Is superannuation paid on workers compensation payments in NSW?
Published on November 25, 2024 by Scott Dougall
Superannuation and workers compensation are two separate entitlements, but the question often arises whether superannuation contributions should continue to be made when an employee is receiving workers compensation payments. In New South Wales (NSW), the answer to this is not straightforward, and depends on various factors such as the nature of the worker’s employment agreement, the specific award they are covered under, and whether they are able to return to work in some capacity.
Superannuation and workers compensation – an overview
Under Australian law, employers are generally required to make superannuation contributions for their employees. This obligation is mandated by the Superannuation Guarantee (Administration) Act 1992 (Cth), which currently requires employers to contribute 11.5% of an employee’s ordinary time earnings (OTE) into their superannuation fund. These contributions are designed to help employees save for their retirement, and they are usually based on the wages the employee earns while working.
However, workers compensation is a separate legal framework. Workers compensation payments are designed to provide financial support to employees who have been injured or fallen ill due to their work. These payments typically cover lost wages, medical expenses, and rehabilitation costs. Workers compensation does not serve as a regular wage for work performed; instead, it replaces the income an employee would have received if they had not been injured or incapacitated.
Is superannuation paid on workers compensation payments in NSW?
In NSW, employers are generally not required to make superannuation contributions while an employee is receiving workers compensation payments. This is because workers compensation payments are not considered “ordinary time earnings” under the superannuation guarantee laws. The Australian Taxation Office (ATO) has made it clear that workers compensation payments are not considered a reward for services rendered by the employee, but are instead payments made in recognition of the employee’s inability to work due to injury or illness.
Since superannuation contributions are based on ordinary wages for work performed, workers compensation payments fall outside the scope of the Superannuation Guarantee. In simple terms, if you are unable to work due to an injury, your workers compensation payments are not treated as regular wages, and therefore do not attract superannuation contributions.
Exceptions to the rule
While superannuation is not typically paid during periods when an employee is fully reliant on workers compensation payments, there are exceptions. Some employees may be covered by a modern award or an enterprise agreement that specifically stipulates that superannuation contributions must continue to be paid while the employee is on workers compensation. Employers in these circumstances are legally bound to follow the terms of the applicable award or agreement, which may provide more generous conditions than the statutory minimum.
For example, if an employee’s modern award specifies that superannuation must continue to be paid while the employee is receiving workers compensation, then the employer must comply. Similarly, if an enterprise agreement (a collective agreement between the employer and its workers) contains a clause requiring ongoing superannuation contributions during a compensation period, the employer will be required to continue making super contributions during that time.
Partial capacity to work
Another important exception arises when an injured worker has returned to work with a partial capacity. If an employee is able to perform limited duties or work fewer hours while recovering from their injury, and their employer is paying them for these hours, then superannuation contributions must be made for the hours worked. In this situation, the employer is required to contribute to the worker’s superannuation based on the ordinary time earnings for the hours that the employee is actually working.
However, it is important to note that the superannuation guarantee only applies to the hours worked by the employee. Any top-up payments made by the workers compensation insurer to make up for lost wages will not attract superannuation contributions. The employer’s obligation to pay superannuation applies only to the wages paid for work performed, not the workers compensation payments.
Length of workers compensation payments and superannuation
In NSW, workers compensation payments are generally available for a maximum period of five years (260 weeks), unless the worker’s level of impairment is assessed at greater than 20%. Workers whose injuries result in a permanent impairment greater than 20% may be entitled to receive compensation payments until they reach retirement age. However, these extended payments do not change the rules around superannuation. Unless the worker has returned to work in some capacity, they are not entitled to superannuation contributions, regardless of how long they remain on workers compensation.
Summary
In summary, superannuation contributions are generally not payable on workers compensation payments in NSW, as these payments are not considered ordinary time earnings. The exceptions to this rule include circumstances where an employee is covered by a modern award or enterprise agreement that requires ongoing super contributions, or where an employee has returned to work on light duties with a partial capacity. In these situations, the employer must continue to pay superannuation based on the hours the employee is working.
It is important for injured workers to carefully review the terms of their employment agreements and seek legal advice if necessary, as they may be entitled to superannuation contributions under certain conditions. Understanding the nuances of workers compensation and superannuation entitlements can help injured workers navigate this complex area of law and ensure they receive the benefits they are entitled to.
Please note that this article does not constitute legal advice. If you are seeking professional advice on any legal matters, you can contact Carroll & O’Dea Lawyers on 1800 059 278 or via our Contact Page and one of our lawyers will be able to assist you
