Many Australians find the idea of becoming a sole trader or an independent contractor appealing. You can enjoy better control over your time, be your own boss and determine the direction of your business.
However, being a sole trader or contractor means you are also at risk of injury, ill-health or accidents just like employees. Are you eligible for workers compensation? What are the options available to protect yourself in case of illness or injury?
What Is Workers Compensation?
Employers have to take out workers compensation to cover their employees for lost wages due to injuries or health issues. Workers compensation also helps pay for medical expenses, hospital bills and rehabilitation.
All businesses in Australia are legally required to have workers compensation insurance for:
- Full-time employees
- Part-time employees
- Casual workers
- Contractors and sub-contractors (under certain circumstances)
In some cases, the employee or worker may receive a lump-sum payment for permanent disability.
Contractors and Sub-Contractors
As a contractor, you will work with clients to provide materials, services or complete a job. Sub-contractors may work for contractors but are different from ’employees’ as they set their hours and wages. The most significant difference between contractors and sub-contractors is that subcontractors report to contractors and not directly to clients.
Many people believe that since a contractor is not an employee, the employer does have not an obligation to invest in workers compensation. However, this is not always the case.
The principal employers and the contractors may be responsible for workers compensation. An injured or sick worker may be able to claim compensation from the contractor or principal employer or both.
A contractor or sub-contractor may need workers compensation if they are considered as working for a client. For example, a bricklayer hired by a builder or painter hired by a decorator can be considered as workers and should be covered by workers compensation. The principal employer and the contractor are both liable to insure the subcontractor and his/her employees.
Are Sole Traders Entitled to Workers Compensation?
Sole traders own their businesses and do not have business partners. As a sole trader, you are not entitled to workers compensation (since you are not an employee). However, there are other solutions to protect yourself from sickness, injury and loss of revenue.
For example, you can invest in income protection insurance that can cover you for loss of income in case of ill-health or injury. Income protection insurance also covers employers for injuries incurred outside of work.
If you are registered as a working director, for example, then you may be entitled to workers compensation. But if you hire employees, it’s mandatory to take out workers compensation to cover them for injuries, medical expenses and loss of wages. Sole traders may also wish to consider taking out life insurance, trauma insurance or total and permanent disability insurance for added protection against unexpected problems.
If you’ve been injured during work, please contact Owen Hodge Lawyers on 1800 770 780 for expert guidance regarding workers compensation. We will help clarify your legal position as a contractor, subcontractor or sole trader. Our experienced lawyers specialise in helping victims of workplace injury pursue the benefits that they’re entitled to receive.