As governments around the world move to contain the public health risk posed by COVID-19, many businesses have seen a sudden drop in demand for goods and services, and those providing non-essential services have had to close their doors.
For the majority of businesses, the economic reality of their world has changed and assisted by their accountants they will be casting a critical eye over their balance sheets and financial forecasts.
To help businesses navigate the severe economic impact of COVID-19 the Australian government has introduced a range of initiatives and relief packages, including the JobKeeper program.
With many businesses having to shut down or reduce their workforce due to COVID-19 there are also implications for workers compensation insurance. The state’s nominal insurer, Insurance and Care NSW (icare) has been working with the 325 million businesses it covers to help them continue to protect their 3.2 million workers with a range of COVID support measures.
Of the NSW businesses icare cover, 94% are small businesses whose owners rely heavily on their accountant to get the right advice on financial matters and compliance.
To help accountants provide the best advice to clients regarding icare’s workers compensation premium calculations, here’s a quick guide:
What is icare?
icare manages workers compensation for NSW and delivers the state’s insurance and care services for injured workers and their employers
Who does icare cover?
Hundreds of thousands of people in NSW are injured in workplaces or on our state’s roads each year. When this occurs icare is there to help with recovery and return to the workforce. We do this by providing workers compensation to people injured in NSW workplaces; and people injured on NSW roads are covered by Compulsory Third Party insurance, which is paid for via a levy on green slips.
Which businesses need to have workers insurance?
Workers insurance is compulsory for all NSW employers to cover their workers.
As an employer, you’re not required to get an insurance policy only if:
- you pay $7,500 or less in annual wages
- you don't employ an apprentice or trainee
- you’re not a member of a group for premium purposes.
For those businesses that do need a policy, it’s important for accountants to consider a client’s business structure to understand the liability implications. For example, not all workers covered by workers insurance are ‘employees’.
Some people are deemed to be workers for workers insurance purposes. These can include people who are working for you on a contract or through a subcontractor arrangement. Examples of different categories of who needs to be covered can be found here.
How do businesses pay the correct premium?
Here are the main considerations:
- To ensure companies are paying the right premium they must declare wages to icare each year. They must declare their actual wages up to four months after their policy renewal date. A business’s wages are an important part of their workers insurance policy and help ensure they are paying the correct premium.
- Apprentice wages also need to be declared on your client’s wages declaration form as they attract a premium reduction.
- Sole traders or partnerships who hire a worker need to take out a policy to cover that worker; and they will need personal accident or income protection insurance for themselves.
- Premiums are capped at 30%. icare compares your premium percentage rate for the renewal against last year’s premium percentage rate. If the percentage difference exceeds 30%, icare will cap it and your client won’t pay any more than this for their policy.
How premiums could change with COVID-19
Premiums can be adjusted to reflect wage changes resulting from the impacts of COVID-19. If a business has had to reduce staff or shut down due to COVID-19 icare may be able to assist by reducing their declared wages and coverage to reflect their new circumstances. icare may also assist by refunding the unused premium portion or deferring premium payments for up to six months where financial hardship exists.
In May, icare had reduced premiums by $67 million for 12,500 customers and placed $45 million in premium payments on hold to assist customers with their financial needs. More information about how premiums could change with COVID-19 can be found here.
Who is liable if a worker contracts COVID-19?
In some circumstances coronavirus (COVID-19) may be a compensable workplace injury as a disease is included in the definition of injury under the Workers Compensation Act. To be compensable, work activities must be proven to be the main contributing factor to contracting the virus. Due to the nature of viruses, it may be difficult to determine that employment was the main contributing factor. Each claim will be assessed on its individual merits.
What happens to non-compliant businesses?
Compliance and enforcement activity regarding employers who fail to take out workers compensation insurance is undertaken by the State Insurance Regulatory Authority (SIRA). Employers may be identified by worker’s injury claims, data mining, or anonymous tips and face significant fines and even jail time particularly if there’s been a significant injury.
How clients can make a claim?
To make a claim, call 13 77 22 and provide a full account of the workers accident or incident. Be sure to calculate and provide their annual wages so icare can organise accurate weekly payments to the injured worker to cover loss of wages.
More information can be found at icare’s website: https://www.icare.nsw.gov.au/