Do employers have to pay workers compensation indefinitely?

In weighing up the hit you might feel on your premiums against cutting staff costs there are some questions you have to ask. By ANDREW DOUGLAS

By Andrew Douglas

Workers compensation obligations

In weighing up the hit you might feel on your premiums against cutting staff costs there are some questions you should ask.

Employers sometimes feel that they are obliged to pay workers compensation for injured workers indefinitely. This is not true, as long as care is taken in how it is stopped.

Recently the general manager of a business operating in both New South Wales and Victoria asked me about long-term workers compensation for employees who will never be fit to return to their pre-injury duties.

This business had a number of employees who had been on workers compensation for more than two years. He asked: “Does this go on forever?” The answer is an emphatic no!

In Victoria and New South Wales, there comes a time when employers are no longer obliged to continue to offer work to an injured employee who is not fit for pre-injury duties. In Victoria it’s 12 months, in NSW it’s six. Queensland is similar to Victoria, but the other states have more complex requirements (South Australia is particularly difficult).

However, in even in the states in which it is possible, how you stop making the payments is a tricky process. There are some issues you need to consider:

  • The cost of termination on your premium. After a certain time injuries become less premium sensitive, so there is less downside, premium wise, in termination. Termination earlier requires, among other things, a balancing of production loss and casualisation (people you employ to fill the role) against premium cost.
  • Have you performed a qualified assessment that identifies the employee is not fit for pre-injury duties? Does the employee agree?
  • Does your insurer support your decision?
  • Is the impairment so slight that with some modification, the employee can do his or her pre-injury duties?
  • Are there suitable alternative duties that the employee could undertake?
  • What are the risks of continued employment? Has the employee made sequential claims in the past? What future premium risk arises?
  • Is the employee a valuable employee?
  • Is the union strong?

Why must you answer these questions?

Because as a business you must choose a path that is seen to be fair, predictable, financially sensible and defensible.

If the employee has only a minor impairment, and with a modification of the environment is skilled and capable of carrying out his or her pre-injury duties, it would be both foolish in business terms and fatal at law to terminate employment.

However, if that is not the case and you carefully plan the process, and have objective evidence demonstrating the nature of the injury and prudently follow that process, it is likely that termination will be defensible.

It will also shed light on the new direction of the business. Oddly, such changes in direction, which involve greater vigilance of workers compensation, lead to a reduction in premium, less claims, greater productivity and ultimately a growth in profitability and quality.

Therefore the true cost of the termination is not the hit on premium. It is the ultimate cost saving achieved and the improvement in the business culture.


Andrew Douglas is the director of Douglas Workplace and Litigation Lawyers



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