Comparison of Workers’ Compensation Arrangements in Australia and New Zealand (2012)

Chapter 4 - Benefits

Once it is established that an injured worker is entitled to workers’ compensation, the next step is to determine the type and amount of benefits the worker is entitled to receive. The benefits an injured worker receives should assist them financially whilst they are recovering from their injury, as well as helping them return to their pre-injury employment in a timely, safe and durable manner through rehabilitation and other necessary support. The types of benefits that an injured worker may receive include:

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  income replacement payments
  
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  costs of medical and hospital treatment
  
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  permanent impairment entitlements
  
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  death entitlements, and
  
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  other benefits.
  

Income replacement

Income replacement payments (generally known as weekly payments) are periodic payments that are usually calculated on the basis of the worker’s pre-injury earnings.

While income replacement payments aim to substitute fairly the lost earnings of an injured worker, there are limits to entitlements depending on the degree of incapacity. Income replacement payments are ‘stepped down’ by a percentage or to a set amount for workers who cannot earn an income because of a work related injury.

All jurisdictions index income replacement amounts notionally to keep pace with increases in average incomes, although the amounts and timing of indexation vary.

An injured worker may elect to receive a one off lump sum payment, which replaces the workers ongoing weekly income replacement payments. This type of payment needs to be agreed by the injured worker and the insurer, and can be referred to as settlement, redemption or commutation payment. There may be criteria that need to be met in order for an injured worker to receive a lump sum settlement payout. If an injured worker elects to receive a lump sum payment, the insurer’s liability and weekly income replacement benefits cease, but in some jurisdictions this payment does not affect medical and like expenses.

Income replacement arrangements differ across all of the workers’ compensation jurisdictions. Table 4.1 shows the income replacement arrangements in each jurisdiction.

Medical, hospital and other costs

Payment of medical and hospital costs assist workers in their recovery from injury by providing necessary rehabilitation and medical services. Most workplace injuries will require some form of medical assistance and there are instances where the worker requires hospital admission due to the severity of the injury. Workers’ compensation schemes cover medical, hospital and allied health expenses. In some cases payments are also made for other services such as home help, attendant care and vehicle or home modifications.Table 4.2 outlines medical, hospital and other costs by jurisdiction.

Permanent impairment payments

In most cases injured workers make a full recovery from their injury, but there are instances where an injury sustained to a worker is permanent. In these situations, an injured worker may be entitled to permanent impairment benefits, which are awarded in addition to income replacement payments. Permanent impairment payments are a lump sum payment for each impairment sustained to cover non-economic loss. Table 4.3 shows permanent impairment payments in each jurisdiction.

Death entitlements

In the event that a workplace injury results in death, all jurisdictions provide access to death entitlements. A spouse or dependent of a worker who died in a work related incident may be entitled to certain payments, which can assist the family with funeral costs and ongoing living expenses. The amount and type of damages accessible vary between jurisdictions. Table 4.4 outlines death entitlements in each jurisdiction. Table 4.5 outlines the treatment of spouse and dependants for death entitlements.

Common Law Access

Before the introduction of statutory workers’ compensation schemes, injured workers had to sue their employers under common law to receive any benefits. Common law actions were far less restrictive than statutory schemes, and could have potentially provided injured workers with larger benefits. If an injured worker had a cause of action, they were entitled to bring such an action and were entitled to a wide variety of damages, and there were no caps placed on the amount of damages they could receive. Each case was decided on its individual merits and there was no guarantee of success, unlike statutory entitlements that are fixed in law.

However, with the introduction of statutory ‘no-fault’ workers’ compensation schemes, and with the benefit of reducing costs for all parties involved, access to common law has been significantly restricted.

Some jurisdictions have:

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  abolished the right to access common law, or
  
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  introduced threshold tests, and/or
  
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  placed restrictions on types of damages that an injured worker can receive, and/or
  
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  placed caps on the amount of damages that can be awarded.
  

Despite these restrictions, some injured workers still want to pursue common law. If an injured worker elects to pursue common law, they may have to reimburse their employer or the compensation authority for any statutory benefits paid out. Table 4.6 outlines the access to common law in each jurisdiction

Suspension and Cessation of benefits

Compensation and rehabilitation of injured workers imposes mutual obligations on insurers, employers and employees. Payments may be suspended or ceased if certain obligations are not met by the injured worker. Table 4.7 lists the provisions in legislation which may result in compensation being ceased or suspended until certain conditions are met.

Settlement of future incapacity benefits

Some jurisdictions provide for settlement of future incapacity payments entitlements to injured workers on the basis that certain criteria are met. These payments (often referred to as redemptions or commutations) are paid out as a settlement payment by the relevant Authority, which may include provisions that the injured worker can no longer claim benefits for their injury. Table 4.8 provides information on the settlement provisions in each jurisdiction.