WorkCover payments can be complex: be careful of the pitfalls when doing the right thing

Karthik Prabhakar. Associate Director, Forensic
Karthik Prabhakar. Associate Director, Forensic
Martin Dougall, Partner in Charge, Forensic
Martin Dougall, Partner in Charge, Forensic

The Workplace Injury Rehabilitation and Compensation Act 2013 operates with a big heart, with generous income protection provisions for employees when, due to a workplace injury, they lose their capacity to work.

But there is an inherent complexity in calculating the correct remuneration.

Our forensic team has recently been engaged, as independent experts, to investigate and quantify the correct WorkCover payments in disputes between employee and employer. Indeed, the payment of WorkCover compensation has become a contentious issue between employer and employees often involving significant outstanding short-payment plus interest and penalties.

The issues often arise due to incorrect interpretation of the legislation.

There appears to be three commonly encountered issues.

Calculation of employee’s wage under the WorkCover legislation

Many employers choose to pay 100 percent of an employee’s wage in the first 13 weeks with the good intention of not wanting to disadvantage the employee or to comply with Enterprise Bargaining Agreement (EBA) requirements. However, an employee’s wage, under the legislation, is the average of the 52-weeks earnings prior to the injury date and includes overtime and other allowances typically not considered as part of a normal wage. Hence, 95 percent of an employee’s wage under the legislation often tends to be higher than the employee’s normal wage. So even while the employer is paying at 100 percent, the amount paid may, in fact, be lower than what is legally due.

Treatment of Annual leave

When an employee takes annual leave whilst on WorkCover, the employer pays for either annual leave or the WorkCover compensation. This is the case for a normal employee (without any injury) who takes leave and is paid the normal wage with a subsequent reduction in annual leave hours owing. However, under WorkCover legislative interpretations as they currently stand the affected employee will be entitled to both sums.

Return to work 

When an employee returns to work after the 13th week for a few days a week or on modified duties, there is an entitlement to 80 percent of wages plus an incentive. Employers in some instances chose to pay 100 percent, primarily due to EBA requirements, and believe this is higher than the legislated amount. However, although the employer’s rationale may seem correct, the incentive amount will often push the legislated amount higher than the employee’s normal wage resulting in a short payment.

There are other matters of ambiguity including the type of allowances and pay-types that form a part of an employee’s wage under the legislation, treatment of other leave such as sick leave and other paid leave.

Calculation of WorkCover compensation is far more complex than often anticipated with the potential of becoming a contentious issue with an employee at a time when they may be vulnerable. In calculating WorkCover payments, employers need to clearly understand the Act and take care to avoid drawn out negotiations and remediation payments.

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