Who should I cover?
This page provides useful information to help you determine who is a worker according to Workers’ Compensation and Rehabilitation Act 2003 (the Act).
The Act lists specific inclusions and exclusions for who should be covered for workers’ compensation. This information should be used as a guide only. If you need help determining who to cover for workers’ compensation insurance, please call us on 1300 362 128.
Who is a ‘worker’?
Under section 11 of the Act, a worker must be an individual. Therefore, if you engage a corporation they will not be worker as only an individual can be a worker.
Sole traders are engaged as individuals and if you engage a partnership to do work for you, then each of the partner/s may be individually engaged by you and may be a worker for you. This is because, under partnership law, the partners are liable as individuals for all contracts the partnership enters into. Unlike companies, a partnership is not regarded as a separate legal entity and as a result, a partner may be an individual.
Please note a person/individual can be a worker even if they have an Australian Business Number (ABN) or are responsible for their own tax. A person who works under a ‘contract of service’ is a worker. A ‘contract of service’ is a standard employer and employee relationship. A large part of the workforce works under a contract of service.
A worker is likely to be a person who performs the same work in the same way as an employee. Even where a person calls themselves a ‘sub-contractor’, if you engage them for work and control the ‘what, when, where and how’, they are likely to be a worker under the Act.
A person who works ‘substantially for labour only’ is also a worker When deciding whether a person is a worker or not, you must consider whether you are engaging a person working under a contract, or at piecework rates, for labour only or substantially for labour only. A person who is engaged for labour only or substantially for labour only, will be considered a worker. In other words, if the payment to the person is mainly for labour, then the person will be a worker.
Other person/s who are workers
A person who satisfies any one of the following criteria will also be a worker:
- a person who fails the results test or does not have a personal services business determination (PSBD)— these are explained further down the page
- some sharefarmers
- a sales person paid by commission
- a person engaged by a labour hire agency, group training organisation, or holding company is a worker of that organisation.
Further details on these inclusions can be found under Schedule Two, Part One ‘Persons who are workers’ of the Act.
Persons who are not ‘workers’
The Act specifically excludes some people from workers’ compensation coverage. A person who performs work under a contract of service for:
- a corporation of which the person is a director
- a trust of which the person is a trustee
- a partnership of which the person is a member (for example, a lawyer in a law firm or an accountant in an accounting firm) is not a worker of that corporation, trust or partnership.
Other people who are excluded include:
- people who perform work under a contract of service with the Commonwealth or a Commonwealth authority
- professional sportspeople
- members of the crew of a fishing vessel receiving wholly or mainly a percentage of gross earnings or profit
- people who use a motor vehicle for tuition
- people who participate in an approved program or work for unemployment payment under the Social Security Act 1991.
Further details about these exclusions can also be found under Schedule Two, Part Two ‘Persons who are not workers’ of the Act.
What is the results test?
A person engaged under a contract (regardless of whether the contract is a contract of service), will be a worker if they do not meet all three elements of the results test.
A person will satisfy the three elements if they:
- are paid to achieve a specified result or outcome and
- have to provide the plant and equipment or tools of trade needed to perform the work and
- are, or would be, liable for the cost of rectifying any defect in the work performed.
1. Achieving a specified result or outcome
To satisfy this element of the results test, generally the person’s contract or quote must require:
- the person to complete a specified result and
- that payment is an agreed price, based on completing the specific result, rather than an hourly or daily rate.
To satisfy this part of the test, the contract or quote to complete a specified result or outcome must be with one individual (person). A person engaged as part of a group or gang will not satisfy this part of the test. A person engaged under a contract for ongoing work will also not satisfy this element of the results test.
2. Providing the plant and equipment or tools of trade needed to perform the work
To satisfy this element of the results test, the person’s contract must usually require that the person provide all the plant and equipment or tools of trade that he or she needs to perform the work under the contract.
3. Liability for the cost of rectifying defects in the work performed
To satisfy this element of the results test, the person’s contract must make him or her legally liable for the cost of rectifying any defect in the work performed. Rectification would normally require the person to be responsible for the supply of the labour necessary to rectify the faulty work. If the person would be responsible for paying for the faulty work to be corrected, for completing the work in his or her own time, or to have an amount deducted from retention monies, they meet the third element of the results test.
A contractual requirement to hold professional or product liability insurance may demonstrate that a person is liable for rectifying defects in their work. It should be clear that the insurance would cover the cost of rectifying defects in the person’s work. Public liability insurance will not satisfy this element of the results test.
What evidence is needed for the results test?
To determine whether the results test is satisfied, WorkCover will look at available evidence, such as a written contract, work order, or quote specifying the terms and conditions of the contract and any invoices specifying payment details. If there is no written contract, each party may be required to provide a signed statement about the details of the work agreement.
What is a personal services business determination?
A personal services business determination (PSBD) is written advice from the Australian Taxation Office confirming that the applicant is a personal services business. To determine whether a PSBD is in effect, you will need to give WorkCover Queensland a copy of the written determination issued by the Australian Taxation Office.
If you would like more information or clarification, call us on 1300 362 128.
Who should I cover for workers' compensation FS123 (pdf, 239.8 KB)