Who needs workers’ compensation insurance?

All Queensland-based employers who employ workers must insure them against work-related injury or illness.

Who is a worker?

Who must be covered by a workers’ compensation policy is determined by who is considered a worker.

All PAYG and some contractors are generally considered workers.

The Act says that a worker is:

• only an individual, not a corporation, partnership or trust (sole traders may be considered workers)
• a ‘person who works under a contract and, in relation to the work, is an employee for the purpose of assessment for PAYG withholding’
• someone who works under a ‘contract of service’. A 'contract of service' is a type of contract between employer and employee. This is how most employers employ their workers. It's not the same as a 'contract for services', which is generally an arrangement with a contractor.

But the legal definition can be complex, and some people are not considered workers under the Workers' Compensation and Rehabilitation Act 2003 (the Act) for the purposes of workers’ compensation.

The difference between an employee and a contractor

Whether a person is an employee (contract of service) or a contractor (contract for service) can be figured out by looking at the working arrangement. There are six main points for each – as set out by common law – to consider.

Employee (usually a worker):

1. The worker can't pay someone else to do the work (subcontract).
2. The worker is paid by the hour for the time they work, per piece of work or for a commission.
3. The worker doesn’t provide their own tools or equipment for the job or, if they do, they are paid an allowance for this.
4. The worker isn’t legally liable for the cost of fixing any faults. The employer is responsible.
5. The employer has the right to tell the worker where and how to do their job.
6. The worker works within and is considered part of the employer’s business.

Contractor (may not be a worker):

1. The contractor can pay someone else (subcontract) to do the work.
2. The contractor is paid for a job done based on a verbal or written quote they provided.
3. The contractor provides their own tools and equipment for the job and doesn’t get an allowance for this.
4. The contractor is legally responsible for their work and for the cost of fixing any faults in the work.
5. The contractor can do the work in the way they see fit, subject to the specific terms of any contract or agreement.
6. The contractor operates their own business independently from the employer and is free to accept or refuse additional work.

Important: Some contractors are still considered workers and need to be covered. See the section below called ‘Cover for contractors’ for more information or apply the ATO’s 6 key common law principles to work out specific contracting arrangements.

How do I know if a contractor is a worker?

Even if a contractor has an Australian Business Number (ABN) or is responsible for their own tax, if they’re working under a 'contract of service', they’re still considered to be a worker.

If an employer hires a contractor to do work for them, they’ll need to work out whether they need to cover the contractor. This will depend on the arrangement between the employer and the contractor.

An employer can figure out if they need to cover a contractor by using tools like:

• the ATO’s ABN Lookup tool to work out whether contractors are registered as an Individual or Sole Trader
• the ATO’s 6 key common law principles to work out their status as a contractor or an employee.

An employer can also work through the steps on WorkCover Queensland’s Worker determination tests page.