Workers' compensation traps

Often state or nationwide wage audit campaigns are undertaken to assess whether business entities that pay and declare wages are paying the appropriate premiums and adhering to the regulated Workers’ Compensation Act relevant to each state.

Workers’ compensation law gives WorkCover and its Scheme Agents a legal right to access an employer’s wages records. 

According to the WorkCover Authority of NSW:

“They use a range of data mining techniques to review employers’ policy details, develop risk profiles for identifying areas of high-risk for non-compliance, and target wage audits. The agents may also identify employers for wage audits based on observed policy activity.

As an employer you are required by law to adhere to the information requested under these wage inspections and respond within a reasonable time frame after the insurance company has issued the wage audit request notification. If an employer does not comply with the wage audit request they may be issued with an order under workers compensation law. If an employer still does not comply, they may be prosecuted and fined up to 500 penalty units which is currently $55,000.”*

Common errors made on submitting premium information include:

1.  Non consideration of ‘Grouping Provisions’ for related companies
2. Determining the state of connection for a worker using specific tests if business activities are carried out in different states
3. Omission or incorrect disclosure of superannuation payments to employees including working directors
4. Payments of commissions, bonuses, allowances and leave loadings
5. Incorrect disclosure of amounts paid for long service leave payments
6. Incorrect disclosure of amounts paid for termination payments
7. Trust distributions paid to workers where the distribution is in-lieu of wages for work carried out under the trust business activities
8. Grossed up values of fringe benefits that pertain to allowances subject to FBT
9. Inclusion, as opposed to exclusion, of directors fees paid to non working directors
10. Incorrect disclosure of business activities for appropriate rate calculations and assessment of industry based risk profile.

If you are unsure whether you are providing the correct information to your insurance company and would like some assistance in understanding the requirements under the Workers’ Compensation Legislation please speak to Tanya Moran in our Sydney Office and Stephen Smith in our Qld Office.

*Reference: Extraction from WorkCover Authority of NSW website www.workcover.nsw.gov.au