GN 5.6 Weekly payments for exempt workers

Published: 12 August 2019

Last edited: 27 November 2020

- GN 5.6 Weekly payments for exempt workers

Application: this guidance applies only to exempt workers.

Overview

A worker may be entitled to weekly payments if their work-related injury/illness has resulted in incapacity for work and loss of earnings due to the incapacity. To demonstrate incapacity, the worker must provide a medical certificate to the insurer. The workers compensation certificate of capacity can be used for this purpose.

Weekly payments for exempt workers are calculated in accordance with the legislation as in force prior to the Workers Compensation Legislation Amendment Act 2012 (2012 Amendments).

This guidance looks at the calculation of weekly payments for exempt workers.

Calculating weekly payments

The insurer calculates weekly payments based on the following:

Average weekly earnings (AWE): this is the average amount a worker received each week over a period of time (usually the last 12 months of employment, including overtime and shift allowances), or
Current weekly wage rate (CWWR): this applies when the worker is employed under an agreement that fixes a rate for a weekly or longer period. If no such agreement exists, the CWWR is calculated to be 80 per cent of the worker’s AWE.

The insurer should identify the CWWR and AWE applicable at the date of the injury. Where possible, the insurer should seek agreement between the worker and the employer about the worker’s AWE to avoid disputes.

It is the insurer’s responsibility to advise the worker and employer of the amount of the weekly payment. Workers receiving payments directly from their employer should be paid in accordance with their usual pay cycle.

If the insurer is required to commence making weekly payments but does not have sufficient information to determine AWE, they should use the award rate in the first instance. Once further information becomes available, they should review the AWE to ensure that the worker’s weekly payments are calculated correctly.

The amount of the weekly payment varies depending on whether the:

level of incapacity is total or partial
worker’s pre-injury earnings are paid under an award, industrial or enterprise agreement
period the worker is being paid is during the first 26 weeks of incapacity or after the first 26 weeks of incapacity.

If a worker is to be paid for a period of less than a week (for either total or partial incapacity) the weekly payment will be paid on a pro-rata basis (ie as the proportion of their normal weekly earnings, the period of incapacity represents).

Concurrent exempt and non-exempt employment at time of injury

If a worker has two sources of employment, additional information will be required from all employers to help correctly calculate the AWE.

Earnings from all jobs are to be taken into account when calculating weekly payments, up to the maximum 40 working hours per work (if the worker’s weekly payments are made in accordance with the 1987 Act, as in force prior to the 2012 amendments).

Payments when totally unfit

During the first 26 weeks of incapacity, workers are entitled to weekly benefits based on their CWWR before the injury.

For workers paid under an award, industrial or enterprise agreement, the weekly wage rate is calculated at 100 per cent of the CWWR (excluding overtime, shift work, payments for special expenses and penalty rates).

For those not employed under an award, industrial or enterprise agreement, the weekly wage rate is calculated at 80 per cent of the worker’s AWE (including regular overtime and allowances).

After the first 26 weeks of incapacity, the weekly payments are reduced and are usually the lesser of:

the statutory rate, or
90 per cent of AWE.

The total weekly benefit cannot exceed the worker’s current weekly wage rate.

Note: The statutory rate is indexed twice each year in April and October. Where there are dependent children and/or a dependent spouse, additional payments are payable. Current and past rates can be found in the Workers compensation benefits guide.

Payments when partially unfit

If a worker is partially incapacitated and they return to suitable work, they will earn income for the hours they work.

If this income is less than the worker earned before the injury/illness (for example, they are working part-time or at a lower pay rate), then they may also receive a weekly payment, often referred to as 'make-up' pay.

Make-up pay is usually calculated based on the difference between the worker’s AWE (including overtime, shift work and penalty rates) and the amount they are earning while in suitable work.

Note: A worker's weekly payment during any period of partial incapacity for work is not to exceed the weekly payment payable during a period of total incapacity for work. See section 40(5) of the Workers Compensation Act 1987 (pre-2012 amendments).

During the first 26 weeks, weekly payments when working in suitable employment are calculated as the lesser of:

the AWE minus any actual earnings, or
the weekly amount that a worker would be paid if totally incapacitated:
- the worker’s CWWR, or
- 80 per cent of AWE if not employed under an award.

If CWWR is more than the maximum weekly compensation amount, then the maximum weekly compensation amount is used to calculate the entitlement.

Note: The maximum weekly compensation amount is indexed twice each year in April and October. Current and past rates can be found in the Workers compensation benefits guide.

After 26 weeks the weekly payment amount is calculated as AWE minus actual earnings. This weekly payment amount is capped at the statutory rate and cannot be more than the worker would earn when totally incapacitated.

Payments when partially unfit and suitable work is not available

A weekly section 38 payment (as in force prior to the 2012 amendments) may be paid if a worker has some capacity to work, but not the full capacity to return to their pre-injury role. This payment may be made if the pre-injury employer does not provide the worker with suitable employment.

To be eligible, a worker must be:

partially incapacitated for work and not suitably employed, and
undertaking reasonable steps to obtain suitable employment including job seeking and/or undergoing rehabilitation or retraining.

If suitable employment is not provided, the worker receives a weekly payment for a maximum of 52 weeks while seeking employment.

During the first 26 weeks where the worker has partial incapacity (including any period of total incapacity already taken), they may receive their CWWR. For example, if a worker has been totally incapacitated for six weeks and then becomes fit for suitable work, but no suitable work is available, the worker will be paid their CWWR for a total of 20 weeks.

For any remaining period up to a total of 52 weeks, a worker may receive:

the greater of 80 per cent of their CWWR, or
the statutory rate.

After this, if the worker continues to remain fit for suitable duties, they may be entitled to make-up pay. This payment will be based on an assessment of the capacity for work (section 40A assessment). A section 40A assessment (see 'After 52 weeks' immediately below) will determine a worker’s capacity to earn and any entitlement to ongoing weekly benefits.

After 52 weeks

When a worker has received at least 52 weeks of partial incapacity payments, their weekly pay rate may be reviewed in accordance with section 40 of the 1987 Act (as in force prior to the 2012 amendments).

The insurer may engage an external provider to undertake an independent assessment to determine the worker’s earning capacity by reviewing their functional restrictions and vocational options, taking into consideration the general labour market reasonably accessible to the worker.

The worker’s weekly earnings are then calculated as the difference between:

the weekly amount they would have been earning as a worker (but for the injury) if they had continued to be employed in the same or similar employment, and
the average weekly amount that they are earning or would be able to earn in some suitable employment, after the injury.

The difference between the worker’s pre-injury gross wages and the assessed post-injury gross earning capacity is calculated, and the worker will then receive the difference between these amounts up to the statutory rate.

A section 40 rate can be applied in the following circumstances:

the worker is employed but not earning up to their pre-injury earnings
the worker is unemployed and is seeking suitable employment
the worker has unreasonably rejected suitable employment.

If a worker’s weekly entitlements are to be reduced or discontinued, the insurer must provide adequate notice. For workers who have been receiving weekly payments of compensation for a continuous period of one year or more, the prescribed period of notice is six weeks. See section 80 of the Workplace Injury Management and Workers Compensation Act 1998 (1998 Act).

Informing workers of a reduction in weekly payments

The following reductions in weekly payments of compensation are not subject to legislated notice periods:

after the first 26 weeks of incapacity
after the maximum entitlement payable under section 38 (52 weeks).

However, workers should have the opportunity to prepare for any change or reduction in their weekly payments, and sufficient notice will enable them to do so. A worker with no or few dependents may have their weekly payments reduced significantly if they are not working at the end of 26 entitlement weeks.

Regardless of the legislated step-down, the principle of timely advice (in writing and over the phone) and notice to the worker applies. The advice to the worker should request a statement of dependency from the worker to determine the number of dependants.

Calculating weekly payments

A formula is applied using the worker’s CWWR and AWE to determine the amount of the weekly payment. The formula used to determine this amount depends on factors such as the worker’s entitlement period and their capacity for work (see sections 35, 36, 37, 38 and 40 of the 1987 Act – as in force prior to the 2012 Amendments).

The formulas, and when to use them, are summarised in the table below:

	Section of the 1987 Act	Weekly payment calculation
Total incapacity – first 26 weeks.	36	The worker’s CWWR which is: the worker’s award weekly wage rate, OR 80% of the worker’s AWE if not employed under an award.
Total incapacity – from 27 weeks onwards.	37	The lesser of: the statutory indexed rate, OR 90% of the worker’s AWE.
Partially incapacitated – first 26 weeks. Where worker is seeking suitable employment but not employed.	38¹	Note: This period of 26 weeks at the CWWR will be reduced by the number of weeks that the worker has received weekly payments under section 36.	The worker’s CWWR.
Partially incapacitated – from 27 weeks. Where worker is seeking suitable employment but not employed.	38¹	Note: This period of 26 weeks will be increased after 26 weeks where the worker has received weekly payments under section 36 so as to reach the 52-week total period.	The greater of: the statutory indexed rate, OR 80% of the worker’s CWWR.
Partial incapacity – first 26 weeks. Where worker is working or not seeking suitable employment.	40	The lesser of: A – B = weekly payment OR The weekly amount that the worker would be paid if totally incapacitated (in accordance with section 36 ie the CWWR). A = AWE B = Actual earnings or capable of earning
Partial incapacity – from 27 onwards. Where worker is working or not seeking suitable employment.	40	The lesser of: A – B = weekly payment OR The weekly amount that the worker would be paid if totally incapacitated (in accordance with section 37 ie the statutory indexed rate). A = AWE B = Actual earnings or capable of earning
Dependants	37	Additional payments may be payable for dependent spouse and children.

¹Section 38 payments may only be paid for a period not exceeding 52 weeks.

Factors	Definition
Maximum weekly payment Section 35 of the 1987 Act - as in force prior to the 2012 Amendments	The weekly compensation amount payable to a worker cannot exceed the maximum weekly payment of compensation. Refer to the Workers compensation benefits guide for the applicable amount.
Current weekly wage rate (CWWR) Section 42 of the 1987 Act - as in force prior to the 2012 Amendments	The CWWR applies where the worker is employed under an agreement that fixes a rate for a weekly or longer period. If the worker has no agreement like this, the CWWR is 80% of the AWE.
Average weekly earnings (AWE) Section 43 of the 1987 Act - as in force prior to the 2012 Amendments	AWE shows the actual amount the worker was receiving as an average weekly amount over a period. The calculation would reflect the worker’s weekly pay rate and would usually cover: the previous period of the worker’s employment up to 12 months amounts such as overtime and shift allowance.
Statutory indexed rate	As determined in (historical) section 37 of the 1987 Act and indexed in accordance with section 82 on 1 April and 1 October each year.