Penalty Review

Different Schemes have different types of Legislative Penalties

In this article, we’ll look at the premium-side penalties in each legislative state.

WorkSafe Victoria

The objective of this guideline is to explain when WorkSafe will impose a penalty under section 444 of the Act, as well as to provide guidance on whether the penalty will be fully or partially remitted.

When an employer must modify their expected rate of remuneration, as well as the consequences of failing to do so. WorkSafe Victoria (WorkSafe) may provide an employer with a notice requiring them to give an estimate of the rateable remuneration they expect to pay for a premium period or a verified statement of rateable remuneration they actually paid for any premium period. WorkSafe uses this information to determine the employer’s premium under premium regulations. An employer who fails to comply with a notice or provides an inaccurate certified statement of rateable remuneration commits an offence under the Workplace Injury Rehabilitation and Compensation Act 2013 (“the Act”).

All businesses must keep an accurate estimate of their rateable remuneration for the current premium period, and certain employers will be asked to give amended estimates during the term. WorkSafe may impose a penalty on an employer in accordance with the clause. If the employer fails to meet this requirement, he or she will be subject to Section 444 of the Act. The applicable penalty rate is determined by WorkSafe having regard to the employer’s circumstances.

When is it necessary for an employer to revise their estimated remuneration?

In each of the following situations, an employer must update their estimate of rateable remuneration during a premium period:

What happens if an employer fails to adjust its estimated remuneration when it is required to do so?

Underestimation Penalty

WorkSafe will calculate an employer’s penalty according to the following formula:

• Penalty = the employer’s premium difference X the applicable penalty rate

Note: The employer’s premium difference is the difference between the premium that should have been payable by the employer for the premium period and the premium calculated using the employer’s incorrect certified statement of rateable remuneration for that period.

When an employer is accountable for the statutory penalty, it is the difference between the premium that the employer should have paid during the premium period and the premium calculated using the employer’s most recent estimate of rateable remuneration for that period. In appropriate situations, WorkSafe has the authority to lower the statutory penalty in whole or in part. The situations that would trigger that discretion, as well as the resulting “penalty rates” that would apply in those cases, are outlined in this guideline. Regardless of this guideline, each case must and will be evaluated on its own merit.

Underestimation of rateable remuneration carries a penalty. An employer who fails to comply with a notice or submits an inaccurate certified statement of rateable remuneration commits an offence under the Workplace Injury Rehabilitation and Compensation Act 2013 (“the Act”). If an employer fails to meet this obligation, WorkSafe may impose a penalty under section 444 of the Act.

What is the applicable penalty rate?

The rates of penalty that will apply to an employer’s premium difference are summarised in the table
below:

Note: WorkSafe will not apply a penalty to an employer if the penalty amounts to less than $100

Penalties will not Be imposed where employers can show reasonable care

Employers who can demonstrate that they handled their premium concerns with reasonable care will not face penalties. Employers must keep complete and accurate records, make active attempts to understand and comply with the law, seek expert advice on uncertain or difficult subjects, and be honest in their contacts with WorkSafe under the reasonable care standard. WorkSafe will evaluate a variety of elements in deciding whether or not an employer has exercised reasonable care, including the employer’s understanding of applicable legislation, commercial experience, availability to professional assistance, and fluency with the English language.

The following situations, whilst not exhaustive, may indicate that an employer or a representative of
the employer has taken reasonable care:

• the employer has maintained appropriate and proper recording systems;
• the employer has taken reasonable steps to be aware of his or her premium obligations and has become familiar with the relevant legislation so as not to overlook the legislative requirements;
• the employer has applied any relevant public rulings or guidelines in good faith;
• the employer has sought professional advice or private rulings for uncertain or complex matters
• where no public ruling applied, or his circumstances differed from those described in a public ruling or guideline;
• the employer has acted in good faith in applying any independent premium advice received;
• the employer has observed any private ruling received and has notified WorkSafe if there have been any changes in the information on which the ruling was formed;
• the employer has acted promptly to seek advice or provide information once made aware, from any source, that he or she might have premium liability;
• the employer has sought a formal decision from WorkSafe before relying on any legislative
• exemption or concession which requires WorkSafe to exercise its discretion or grant approval.

Circumstances beyond the employer’s control

The following are examples of situations beyond the control of the employer or someone acting on behalf of the employer who has made every reasonable attempt to mitigate the impact of these circumstances:

• Postal or delivery delays, but not where the employer could arrange for a different mode of delivery because the employer is aware of the possibility of a delay;

• fires, floods, or other natural disasters; key personnel not available due to sudden resignation, illness, or death;

• computer breakdowns, including third-party systems like Electronic Funds Transfer systems.

• key personnel not available due to sudden resignation, illness or death financial inability of the employer is not considered to be a circumstance beyond the employer’s control.

Voluntary Disclosure before a review of premium

Voluntary disclosure before a premium review is made before the start of the review. A voluntary disclosure must be in writing and contain enough information for WorkSafe to assess the nature and amount of the premium default, as well as the right premium to be paid.
The reduced penalty for a voluntary disclosure before the view is a concession to businesses who completely cooperate in submitting information to WorkSafe and thereby avoid the necessity for a formal review.

Victoria’s WorkSafe is the only state that enforces this penalty. You are subject to this underestimated penalty if your actual remuneration after 30 June is 20% more than your estimated remuneration before 30 June. You are considered a small employer if your annual salary is less than $200,000. You will not be subject to the penalty. You will be categorised as a medium to a large employer if your remuneration surpasses $200,000. It is recommended that you examine and amend your remuneration by the end of March each year to avoid the Underestimation Penalty.

More information on penalties can be found here.

Premium late payment penalty

The penalty describes an amount payable as a late payment penalty or interest in relation to an amount payable or payable as a premium or penalty under the Act, the Accident Compensation Act or the WorkCover Insurance Act. Late payment fees may be charged on the past-due premium and are compounded monthly on the outstanding balance at the end of each month. The interest rate applied to late payment of premiums will be calculated in accordance with section 454 of the Workplace Injury
Rehabilitation and Compensation Act 2013. It uses the average daily Reserve Bank Bills Rate for the month of May each year plus a 9% penalty and the rate is updated annually. Agents from WorkSafe will be in charge of collecting past-due premiums. Uncollected premiums might be referred to a third party for collection. The employer is responsible for any additional collection fees.

Penalties for providing an incorrect Certified Statement of Rateable Remuneration

If an employer provides an inaccurate certified statement of rateable remuneration, WorkSafe may impose a penalty under section 444 of the Workplace Injury Rehabilitation and Compensation Act 2013 (“the Act”), however, the amount of the penalty depends on how much the employer was at fault.

If an employer provides WorkSafe with an incorrect certified statement of rateable remuneration, the employer is responsible to pay –

• the difference between the premium that should have been paid by the employer for the premium or policy period and the premium calculated using the employer’s incorrect certified statement of rateable remuneration for that period; and

• a statutory penalty.

The same requirements and conditions as well as the same statutory penalty and applicable penalty rate apply to Underestimation Penalty.

Uninsured Penalty

Employers must register for WorkCover Insurance if they employ workers or contractors deemed to be workers and pay, or expect to pay, more than $7,500 in rateable remuneration each year, or if they employ apprentices or trainees.

Employers with new businesses have 60 days to register with WorkSafe. If you want an extension, you can request a Cover Note, which will allow you to register with WorkSafe for an additional 30 days. Injured workers in Victoria will still be covered because the state has a no-fault system. Regardless of whether their employer has a policy, workers are entitled to compensation in the case of a working accident or illness. Because WorkCover claims are backdated, WorkSafe can backdate the coverage to the allowable maximum period of 5 years.

WorkSafe may impose a penalty on the employer for failing to register under section 452 of the Workplace Injury Rehabilitation and Compensation Act 2013 (“the Act”), and the employer may be responsible for the entire cost of any claims under section 34 of the Act. Furthermore, an employer who fails to register for and keep in force insurance when required to do so commits an offence under section 434 of the Act.

If an employer fails to register for WorkSafe Insurance when they are required to do so, they
will be –

• required to pay a premium in relation to that period. All premiums payable by employers for their WorkCover Insurance are calculated in accordance with the applicable Premiums Order; and

• liable to pay a statutory penalty.

An uninsured Penalty has the same requirements and conditions as Underestimation Penalty, as well as the same statutory penalty and relevant penalty rate.

Penalties for a failure to provide full and true disclosure

Employers who fail to give complete and truthful information to the VWA in respect of matters relevant to premium calculation may face WorkSafe sanctions. Persons who deliberately make false or misleading information or omissions in any document given to WorkSafe to compute or collect the premium owed by the employer commit an offence under the Workplace Injury Rehabilitation and Compensation Act 2013 (“the Act”).

Full and true disclosure means that the employer or their representative has provided accurate, valid, and relevant information within the established timeframes, and has not acted in any way to deceive, mislead, or obstruct the correct determination of the employer’s premium based on their experience and knowledge of the relevant aspects of the premium calculation.

If an employer fails to provide full and true disclosure, then the employer is liable to pay –

• the difference between the premium that should have been payable by the employer for the policy period and the premium for that period that was miscalculated owing to a failure to provide full and true disclosure; and

• a statutory penalty

The statutory penalty is equal to the difference between the premium that should have been paid by the employer for the policy or premium period and the premium that was calculated incorrectly due to a failure to make complete and true disclosure for that period. The penalty will be increased by 20% when a review is hindered by an employer or their representative.

Penalties For A Failure To Provide Full And True Disclosure has the same requirements and conditions as Underestimation Penalty, as well as the same statutory penalty and relevant penalty rate.

Premium Avoidance Schemes

Employers who participate in premium avoidance schemes may face penalties under section 457 of the Workplace Injury Rehabilitation and Compensation Act 2013 (“the Act”). In addition to the penalties listed above –

• it is an offence under the Act if persons knowingly make false or misleading statements or omissions in any document given to WorkSafe for the purposes of calculating or collecting the premium payable by the employer; and

• under the Act, if an employer is liable to pay a premium penalty and that liability has arisen owing to the negligence of a premium adviser, the premium adviser is liable to pay to the employer the amount of the penalty. However, this does not exonerate an employer from their liability under the Act to pay the penalty.

WorkCover Queensland

WorkCover Queensland has Authorised Persons who can conduct administrative compliance actions to identify and penalise employers who do not have appropriate workers’ compensation insurance.

Uninsured Penalty

WorkCover Queensland is a self-funded, government-owned scheme. WorkCover can recover unpaid premiums as well as a penalty equal to 100 per cent of the unpaid premium for employers who are uninsured or underinsured. Also, if WorkCover provided compensation or damages for a worker’s accident while the employer was uninsured or underinsured, WorkCover can collect the amount of the payment plus a penalty equivalent to 50% of the payment. Workers’ Compensation Regulatory Services (WCRS) can also report uninsured and underinsured employers to WorkCover Qld for investigation and possible prosecution.

Employers failing to hold insurance in the Queensland Workers’ Compensation Scheme

Employers who fail to meet their workers’ compensation duties are in violation of the Workers’ Compensation and Rehabilitation Act 2003 (the Act). After hiring workers, an employer has five days to get a policy and pay the premium. Individuals who do not have workers’ compensation insurance face a maximum penalty of 275 penalty units (currently $37,908.75). The maximum penalty for a business is five times the maximum penalty for an individual, making the maximum penalty for a corporation $189,543.75.

WorkCover may seek payment of the outstanding premium as well as a penalty equal to 100 per cent of the unpaid premium from the employer.

If WorkCover has paid compensation or damages for a worker’s injury while the employer is uninsured, WorkCover may be able to reclaim the amount of compensation provided, as well as a penalty of 50% of the amount paid. If the case is referred to the Worker’s Compensation Regulatory Services (WCRS) for enquiry and it is determined that there is sufficient evidence of failure to insure, WorkCover may support a prosecution recommendation to WCRS. The Workers’ Compensation Regulator is in charge of investigating and bringing charges against anyone who is accused of violating the Workers’ Compensation and Rehabilitation Act 2003. (the Act). Further reading on the prosecution

Premium late payment penalty

Your insurance coverage may be impacted if you pay your premium late. You’ll not only be charged a late payment penalty, but you’ll also lose your insurance coverage until your payments are current (including penalty fees). You’ll be responsible for any fees and costs incurred by one of your workers if you are not covered. The late payment fee is calculated at an interest rate and is adjusted annually.

New South Wales – icare Workers Insurance

icare Workers Insurance is the nominal insurer in NSW and is governed by the State Insurance Regulatory Authority (or SIRA). SIRA is “The Authority” and is constituted under the State Insurance and Care Governance Act 2015. The penalty notices will be issued under s155 of the Workers Compensation Act 1987. SIRA will also seek recovery on unpaid premiums under s156 of the Workers Compensation Act 1987. Note, that SIRA’s role is to identify and collect evidence to prosecute a case, but it is the courts that determine the penalty outcomes of a prosecution.

Employers that are not insured are liable for any medical and rehabilitation costs for injured employees. Company directors can be held personally liable for these costs. This could be in the tens of thousands of dollars depending upon the type of injury.

Uninsured Penalty

Due to the fact that icare does not backdate policies, there is no Uninsured Penalty for late registration in NSW. If a claim is filed prior to the policy’s start date, it will be classified as an Uninsured Claim. This is referred to as an “Uninsured Employer,” which is defined as an employer who does not have a policy in place to cover their liability under the Workers Compensation Acts at the time of the incident.

The “Uninsured Liability Indemnity Scheme,” a government safety net, will continue to cover injured workers. The scheme aims to recoup expenses from an uninsured employer or relevant directors. Any medical and rehabilitation expenditures are the responsibility of the employer. Fines and penalties may be imposed, and uninsured employers may be asked to pay back premiums they owe as well as face penalties. The penalty might be up to three times the amount of the delinquent premium.

Premium late payment penalty

Premiums that are past due may be subject to late payment penalties. These are calculated with a rate of 1.20% (at the time of printing) and compounded monthly based on the outstanding balance at the end of each month. The State Insurance Regulatory Authority (SIRA) set the rate. Overdue premiums will be collected on behalf of icare by the third-party premium collection service providers listed below.

Premium Collection Service Providers include:

• Revenue NSW, the state’s revenue management agency (icare’s primary collections provider from 1 September 2020).

icares approved Legal Debt Recovery Services Panel members (effective from 1 January 2022):

• Craddock Murray Neumann
• Hall & Wilcox
• Turks Legal
• Woods & Day Pty Ltd.

Giving false information for premium calculation

When providing information to an insurer for the purpose of calculating the premium payable under a policy of insurance issued, renewed, or to be issued or renewed by the insurer (whether or not the information is provided pursuant to a requirement of this Act or the regulations), a person must not provide information that the person knows is false or misleading in a material.

Maximum penalty—50 penalty units (at the time of printing)

Records relating to wages, contracts etc. to be kept and supplied

An employer must keep accurate records of all wages paid to employees, as well as the trade, occupation, or calling of each employee, and any other information relating to those wages (or otherwise relevant to the calculation of premiums payable under insurance policies) as the regulations may require. Any such record must be kept in good order and condition for at least 5 years after the last entry in the record was made.

Maximum penalty—500 penalty units (at the time of printing)

Liability of “principal contractor” for unpaid premiums payable by “subcontractor”

This applies to a person (the principal contractor) who has signed a contract for work to be done by someone else (the subcontractor). The work is carried out by employees of that subcontractor (the relevant workers), and it is carried out in conjunction with a business undertaking of the principal contractor and is work that is a part of that business undertaking’s work. Unless the principal contractor has a written statement given by the subcontractor under this section for that period of the contract, the principal contractor is liable for payment of any workers’ compensation insurance premiums payable by the subcontractor in respect of the work done in connection with the contract during that period of the contract.

A subcontractor who gives the principal contractor a written statement knowing it to be false is guilty of an offence.

Maximum penalty—100 penalty units (at the time of printing)

Grouping of employers for insurance purposes

icare Workers Insurance is to keep a register of employers who are members of a group. An employer must notify the icare if the employer becomes a member of a group to which this Division applies. The notification is to be made within 14 days of the employer becoming aware, or of the date, the employer ought reasonably to have become aware through the exercise of due diligence, that the employer is a member of a group to which this Division applies. The notification is to be made to icare in a form and manner approved by icare. icare Workers Insurance may remove an employer from the register if it is satisfied that the employer has ceased to be an employer that is a member of a group to which this Division applies. If a change occurs in the information provided to icare in a notification, the employer must, within 14 days, notify icare of that change.

The members of a group where the total wages paid to workers employed by the members of the group exceed $750,000 per year must be grouped.

The policy of insurance that an employer who is a member of a group obtains and maintains in force for the purposes of compliance with section 155 (a workers compensation insurance policy) must—

• be obtained from or through the same scheme agent that provides workers’ compensation insurance policies to the other members of the group, and

• have the same renewal date as those other policies.

An employer who contravenes is guilty of an offence.

Maximum penalty—500 penalty units (at the time of printing)

Inspection of records of employers

icare Workers Insurance may give an employer written instructions to make particular records in the employer’s possession that are relevant to any of the following available for inspection by a designated person permitted by icare at the time and place specified in the direction:

• the determination of whether the employer is a member of a group,

• the identity of other members of a group of which the employer is a member.

• a person authorised to inspect records in accordance with the terms of the direction and make copies of, or take extracts from, those records.

• an employer is given a direction under this section—
  • must comply with the direction, and
  • must not wilfully obstruct or delay an authorised person when exercising their power under the act.

Fail to adhere is an offence:

Maximum penalty—100 penalty units (at the time of printing)

Floored Capping penalty

On June 30, 2018, the State Insurance Regulatory Authority (SIRA) added premium capping to the Market Practice and Premium Guidelines as a new rule. (MPPGs). Under this new clause in the MPPGs, insurers must ensure that an employer’s premium rate does not increase by more than 30% from the previous policy year due to the employer’s own claims experience or changes to an insurer’s pricing methodology. SIRA also implements “floored capping,” which limits an employer’s premium rate decline from the preceding policy year by more than 30% due to the employer’s own claims experience. Because the premium is floored capped, you will be penalised and would have to pay an extra 30% on top of your premium.

Only experience-rated insurance is subject to capping. It does not apply to plans under the Loss Prevention and Recovery model, which calculates premiums using a separate approach based on claims costs rather than wages. The crucial point to remember about premium capping is that it can only be used when an employer’s claims expenses have changed, as an employer’s own claims performance is the only factor that can significantly affect their premium rate.

Premium capping does not apply if an employer’s earnings vary, for example, when their business grows, or if the employer’s risk changes, as measured by their Workers Compensation Industry Classification (WIC) rate.

South Australia – RTWSA

ReturnToWorkSA (RTWSA) is the state insurer operating under The Return to Work Act 2014. You must register for work injury insurance cover within 14 days of employment. You may apply for coverage prior to employing workers.

Failure to register

In addition to any other penalties, an employer who fails to register as required under this Act may be fined by the RTWSA up to 3 times the amount of premium that would have been payable under this Act if the employer had registered as required.

Premium late payment penalty

If any premium payment is not paid by the due date, RTWSA may impose a late payment penalty interest/fine. For any term indicated by the RTWSA premium provisions or an RTWSA premium order that applies to the employer, the employer will be required to pay a premium or premiums in accordance with the requirements of this Act.

If an employer fails to make a statutory payment as and when required by or under this Act, the amount in arrears will be increased by penalty interest at the prescribed rate unless the Corporation determines otherwise, and the Corporation may impose on the employer a fine of an amount (not exceeding 3 times the amount assessed) fixed by RTWSA (unless a fine has been imposed under section 154(3) on account of a failure to make a statutory payment).

Liability to keep accounts

To comply with the requirements of this Part, an employer must keep an accurate account of all remuneration given or payable to the employer’s employees, as well as any additional information the RTWSA may request. Failure to comply is an offence.

Maximum penalty: $10,000 (at the time of printing)

Fail to produce or alter a Certificate of Currency

An employer who is registered under this Act shall present a current certificate of registration for examination by a person permitted such as a WorkCover Inspector within 5 business days of receiving the request.

Maximum penalty: $1 000 (at the time of printing)

Employers who fraudulently alter a certificate of registration issued under this section are guilty of an offence.

Maximum penalty: $25,000 (at the time of printing)

The employer shall notify the RTWSA within 5 business days of the certificate’s issuance if the certificate contains an error in respect to the employer’s information.

Maximum penalty: $5,000 (at the time of printing)

Western Australia | Tasmania | Northern Territory | Australian Capital City