What Small Business Owners Need To Know About Workers' Compensation

Insurance is a crucial investment irrespective of the scope of your business or the industry that you are in. Nonetheless, when you start your small enterprise, you are likely focusing on how to protect your business's assets and safeguard yourself from liability and not paying close attention to the degree of protection you are offering your employees, even if you only have one employee. And what happens if you are a one-person operation such as a tradie or a freelancer? Do you qualify for protection then?

Certainly, this can be confusing. Workers' compensation is the first type of insurance you should prioritise. However, since it is regulated at a state level, it is imperative to enlist the services of an insurer so that they can educate you on your individual state's requirements for this coverage. This piece is a simplified overview of what small business owners need to know about workers' compensation insurance.

Which industries need workers' compensation?

When selecting insurance for your new business, one tends to focus on covers that will address hazards specific to their industry. For instance, if you have started a construction business, you will need general liability insurance, builders risk insurance and more. However, when it comes to workers' compensation insurance, you cannot pick and choose. The Work, Health and Safety laws of Australia require all industries, from hospitality to media, to have workers' compensation for their employees to ensure the workspace is as safe as possible.

Granted, all the different industries will have varying levels of risk, with office jobs seemingly the least risky. Nonetheless, if anything at work results in an illness or injury for your employee, this type of insurance will cover most bills, including damage to their personal belongings, medical expenses, rehabilitation or physiotherapy and the provision of monetary benefits too.

Are you obligated to get workers' compensation as a sole trader and your contractors?

What happens when you are your own business's employee? Are you legally required to pay for workers' compensation? The answer is no. In truth, one cannot cover their sole trader status with this insurance, but this does not mean you cannot seek protection via another cover. In this scenario, income protection would be the best policy to pay for. Depending on what your insurer provides, the income protection can ensure you receive an income whether you fall ill, get involved in an accident and so on.

If you decide to hire contractors on a project-to-project basis, it can be puzzling to determine if workers' compensation is mandatory. For these instances, you need to consult with the insurer about your state's legislation regarding workers' comp. The provision of this insurance may also be dependent on the terms outlined in the contract drawn up between you and the contractors.