GN 5.13 Indexation
Application: This guidance applies in part to exempt workers
Overview
The Workers Compensation Act 1987 (1987 Act) provides for indexation of workers compensation benefits. Indexation of certain amounts occurs on 1 April, 1 July and 1 October each year (see Part 3, Divisions 6 and 6A of the 1987 Act). Amounts are adjusted by reference to movements in the Wage Price Index, Consumer Price Index or Average Weekly Earnings survey published by the Australian Bureau of Statistics (ABS).
Increases in indexation amounts are declared by an Order published on the NSW legislation website and reproduced in SIRA’s Workers compensation benefits guide.
Indexation of weekly payments
As provided for by section 82A of the 1987 Act, on 1 April and 1 October each year a worker’s weekly payment is indexed using the formula:
A x B/C
Where A is the pre-injury average weekly earnings (PIAWE) amount, or the amount last varied by indexation, and
B/C is the indexation factor declared in the Workers Compensation (Indexation) Order published on the NSW legislation website.
The current B/C factor is also available in the latest Workers compensation benefits guide.
Rounding
Once indexed using A x B/C, the result is rounded in accordance with section 82D of the 1987 Act. If the result is less than $1,000, it is rounded to the nearest whole $1. If the result is greater than or equal to $1,000, the result is rounded to the nearest whole $10.
Workers not in receipt of weekly payments
If a worker was not in receipt of weekly payments over one or more indexation review dates, and later became entitled to weekly payments, it is necessary to go back to apply the indexation process for all missed review dates from the date the worker first became entitled to weekly payments for that injury.
Applying the ‘no reduction’ rule
Where the B/C factor has the effect of reducing PIAWE (or the amount last varied by indexation) on an indexation review date, section 82C(a) of the 1987 Act applies, which deems the variation to not have taken effect. Therefore, a worker’s PIAWE or amount last varied by indexation will remain the same.
Offset of a reduction in a previous year
Where this amount is varied and increased in respect of the next or subsequent financial year, section 82C(b) of the 1987 Act provides that only the amount which exceeds the reduction from a previous financial year can be applied.
Indexation of PIAWE between 1 October 2012 and 21 October 2019
For indexation review dates before 21 October 2019, an additional requirement in the now repealed section 82A(3) of the 1987 Act applies.
Section 82A(3) provides that indexation does not take effect if it increases the worker’s PIAWE to more than 100% of the worker’s current ordinary earnings had they not been injured.
To apply indexation in accordance with Part 3, Division 6A of the 1987 Act in force before 21 October 2019, the insurer requires
- the existing PIAWE amount, or the amount last varied by indexation
- the B/C indexation factor for the review date
- the current ordinary earnings the worker would be earning, had they not been injured (at the time indexation is being applied).
Indexation is applied at each review date as follows:
- Index as according to section 82A(1): multiply the PIAWE (or the amount so varied) by the current indexation factor
- Rounding: if the result in Step 1 is less than $1,000, then round the amount to the nearest whole $1. If the amount in Step 1 is greater than or equal to $1,000, the amount should be rounded to the nearest whole $10
- Additional step according to section 82A(3): compare this rounded figure to the current ordinary earnings (had the injury not occurred).
If the new rounded indexed PIAWE is greater than the current ordinary earnings figure, the indexation is not to take effect as it increases PIAWE to more than 100 per cent of current ordinary earnings.
If the new rounded indexed PIAWE is less than the current ordinary earnings figure, then indexation is to take effect.
Note: Workers with a date of injury before 26 October 2018 will have shift and overtime amounts removed from their PIAWE after 52 weeks of weekly payments. After this, it will be necessary to re-apply the indexation process to the ordinary earnings component of the PIAWE for each of the indexation points from the date of injury (excluding shift and overtime), to ensure the ordinary earnings component of PIAWE is brought up to date.
Workers injured before the introduction of the 2012 indexation provisions whose weekly payments are determined using PIAWE
Note: The following content applies to workers injured before 1 October 2012.
The decision of the NSW Court of Appeal in Theoret v Aces Incorporated [2021] NSWCA 3 found that a worker who was injured before 1 October 2012 has their PIAWE indexed from the first review date after the worker first became entitled to weekly payments for that injury.
The circumstances in which the issue arises:
- the worker was injured and suffered an incapacity such as to entitle the worker to receive weekly payments of compensation before 1 October 2012; and
- the worker was not an existing recipient (not in receipt of weekly payments immediately before 1 October 2012); and
- the worker later (after 1 October 2012) became entitled to weekly payments of compensation in respect of the injury.
A table of historical indexation factors is included in the Workers compensation benefits guide to assist insurers in calculating weekly payments entitlements up to 1 October 2012.
Other amounts subject to indexation
There are other worker entitlements which are subject to indexation. The Workers Compensation Act 1987 (the 1987 Act) specifies five separate indexation processes of different payments payable to injured workers or family members. Each process is required by a different section of the 1987 Act – sections 79/80, 82A, 82B, 82BA and 82F.
The adjustments are calculated using the relevant methodology and are based on a number of different measures published by the Australian Bureau of Statistics (ABS). The results of indexation are published in the Workers compensation benefits guide.
Indexation provision | Indexation review date | ABS measures |
---|---|---|
Sections 79/80 | 1 April, 1 October | Wage Price Index |
Sections 82A, 82BA | 1 April, 1 October | Consumer Price Index |
Section 82B | 1 July | Average Weekly Earnings |
Section 82F | 1 July | Consumer Price Index |
April and October indexation
Sections 79/80 adjusts the following adjustable amounts:
- Section 25(1)(a) and (b) – Death of worker leaving dependents
- Section 25(1)(a) (before the 2015 Amendment Act)
- Section 34(1) – Maximum weekly compensation amount
- Section 35(1) – Maximum weekly compensation amount (before the2012 Amendment Act)
- Section 37(1) – Weekly payment during total incapacity—after first 26 weeks (before the 2012 Amendment Act)
- Section 40(2A) – Weekly payment during partial incapacity—general (before the 2012 Amendment Act)
- Clause 2 of Part 3 of Schedule 6 – Provisions relating to compensation payable on death (under the former Workers Compensation Act 1926)
- Clauses 4(1), 4A(2) and 7(2)(a) of Part 4 of Schedule 6 – Provisions relating to weekly payments of compensation (under the former Act Workers Compensation Act 1926)
- Clause 2 of Part 19H of Schedule 6 – Transitional amount (this is a rate applying to workers who were receiving weekly payments before the 2012 reforms took effect)
- Section 297(2) of the Workplace Injury Management and Workers Compensation Act 1998 – Maximum medical expenses compensation payable under an interim payment direction
- Section 8(2B)(b) of the Workers Compensation (Dust Diseases) Act 1942 – Death of a worker leaving dependents
- Section 8(2)(a) of the Workers Compensation (Dust Diseases) Act 1942 – Maximum and minimum weekly payments for workers covered by the Dust Diseases Act
July indexation
- Section 82B adjusts the amount a worker, with current work capacity, must be earning in order to retain an entitlement to weekly ‘top up’ payments, as per sections 38(3)(b), 40(1)(d) and 41(5)(b).
- Section 82F adjusts the amounts prescribed under section 66(2)(a)-(h), which identify the amount of lump sum permanent impairment compensation to be paid to an injured worker. This was inserted into the 1987 Act as part of the 2015 reforms.
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