AU Payroll - WorkCover Maintenance

WorkCover is a scheme that provides employers with a type of insurance and manages a workers' compensation scheme for employees in Australia. It is administered by a different authority in each state of Australia.

WorkCover schemes are funded by premiums paid by employers. The premiums payable by an employer are based on a percentage of certain wage items paid to employees. The percentage is determined by the workplace industry classification (WorkCover) code that applies to an employer. Depending on the State, Industry and type of work employees carry out for an employer; multiple WorkCover codes and rates may apply to a given employer.

The WorkCover liability for each payee in a pay batch is calculated during the Wage Costs stage of the pay batch process. Before the system can calculate WorkCover liabilities as part of the pay batch process, the following must be configured:

• WorkCover codes and rates

• WorkCover state and pay code group links

• WorkCover state and office links

• WorkCover superannuation and salary sacrifice rules.

Each of these is described below.

WorkCover Codes and Rates

WorkCover premiums differ depending on the state or territory in which they are payable and the industry in which payees work. For example, industries in which there is a greater risk of injury to a payee generally attract a higher premium to industries in which there is a lower risk of injury and therefore a lower number of insurance claims. 

Individual industries in each state/territory of Australia have a WorkCover code that uniquely identifies the industry. Each WorkCover code has a different rate at which the WorkCover premium for that industry is calculated.

A WorkCover code is assigned to a job order prior to submitting the job order to timesheet. This allows the system to determine which industry the job order falls under and therefore the rate at which WorkCover liabilities are to be calculated for that job order. WorkCover codes are also used in WorkCover state and office links (see below).

WorkCover State and Pay Code Group Links

WorkCover premiums are calculated based on certain types of remuneration paid to payees. The remuneration that is rateable for the purposes of WorkCover differ between states/territories. To allow the system to calculate WorkCover, pay code groups must be configured to group the pay codes that contribute towards rateable remuneration for each state/territory. Each applicable pay code group must be linked to the relevant WorkCover state/territory to allow the system to determine which pay codes are rateable in each state/territory.

WorkCover State and Office Links

Generally, WorkCover premiums are payable based on the location where work was carried out by a payee. For example, a payee may be employed via an agency office that is located in Victoria but the payee may be placed in a job order that requires the payee to work at a client site that is located in New South Wales. In this case, the remuneration that this paid to the payee while working in the job order contributes towards the total remuneration that is rateable for WorkCover purposes in New South Wales.
However, a payee may receive remuneration that is not directly attributable to a job order. For example, manual pay items can be added to the payee's pay items during the pay batch process. In such cases, the system determines which agency office manages the payee and allocates any rateable remuneration earned by the payee, which cannot be attributed to a job order, to the WorkCover state of the relevant agency office and applies the relevant WorkCover rate as defined by the WorkCover code that is assigned to that agency office. Therefore, a WorkCover code can be assigned to agency offices to determine the relevant WorkCover rate when remuneration cannot be attributed to a job order.

WorkCover Superannuation & Salary Sacrifice Rules

The WorkCover authority in each state and territory stipulates rules regarding whether different superannuation contribution types and salary sacrificed earnings are counted towards remuneration that is rateable for the purposes of calculating WorkCover liabilities. To facilitate this, rules must be configured to determine if the following is included in remuneration that is rateable for WorkCover liability calculations on a per state/territory basis:

• salary sacrificed earnings (excluding earnings salary sacrificed into superannuation)

• superannuation contributions that contribute towards the superannuation guarantee (SG) 

• additional employer superannuation contributions that are above the legislated SG amount

• superannuation contributions resulting from a salary sacrifice arrangement.

The rules are subject to validity periods so that where the legislative requirements for a given state/territory are due to change at the start of an upcoming tax year, a new set of rules can be configured in advance and the system will apply the relevant rule set based on the payment date of a pay batch.