What’s the difference between an employee and a contractor? Do you need to provide workers compensation insurance for contractors?

As a person who hires staff to assist in the business, it’s important you’re aware of the answer to these questions. Why? This ensures you’re prepared for any responsibility you may have in the event of a workplace injury.


What is workers compensation?

In the unfortunate event of an accident while ‘on the job’, leading to sickness or injury, workers compensation insurance covers loss of wages and associated medical and rehabilitation costs.
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What’s an employee?

According to the Fair Work Ombudsman, generally, an employee is any person paid to do a specific job, on an ongoing basis, works set hours under the direction of their boss and comes under an industrial award. Along with this, a person who doesn’t provide their own tools or equipment and has no financial interest in the business.

Employees are entitled by law to paid-leave and superannuation, their employer deducts tax and are protected by unfair dismissal legislation.

So, if you have employed staff under these conditions, then yes, you do have an obligation to provide workers compensation insurance.


What’s an independent contractor?

Conversely, an independent contractor has an ABN, invoices the business for a specific task and pays their own tax and superannuation. They’re not entitled to any paid-leave and decide, through negotiation, when and where the work will be carried out. In addition, the tools and equipment required to perform the task belong to the contractor.

In this situation, it’s not a requirement for businesses to provide workers compensation insurance. Therefore, the onus is on the contractor to have their own personal injury insurance cover in place.

As you can see, there are several factors that determine the difference between employees and independent contractors. When necessary, a definitive answer can be provided on a case by case basis within the court system.

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How do I know which workers compensation insurance to get?

OK, so you’ve decided that the staff member is actually an employee and that, therefore it’s your responsibility to provide workers compensation insurance.  Now what?

Navigating the large number of insurance companies and their products can be quite overwhelming.


Thankfully there is a regulatory body in each state:

  • Australian Capital Territory: WorkSafe ACT
  • New South Wales: State Insurance Regulatory Authority (NSW)
  • Northern Territory: NT WorkSafe
  • Queensland: WorkCover Queensland
  • South Australia: ReturnToWork SA
  • Tasmania: WorkCover Tasmania
  • Victoria: WorkSafe Victoria
  • Western Australia: WorkCover WA

Each body provides comprehensive information and advice on the ins and outs of workers compensation insurance. There’s a convenient list of approved insurers too.

Now that you know the difference between an employee and a contractor and where to access more detailed information, you’re on your way to complete peace of mind, knowing that you and your staff have cover in the unfortunate event of an accident or illness in the workplace.

At Grace Insurance in Joondalup, north of Perth, we have many years of experience in providing workers compensation insurance for employers, employees and contractors.