Workers Compensation Guidelines

Best Practice Guidelines – Working Directors

These guidelines are for information and guidance only, and are not intended to take the place of legal advice or individual circumstances applying to each proposal for employers’ indemnity insurance.

Whilst insurers are obliged to provide cover as requested under the Workers’ Compensation and Rehabilitation Act, it is important that the employers and employees involved have no unreasonable or misinformed expectations of the cover provided under workers’ compensation policies issued by Approved Insurers in Western Australia.  It is important that if there is any doubt as to whether a Director is entitled to the benefits of the Act, legal advice is obtained for the individual circumstances.  Individual employers should not be misinformed or through failure of disclosure or ignorance anticipate coverage that is not legally or contractually to be provided by Insurers.

These guidelines are not to be relied upon in place of legal or statutory advice.

In considering the provision of cover for Working Directors, it is recommended that the following be considered:

1. A Working Director is not necessarily an employee of the company and may not be entitled to the benefits of the Workers’ Compensation and Rehabilitation Act.
2. Directors who have been entitled to the benefits of the Act may not be entitled if they are not declared as Working Directors in Schedule B or the attachment to a proposal or statement of salaries and wages for workers’ compensation policy.
3. A Director does not automatically become entitled to the benefits under the Act simply by being declared in Schedule B or by being included in statement of salaries or wages.  It should be noted that this applies to all workers who are not workers under the Act whether or not they are included on wages declarations, not just Working Directors
4. To be eligible for Act benefits a Working Director must be engaged by the company as a workers so defined in the Workers’ Compensation and Rehabilitation Act.
5. There are a number of indicators which may indicate, but not necessarily prove, a Working Director is a worker under the Act, and they are:

• the right of another officer of the company to control and direct the Working Director as to their duties, job description and outcome
• the Working Director is required to work regular hours
• if the company has the right to terminate the employment of the Working Director as an employee

• a written contract of employment between the company and the Director.  This contract may be a verbal one but any contract or arrangement which is not a genuine record of the employment relationship between the individual and the company is not likely to affect the decision as the whether the individual is a worker
• payment by the company of regular wages to the Director
• the deduction by the company of Pay As You Go tax from the earnings or wages of the Director but there are cases that directors receiving wages are not workers because they are not being directed in their work (they are the “boss”)
• Payment by the company of superannuation particularly if the payments are made at a rate equal to or greater than the statutory rate
• Completion by the company of a tax group certificate for the Director at the end of each financial year

These guidelines are not intended to take the place of legal advice and are recommendations as part of the disclosure to employers in order to minimise the potential for disputes arising from the provision of cover under the Workers’ Compensation and Rehabilitation Act for Working Directors.