One of the most common insurance questions tradies ask is also one of the most important: what’s the difference between public liability and workers comp, and do I need both?

The confusion is understandable. Both protect against injury. Both are often required by law. Both come up when someone gets hurt on a job site. But they cover completely different people, in completely different situations, and getting the distinction wrong can leave you personally liable for costs you assumed insurance would cover.

This guide explains the difference in plain terms, with state-by-state workers comp rules and the subcontractor grey area that catches more tradies than anything else.

The one-sentence distinction

Public liability covers injury or damage to third parties — clients, passers-by, neighbours, anyone who isn’t you or your employees.

Workers compensation covers injury or illness to your employees — the people who work for you.

That’s it. PL = other people. Workers comp = your workers. Different insured groups, different policies, different regulators. You can’t use one to cover the other.

What each policy actually covers

Public liability

Who it covers: third parties — your client, their family, their neighbours, visitors to the site, members of the public walking past, other trades working on the same site (who aren’t your employees).

What it covers: bodily injury and property damage caused by your work activities or negligence. Medical costs, rehabilitation, lost income, pain and suffering for the injured person. Repair or replacement costs for damaged property. Legal costs of defending the claim.

Who it doesn’t cover: you (the insured), your employees, your own property, your own tools, your own injuries.

Example: A client trips over your extension lead on their driveway, breaks their wrist, and can’t work for six weeks. Your PL covers their medical costs, lost income, and any settlement. That’s a third-party bodily injury claim.

Workers compensation

Who it covers: your employees — full-time, part-time, casual, apprentices, and in some cases, contractors deemed to be workers.

What it covers: work-related injuries and illnesses. Medical and hospital costs, rehabilitation, weekly payments while off work (usually a percentage of pre-injury earnings), lump sum compensation for permanent impairment, death benefits for dependants.

Who it doesn’t cover: you as a sole trader or partner (you’re not your own employee), independent contractors with their own ABN and insurance, members of the public, your clients.

Example: Your apprentice falls off a ladder on site, breaks their leg, and needs surgery and three months off work. Workers comp covers the medical costs and weekly payments while they recover. That’s an employee injury claim.

The overlap zone: when both could apply

Sometimes a single incident triggers both policies. If your employee injures a third party in the course of their work — say your apprentice drops a hammer from scaffolding and it hits a pedestrian — the pedestrian’s claim is against your PL (third-party injury). The apprentice’s claim (if they were also injured) is against workers comp. Two different claimants, two different policies, one incident.

If a subcontractor is injured on your site and they’re deemed to be your worker (rather than a genuine independent contractor), workers comp might apply. If they’re a genuine independent contractor, their own income protection or personal accident insurance should respond — but the distinction matters, and getting it wrong is expensive.

State-by-state workers comp rules

Workers compensation is state-based in Australia. Each state has its own scheme, its own regulator, and its own rules about who must be covered.

New South Wales — icare manages the workers compensation scheme. Employers must have a workers comp policy if they pay more than $7,500 in annual wages, or if they employ an apprentice or trainee (regardless of wages). Sole traders and partners in a partnership are generally not covered for themselves but can opt in.

Victoria — WorkSafe Victoria administers the scheme. All employers must register for workers comp. Sole traders and partners are not automatically covered but can apply for coverage. Working directors of a Pty Ltd may or may not be covered depending on circumstances.

Queensland — WorkCover Queensland is the sole provider. Employers must have cover if they pay more than $1,300 in annual wages (one of the lowest thresholds in Australia). Sole traders can take out accident insurance through WorkCover but it’s not workers comp in the traditional sense — it’s a separate personal injury product.

Western Australia — WorkCover WA administers the scheme. All employers must have a workers comp policy. Sole traders and partners are excluded unless they specifically apply for coverage.

South Australia — ReturnToWorkSA manages the scheme. Employers must register if they pay more than $12,236 in annual wages (2025-2026 threshold). Sole traders are not covered unless they apply for personal accident cover through the scheme.

Tasmania — WorkSafe Tasmania administers the scheme. All employers must have workers comp. Sole traders and partners are excluded unless they apply.

ACT and Northern Territory — Similar frameworks with their own regulators. All employers must hold workers comp. Sole traders are generally excluded.

The common thread: if you employ anyone, in any state, you need workers comp. Sole traders and partners need to arrange their own cover separately (income protection or personal accident), because workers comp doesn’t cover them by default.

The subcontractor grey area

This is where it gets messy. You engage a subcontractor — someone with their own ABN, their own tools, their own vehicle, working under their own direction. They’re an independent contractor, right? So workers comp doesn’t apply?

Not always.

Australian courts and workers comp tribunals look at the substance of the working relationship, not just the paperwork. If a subcontractor works exclusively for you, uses your materials, follows your directions on how to do the work, works your hours, and is paid an hourly rate regardless of project outcomes — they might be deemed a worker regardless of their ABN. And if they’re deemed a worker, you owe workers comp premiums on their payments, and workers comp covers them if they’re injured.

State revenue offices and workers comp regulators actively audit this. If they find contractors who should have been classified as workers, they can backdate premiums, impose penalties, and you’ll have no insurance coverage for past injuries.

The safest approach:

  • Engage subcontractors who genuinely run their own business (multiple clients, their own tools, their own insurances, quote per job not paid hourly)
  • Get a certificate of currency for their PL and their own income protection or workers comp
  • If you’re unsure about the classification, get advice from your accountant, your workers comp insurer, or a workplace relations lawyer
  • Don’t assume an ABN makes someone an independent contractor — it’s one factor among many

Sole traders: the comp gap

As a sole trader, you sit in the gap between PL and workers comp. PL protects you from third-party claims but does nothing when you’re injured. Workers comp doesn’t cover you because you’re not your own employee.

This gap is where personal accident and illness (PA&I) insurance or income protection comes in. It’s not workers comp, but it serves a similar function: weekly payments if you can’t work due to injury or illness.

We cover this thoroughly in our dedicated guides:

The short version: if you’re a sole trader without income protection or PA&I, and you get hurt, your income stops immediately. No workers comp. No employer sick pay. No safety net. This is the single biggest insurance gap for sole traders and the one that most regret not closing after an injury.

What happens when you get it wrong

No PL: a client gets injured on your site. They sue you personally. Legal costs, medical costs, compensation — all out of your pocket. Lose the case and you could lose your house. At a minimum, you lose your licence if PL was a condition of it.

No workers comp: an employee gets injured. You’re personally liable for their medical costs, weekly payments, and possibly a lump sum for permanent impairment. The state regulator prosecutes you for failing to hold compulsory insurance. Fines, backdated premiums, penalties. In some states, failure to hold workers comp is a criminal offence.

Wrongly classified subcontractor deemed a worker: the worker gets injured. Your workers comp insurer denies the claim because you didn’t pay premiums for them. You’re personally liable for the entire claim. The regulator audits you and finds more misclassified contractors. The financial hole gets deeper fast.

Getting the PL vs workers comp distinction right isn’t a paperwork exercise. It’s the difference between a claim being paid by insurance or you paying it personally.

Frequently asked questions

I’m a sole trader with no employees. Do I need workers comp?

Not for yourself. Workers comp covers employees, and you’re not your own employee. But you need income protection or personal accident insurance to cover yourself if you’re injured and can’t work. And if you ever bring on a helper — even for a day — workers comp kicks in.

Does workers comp cover me if I’m injured travelling between sites?

Generally yes. Injuries sustained while travelling for work purposes — between sites, to the hardware store for materials, to a client meeting — are usually covered by workers comp. The journey needs to be work-related, not a personal detour. Each state has its own case law on journey claims, but the principle is consistent.

If a subcontractor is injured on my site, does my PL or workers comp cover them?

Your PL covers third-party injury — but a subcontractor might not be a “third party” for PL purposes if the policy excludes contractors working for you. Check your PL wording. Your workers comp covers them only if they’re deemed your worker, which depends on the classification of the relationship. The subcontractor’s own income protection, personal accident, or workers comp (if they employ themselves through a company) should be the primary cover. This is why requiring subbies to carry their own insurance is standard practice.

Are apprentices covered by workers comp?

Yes, in every state. Employers must carry workers comp for apprentices. In many states, the workers comp requirement for apprentices kicks in regardless of the total wages paid — even if the apprentice is your only worker and total wages are below the threshold.

Can I be sued by an employee even if I have workers comp?

Workers comp is generally the exclusive remedy — an injured worker can’t sue their employer for a work injury in most circumstances. The workers comp system replaces the right to sue. There are exceptions: if the employer’s conduct was grossly negligent or intentional, or if the injury falls outside the workers comp scheme’s coverage. These exceptions are narrow. In practice, workers comp is a shield against employee lawsuits as well as a payment system.

Getting the right cover

Getting PL and workers comp right isn’t complicated, but it’s important. If you’re a sole trader, start with PL — it’s the policy that keeps you legal and hireable. If you employ anyone, workers comp is non-negotiable. If you’re somewhere in between (subcontracting, using helpers, trying to figure out the classification), talk to an insurer or broker who understands the trades.

You can compare public liability quotes for your specific trade through BizCover — get a quote and make sure you’re covered before you step onto the next site.

The information in this guide is general in nature and does not take into account your individual circumstances. Workers compensation rules vary by state and are subject to change. Subcontractor classification is a complex legal area — seek professional advice for your specific situation. Read the Product Disclosure Statement (PDS) before purchasing any insurance product.