rehabilitation and return-to-work services
  
• Weekly income compensation while the worker has reduced capacity
  
• Lump-sum payments for permanent impairment, or for dependants in the case of a work-related death

A common misconception worth clearing up: WA does not provide automatic “journey claims” cover for ordinary travel between home and work. Cover only extends to journeys with a real and substantial connection to employment, for example: travel between work sites during the working day, or while on call. Employers with mobile workforces often pair their Workers’ Compensation Policy with a group Personal Accident Policy to fill that gap. The position is similar, though not identical, in NSW, Victoria and Queensland.

It is also important to distinguish workers’ compensation from related products. Income Protection Insurance is a personal policy that responds to a much wider range of illnesses and injuries, not just work-related ones, and is generally arranged by the individual. Public liability Insurance responds to injury or property damage suffered by third parties such as customers or visitors. Sole traders, partners and non-working Directors are not “workers” and cannot insure themselves under a Workers’ Compensation Policy; they need Personal Accident and Sickness or Income Protection cover instead.

Legal Requirements Across Australian States and Territories

Workers’ Compensation in Australia is not a single national scheme – each state and territory has its own legislation, regulator and scheme model:

• NSW — Nominal Insurer scheme administered by icare, with Claim Agents including EML, Allianz, GIO and QBE; regulated by SIRA.
• Victoria — Central scheme managed by WorkSafe Victoria through Agents (Allianz, EML, Gallagher Bassett).
• Queensland — WorkCover Queensland, a single state insurer; large employers may apply to self-insure.
• South Australia — ReturnToWorkSA scheme with EML and Gallagher Bassett as Claims Agents.
• Western Australia — A privately underwritten scheme regulated by WorkCover WA. Employers obtain cover from one of seven licensed insurers – Allianz, QBE, GIO (AAI), CGU, WFI (also CGU), Zurich and Guild – or operate as a licensed self-insurer. The Insurance Commission of WA (RiskCover) is a specialised insurer for State Government Agencies.
• Tasmania, NT and ACT — Privately underwritten or mixed arrangements.
• Commonwealth employees, certain national employers, and seafarers — Covered separately by Comcare or the Seacare scheme.

This privately underwritten WA model is one of the genuine differences for brokers and employers. Unlike NSW or Victoria, premium and policy terms in WA can be negotiated with competing insurers rather than set by a central scheme.

Failure to hold the correct cover wherever your workers are employed can result in:

• Fines and enforcement action — in WA, up to $10,000 per uninsured worker under the 2023 Act (doubled from $5,000 under the 1981 Act)
• Direct liability for claims that should have been insured, recoverable by the regulator from the employer (and, for corporate employers, potentially from Directors personally)
• Back-payment of premiums and levies
• Reputational damage with employees, unions, regulators and customers

For businesses operating in multiple states, getting the “State of Connection” right for each worker is critical — and is often where a specialist broker adds real value.

Calculating Premiums, Managing Costs and Supporting Recovery

Premiums are not set arbitrarily. The standard formula across most schemes is:

Premium = Total Remuneration × Industry Rate × Experience Adjustment + Statutory Levies, Stamp Duty and GST

The primary considerations are:

• Total remuneration: gross wages, salary, overtime, allowances, commissions, bonuses, the cash value of fringe benefits, and (where applicable) working Directors’ deemed earnings
• Industry classification: in WA, the Premium Rating Code (PRC) under the WorkCover WA Industry Classification Order (2nd edition, April 2025), based on ANZSIC with WA-specific modifications
• Claims experience: typically a five-year burning cost view, weighted against the expected loss ratio for the class

In WA, WorkCover WA publishes Recommended Premium Rates each year as a benchmark. The average across all classes was 1.823% of gross wages for the period of 30/06/2025-2026 and has increased to an average rate of 1.931% for the period of 30/06/2026-2027. Actual rates vary widely, from well under 1% for office-based classes to 8–10%+ for high-hazard work such as roofing, demolition or abattoirs. The price Insurer’s set above or below the recommended rate is based on the client’s claims experience, their overall risk profile and the broker’s submission.

One important clarification: WA does not provide a workers’ compensation premium exemption for apprentice or trainee wages. Apprentice wages are exempt from payroll tax in WA under a registered training contract, but they are fully declarable for workers’ compensation purposes. The two regimes are often confused.

Employers are not powerless in this process. Practical steps that genuinely move premiums include:

• Sound workplace health and safety systems aligned with the Work Health and Safety Act 2020 (WA)
• Training leaders and supervisors to identify and address hazards early — including psychosocial hazards, now a major driver of claims
• Encouraging early reporting so support and treatment can start quickly
• Working proactively with treating practitioners on realistic, structured return-to-work plans
• Reviewing claims data regularly to identify patterns and address root causes
• Accurate wage declarations at renewal and within 30 days of policy expiry, to avoid premium adjustments and audit penalties

When an injury occurs, the WA process under the 2023 Act runs to defined timelines:

1. The worker provides the employer with a Workers’ Compensation Claim Form including a First Certificate of Capacity.
2. The employer must forward both to the insurer within 7 calendar days.
3. The insurer must issue a liability decision within 14 days — accept, defer or dispute.
4. If liability is deferred, provisional payments of medical expenses (from date of injury) and income compensation (from date of incapacity) must start within 28 days.
5. If no decision has been made within 120 days, liability is deemed accepted.
6. The employer must keep the worker’s position open, where reasonably practicable, for 12 months from the start of income compensation, and provide suitable duties matching certified capacity.
7. Income compensation in WA is calculated using pre-injury average weekly earnings, generally based on earnings in the period prior to injury (often up to 12 months depending on employment circumstances) and is reduced to 85% of pre-injury earnings after 26 weeks (extended from 13 weeks under the 1981 Act).

Western Australia publishes annually indexed statutory amounts under the Workers 

Compensation and Injury Management Act 2023 (WA), which includes the General Maximum Amount indexed in line with wage price index movements. Medical and health expenses are capped at 60% of the General Maximum Amount – $163,932 for 2025/26 – which is double the cap that applied under the previous Act, and extensions (where available) are statutory exceptions

Throughout the claim, clear documentation, prompt responses to information requests and open communication with the injured worker are essential. Delays and poor communication are consistently the biggest preventable driver of long-duration claims, and long-duration claims are what drives future premiums.

Tailoring Your Workers’ Compensation Strategy

Every business is different. A 12-person professional services firm in West Perth has very different exposures to a labour-hire group operating across mine sites in the Pilbara, and both differ again to a multi-state retailer. The mix of roles, the nature of the work, your growth plans and your internal HR and OHS resources all influence what “good” workers’ compensation arrangements look like.

At Interlink Insurance Brokers, we commence by understanding how your organisation actually operates — including the contractor relationships that, under the new s.12 worker definition in WA, can be the difference between a covered claim and an uninsured liability. From there, we review your existing policies, premium structure and claims experience, and assess whether they line up with your obligations under the Workers Compensation and Injury Management Act 2023 (and the equivalent legislation in any other state where you employ people).

Ongoing support includes claims advocacy, guidance on injury management, and coordination with your HR and OHS teams. Where appropriate, we also advise on whether self-insurance is viable for larger groups (there are currently 23 licensed self-insurers in WA), or whether voluntary workers or principal’s contractor extensions are required alongside your Workers’ Compensation policy.

Understanding workers’ compensation is about more than ticking a legal box. It is about looking after your people, protecting your business, and building a stable foundation for growth. When employers approach it strategically, and with informed advice, they are better placed to meet their obligations, control costs, and create a safer, more confident workplace.

Protect Your Team With Tailored Compensation Cover

If you are reviewing your current cover or setting up a new policy, we can help you placing the right Workers’ Compensation Insurance for your business. At Interlink Insurance Brokers, our focus is on understanding your business, protecting your risk and delivering strong claims advocacy when you need it most. Talk to our team today to clarify your obligations, compare options and gain confidence in your cover.