Compensation payable

Overview

The Workers Compensation Act 1987(1987 Act) provides for indexation of workers compensation benefits. Indexation of certain amounts occurs on 1 April, 1 July and 1 October each year (see Part 3, Divisions 6 and 6A of the 1987 Act). Amounts are adjusted by reference to movements in the Wage Price Index, Consumer Price Index or Average Weekly Earnings survey published by the Australian Bureau of Statistics (ABS).

Increases in indexation amounts are declared by an Order published on the NSW legislation website and reproduced in SIRA’s Workers compensation benefits guide.

Indexation of weekly payments

As provided for by section 82A of the 1987 Act, on 1 April and 1 October each year a worker’s weekly payment is indexed using the formula:

The current B/C factor is also available in the latest Workers compensation benefits guide.

Rounding

Once indexed using A x B/C, the result is rounded in accordance with section 82D of the 1987 Act. If the result is less than $1,000, it is rounded to the nearest whole $1. If the result is greater than or equal to $1,000, the result is rounded to the nearest whole $10.

Workers not in receipt of weekly payments

If a worker was not in receipt of weekly payments over one or more indexation review dates, and later became entitled to weekly payments, it is necessary to go back to apply the indexation process for all missed review dates from the date the worker first became entitled to weekly payments for that injury.

Applying the ‘no reduction’ rule

Where the B/C factor has the effect of reducing PIAWE (or the amount last varied by indexation) on an indexation review date, section 82C(a) of the 1987 Act applies, which deems the variation to not have taken effect. Therefore, a worker’s PIAWE or amount last varied by indexation will remain the same.

Offset of a reduction in a previous year

Where this amount is varied and increased in respect of the next or subsequent financial year, section 82C(b) of the 1987 Act provides that only the amount which exceeds the reduction from a previous financial year can be applied.

Indexation of PIAWE between 1 October 2012 and 21 October 2019

For indexation review dates before 21 October 2019, an additional requirement in the now repealed section 82A(3) of the 1987 Act applies.

Section 82A(3) provides that indexation does not take effect if it increases the worker’s PIAWE to more than 100% of the worker’s current ordinary earnings had they not been injured.

To apply indexation in accordance with Part 3, Division 6A of the 1987 Act in force before 21 October 2019, the insurer requires

1. the existing PIAWE amount, or the amount last varied by indexation
2. the B/C indexation factor for the review date
3. the current ordinary earnings the worker would be earning, had they not been injured (at the time indexation is being applied).

Indexation is applied at each review date as follows:

1. Index as according to section 82A(1): multiply the PIAWE (or the amount so varied) by the current indexation factor
2. Rounding: if the result in Step 1 is less than $1,000, then round the amount to the nearest whole $1. If the amount in Step 1 is greater than or equal to $1,000, the amount should be rounded to the nearest whole $10
3. Additional step according to section 82A(3): compare this rounded figure to the current ordinary earnings (had the injury not occurred).

If the new rounded indexed PIAWE is greater than the current ordinary earnings figure, the indexation is not to take effect as it increases PIAWE to more than 100 per cent of current ordinary earnings.

If the new rounded indexed PIAWE is less than the current ordinary earnings figure, then indexation is to take effect.

Note: Workers with a date of injury before 26 October 2018 will have shift and overtime amounts removed from their PIAWE after 52 weeks of weekly payments. After this, it will be necessary to re-apply the indexation process to the ordinary earnings component of the PIAWE for each of the indexation points from the date of injury (excluding shift and overtime), to ensure the ordinary earnings component of PIAWE is brought up to date.

Workers injured before the introduction of the 2012 indexation provisions whose weekly payments are determined using PIAWE

Note: The following content applies to workers injured before 1 October 2012.

The decision of the NSW Court of Appeal in Theoret v Aces Incorporated [2021] NSWCA 3 found that a worker who was injured before 1 October 2012 has their PIAWE indexed from the first review date after the worker first became entitled to weekly payments for that injury.

The circumstances in which the issue arises:

• the worker was injured and suffered an incapacity such as to entitle the worker to receive weekly payments of compensation before 1 October 2012; and
• the worker was not an existing recipient (not in receipt of weekly payments immediately before 1 October 2012); and
• the worker later (after 1 October 2012) became entitled to weekly payments of compensation in respect of the injury.

A table of historical indexation factors is included in the Workers compensation benefits guide to assist insurers in calculating weekly payments entitlements up to 1 October 2012.

Other amounts subject to indexation

There are other worker entitlements which are subject to indexation. The Workers Compensation Act 1987 (the 1987 Act) specifies five separate indexation processes of different payments payable to injured workers or family members. Each process is required by a different section of the 1987 Act – sections 79/80, 82A, 82B, 82BA and 82F.

The adjustments are calculated using the relevant methodology and are based on a number of different measures published by the Australian Bureau of Statistics (ABS). The results of indexation are published in the Workers compensation benefits guide.