What is workers compensation?
Workers compensation insurance provides support for your workers if they sustain a work-related injury or illness. Your policy protects your construction business from the costs of weekly payments, medical and hospital expenses and a range of other benefits that help your worker recover.
Most employers in NSW are legally required to have a workers compensation policy to protect them from the costs of workers compensation claims (unless they are exempt).
Understanding your workers compensation cover
When you first apply for cover, the cost of your premium is based on the industry (e.g. demolition, excavation, carpentry, bricklaying, concreting, plumbing, painting etc) you work in and how much your business pays in wages. Any incentives, discounts or premium adjustments are also factored in.
If you pay less than $30,000 in workers compensation insurance per year, you’re considered a ‘small employer’. This means if you have an injured worker, the claims costs are not included in your premium calculation.
However, if you pay more than $30,000 in workers compensation insurance, you're considered an ‘experience-rated employer’. Your organisation’s claims history will be considered when your premium is calculated just like other types of insurances.
The premium will include:
- a percentage of the basic tariff premium (general premium charge), and
- a percentage of the ‘experience premium’ (based on your workers compensation claims history).
Duration of your policy
All policies cover a period of 12 months unless you request a shorter term.
Classifying workers or contractors for workers compensation purposes
Whether a worker is a contractor or an employee is dependent on the individual circumstances and is determined by the nature of the relationship, not what the arrangement is called.
A person won’t automatically be an employee or an independent contractor because of the type of work they do. A person may perform the same type of work as an employee of a business but may still be an independent contractor. Several factors separate a worker from a contractor. No single factor is decisive. Some people are 'deemed' to be workers for workers insurance purposes.
A contractor is more likely to:
- be engaged to carry out a particular task using their own skill and judgment
- employ others, delegate or sub-let work to another
- be paid on the basis of a quotation for the job
- supply their own tools and materials
- carry on an independent business in their own name or under a business or firm name.
Note: An ABN by itself is not a definite indicator of a person(s) status.
A worker is more likely to:
- be directed by you regarding the work to be performed and the time and manner in which it is performed
- be required to actually carry out the work
- be paid on a time basis
- have tools and materials supplied by you
- work exclusively for you
- be affected by PAYG tax arrangements.
You need to consider all these indicators when working out whether your worker is an employee or an independent contractor. There usually won’t be one deciding indicator. For example, just because the contractor has an ABN or issues invoices doesn’t automatically make them an independent contractor for the purposes of your workers compensation insurance.
Important: A person may have been hired as a contractor and be a contractor for other purposes such as tax, but still be a worker for the purpose of workers insurance. The status of a person for tax purposes bears no direct relationship to that person's status as a worker for workers’ insurance purposes.
Need more help?
For help working out whether your worker is an employee or an independent contractor you can use the Worker or Contractor Tool as a guide. The tool provides an indication of whether a worker may be a deemed worker or contractor for workers compensation insurance purposes.
Alternatively, you can request a private ruling on the worker status of a person or group of persons for premium purposes.
How to get an insurance policy
To apply for workers compensation insurance, contact a licensed insurer.
Tell them how much you have paid or expect to pay in wages, and how many workers need to be covered, including any contractors that are deemed workers.
Find more information at How to get workers compensation insurance.
Useful links
- Who is exempt from having workers compensation?
- Worker or contractor tool
- Request a private ruling
- Find a licensed insurer
- How to get workers compensation
Updated 14 April 2025