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Small Business Workers' Compensation 101

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One of the things many small businesses forget to include is worker's compensation. They are usually content with basic insurance set up, which is a grave mistake. Namely, workers compensation boils down to giving an employee a small pay-out in case they are injured at the workplace. With no workers compensation, you may face a serious and career-ending lawsuit. More detail below.

What is the worker’s compensation?

Worker’s compensation is a type of insurance that will give out a certain amount of money to the employee if he or she ever gets injured on the job. So in this sense, it is similar to standard insurance. However, there are some important differences. Namely. With workers comp, an employee will be able to pay their medical bills, and just in general get a greater amount of money. On the other hand, with weak insurance, they may just end up suing you, so they can actually get their healthcare in order.

The last thing you need when an injury occurs is to get sued. Not only did you lose a valuable employee, and in turn lose profits and productivity, but you will also have a legal battle to contend with. And not to mention if this happens to multiple workers. How much will their total rehabilitation cost?


There are four key benefits and features of workers compensation, that we mentioned briefly above.

First of all, the employer will bear the direct cost of these compensations. However, he or she will be protected against any lawsuits that may arise. That brings us to the next feature. Namely, a worker, by accepting worker's compensation, waives his right to take any and all legal action (relevant to the situation) against the employer. Furthermore, any negligence or fault from either side will not be considered when the employee is being paid out. Finally, this whole procedure will not be run by either the company nor the employee. Instead, it will be overseen by a neutral agent who will have full control and jurisdiction over the whole thing.

It should be noted, though this isn’t much of a benefit as it is a warning, that often governments will fine companies that don’t offer workers compensation. Of course, this varies quite often.

What are worker’s comp requirements?

In order to set up workers comp, you (the employer) will need to first of all register with the appropriate worker compensation agency. This agency is completely neutral, as we've already mentioned, and will oversee the whole proceeding. You will have a responsibility, as an employer, to prevent illnesses and injuries to your employees that may arise at the workplace. You will also need to pay out certain premiums to your regions neutral agency in order to set things up. Furthermore, know that most of the time, no matter where you are stationed at, the laws and regulations may differ from region to region. In other words, rarely is there a centralized federal way you can implement workers compensation.

Know that the cost of the premiums you need to pay in depend on the category of your business. It essentially boils down to how dangerous the work you do is. For example, premiums for a construction company will be much higher than for a tech start-up.

What do pay-outs and limits look like?

By getting proper workers compensation NSW citizens are covered however there are still limits and variances. You do set up a preventive measure that is in the best interest for you and for your employees. Though note, however, that workers compensation can cover both physical and psychological trauma. So it includes anything from lung cancer due to fumes an employee inhaled, back injuries due to falls, but it can also include post-traumatic stress disorder and anxiety.

These benefits can be set up as weekly payments, a lump sum, or something that directly covers all medical and rehabilitation dues up front.

Next, even though an employee waives his right to initiate a legal proceeding, and even though negligence is also waved, there are still some situations where you can end up being sued. Namely, there are a couple of things that need to be set up first. The employer owes “duty of care” to the employee at the time of the accident. In other words, you promise and facilitate the safety of your employee. Then, you did not fulfill this duty of care. If the injury was caused by this breach, then you pretty much might have a lawsuit on your hands.


Workers compensation is a useful benefit to have at your disposal. It protects both you, and the employee, and will, with certain limitation, leave you both feeling satisfied. Remember to review local laws and legislation, keep the relevant limits and requirements in mind, and you are good to go.


DanielBrown Daniel Brown is a law graduate and a passionate blogger from Sydney. His areas of interest are alternative dispute resolution and its applicability in different fields of law, IP law and resolution of disputes arising from intellectual property infringement and commerce law.
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