As a business owner, figuring out your insurance obligations can be confusing, especially when you’re working solo or with a small team. One question we hear often is: “Do I need workers compensation insurance if I work alone?” The short answer: It depends on your business structure, whether you have employees (including apprentices/trainees), and which state or territory you operate in.

I am a sole trader that has employees or uses subcontractors — do I need it?

If you decide to hire someone under your ABN, such as an employee, apprentice, or even a subcontractor who is legally classified as a “worker” under your state’s legislation, you may then be required to take out a workers compensation policy. This applies even if the person isn’t technically on your payroll, in many cases, certain contractors are deemed to be workers for the purpose of workers compensation, which means you could still be legally responsible for their cover.

What about a sole trader working alone — do I still need it?

If you’re operating completely on your own with no employees or deemed workers, you generally won’t need workers compensation for yourself. But that doesn’t mean you’re fully protected. As a sole trader, you’re still personally exposed if you suffer an injury or illness that prevents you from working. That’s why it’s essential to consider alternative insurance options, such as income protection, or public liability cover. These types of policies can provide financial protection and peace of mind, helping you stay afloat if something unexpected happens, even when you’re not legally required to have workers compensation.

Other Business Structures and Workers Compensation

While sole traders often wonder whether they need workers compensation, the answer can be different if your business operates under a Pty Ltd, partnership, or another structure. Each type of business entity carries its own responsibilities and legal obligations when it comes to insuring workers.

Pty Ltd Companies

If your business operates as a proprietary limited company (Pty Ltd), it is recognised as a separate legal entity. This means the company, not you personally, employs staff — even if you are the sole director or shareholder. In most states, once you or your company begin paying wages (including director payments under PAYG), workers compensation insurance becomes mandatory. This ensures that anyone working for the company, including directors, is covered if they are injured at work. You can read more about employer obligations in our article on Workers Compensation Insurance.

Partnerships

If your business is structured as a partnership, workers compensation may also apply depending on whether you employ staff. While partners themselves are not considered “workers” and can’t claim against the partnership, any employees hired by the partnership must be covered under a workers compensation policy. Additionally, some contractors may be considered “deemed workers,” which could create an obligation for coverage.

No matter your structure, the key rule remains: if anyone other than you is working in the business and earning income under your ABN, you likely need workers compensation.

Working Directors

If you’re a working director in a company or an active partner in a partnership, your workers compensation obligations — and entitlements — can get a little more complex. It all depends on how you’re paid, the nature of your role, and the laws in your state or territory.

Pty Ltd Companies – Working Directors

In a Pty Ltd company, directors are generally considered separate from the company itself. The company is the legal employer, even if you’re the only person running it.

If you’re a working director who draws a PAYG wage, you’re technically an employee of your own company. This means that in many states, you may need to be included in your company’s workers compensation policy. Some jurisdictions automatically include working directors under the company’s coverage, while others require them to be specifically nominated in the policy.

For example, in Queensland, directors are not automatically covered under workers compensation, they must opt in and request inclusion on the company’s policy. In New South Wales, directors who receive wages are typically required to be covered. Because these rules vary so much, it’s important to check with your state authority or consult a broker who can clarify your obligations.

Partnerships – Active Partners

In a partnership, the situation is different. Partners are considered joint owners of the business, not employees, which means partners themselves are not covered by workers compensation. However, if your partnership employs staff (such as administrative assistants, tradespeople, or apprentices), the partnership is legally required to hold a workers compensation policy to protect those employees.

Even though partners can’t usually insure themselves under workers compensation, they should still consider alternative personal cover, such as income protection, personal accident and illness insurance, or business expenses cover. These can provide similar financial protection if you’re injured or unable to work. You can learn more about suitable options for small business owners in our Sole Trader Insurance guide.

Why It Matters

Many working directors and partners assume that if they’re not hiring external employees, they don’t need any form of workers compensation but that’s not always true. Once you start paying yourself through your company or take on any staff, you could fall under the definition of an employer and become subject to mandatory coverage laws.

If you’re unsure whether you or your business structure requires a workers compensation policy, Morgan Insurance Brokers can help you navigate your obligations and find the right protection. Our team will review your setup, clarify state-based requirements, and ensure that both you and your workers are properly insured.

How Morgan Insurance Brokers can help

At Morgan Insurance Brokers, we explain that workers compensation insurance is mandatory for businesses that employ staff, but the specific requirements differ from state to state. Our team can guide you through these variations and help ensure your policy aligns with your local laws.

For sole traders, our Sole Trader Insurance article highlights that even if you’re self-employed, you may still need workers compensation if you hire employees or subcontractors who fall under the legal definition of “workers.” This is a common point of confusion for small operators, and it’s something we can help clarify.

If you’re running a small business or planning to hire your first employee, our blog on What Insurance Do I Need for My Small Business? outlines the key policies every business owner should consider, from workers compensation to public liability and professional indemnity.

We take the time to understand your industry, risks, and goals, then tailor an insurance program that fits your budget and provides the right level of cover.

So if you’re unsure about your workers compensation obligations, or simply want to make sure you’re properly protected, reaching out to Morgan Insurance Brokers is a smart next step. We’ll help you navigate state-based requirements, compare options, and secure the right insurance to protect your livelihood.