Workers Compensation For Sole Traders And Contractors

Workers compensation and common law

In Australia, any business that employs workers must have workers compensation unless they’re a large business eligible to self-insure. Each state has different laws and regulations, so you must know the rules where you operate or work.

NSW and Queensland have ‘no-fault schemes’, which means an injured worker can receive compensation regardless of who caused the injury. They can also make a ‘common law claim’ for damages if the employer’s negligence caused the injury.

The employer’s workers compensation policy usually covers them for common law claims.

Who is covered by workers compensation?

A ‘worker’ is usually an individual (not a company, partnership or trust) who works under a ‘contract of service’ between employee and employer. Some typical workers include PAYG employees, apprentices, labourers and trainees.

In comparison, a business will usually enter into a ‘contract for services’ with an independent contractor, who is not a worker. (Although, even if a contractor has an ABN and organises their own tax, they could still be a worker if they work under a ‘contract of service’. So it’s not simple!)

If you hire a worker through a labour hire firm, that firm is usually the worker’s employer. So an injured worker would claim workers compensation through the labour hire firm, not your business.

However, they might make a claim against both your business and the labour hire firm if they can establish that your business was negligence in your duty of care (i.e. a common law claim).

Can subcontractors claim workers compensation?

Generally, subcontractors are hired by a contractor to perform specific work under the contractor’s direction. In this case, they’re a worker and eligible for workers compensation if injured in the workplace.

If you’re a sole trader or contractor who engages subcontractors, you must organise workers compensation for them.

Can a sole trader or contractor claim workers compensation?

Generally, sole traders and contractors are not covered by workers compensation legislation. They need to take out other insurance – like personal injury insurance – to protect themselves if they’re injured in their own workplace.

However, a sole trader might not meet the criteria for being an independent contractor, despite having an ABN and being engaged as a contractor. For example, they might be expected to work regular hours each week for an hourly rate, and not delegate the work. In this case, they might be considered an employee and have the same rights, including