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30.1.2 Client has been incapacitated for a cumulative period exceeding 45 weeks
Note: The following guidance relates to S19 as amended from April 2002. Delegates engaged in paying incapacity for a period prior to that date should therefore read the following summary in conjunction with the discussion at 31.3.
The method of calculating weekly payments under S19(2) – i.e. the formula (NWE-AE) discussed at 30.1.1 above – extends only for the first 45 weeks of incapacity:
- actually expressed by 19(2) as '45 times the employee's normal weekly hours'
Note: The 45 weeks is a cumulative total, and not necessarily one derived from a continuous period of incapacity. It is common for clients with chronic illnesses to suffer incapacity for work in a sporadic fashion, for example with the client off work for only days or a few weeks at a time or perhaps in longer but still discontinuous 'episodes', with this pattern persisting over a long period.
Delegates must diligently monitor the cumulative total period of 19(2) payments to ensure that the transition to S19(3) entitlement is made accurately, i.e. without any overpayment.
Subsection.19(3) provides that after 45 weeks of incapacity the S19(2) compensation entitlement is to be varied downwards to a level between 75% and 100% of that otherwise payable. The actual percentage of the pre-45 week entitlement previously payable, depends upon the hours per week that the client actually worked.
Subsection.19(3) in fact provides the following formula for post-45 week entitlements:
(adjustment percentage x NWE) – AE
Adjustment percentage is a percentage equal to:
a)if the employee is not employed during that week – 75%, or
b)if the employee is employed for 25% or less of his or her normal weekly hours for that week – 80%, or
c)if the employee is employed for more than 25% but not more than 50% of his or her normal weekly hours during that week – 85%, or
d)if the employee is employed for more than 50% but not more than 75% of his or her normal weekly hours during that week – 90%, or
e)if the employee is employed for more than 75% but less than 100% of his or her normal weekly hours during that week – 95%, or
f)if the employee is employed for 100% of his or her normal weekly hours during that week – 100%.
Thus, upon the expiration of 45 weeks of proven incapacity, the entitlement of a person who is not working at all (0% of normal weekly hours) because of the injury, reduces to 75% of that formerly payable under S19(2). However the entitlement of a person who, for example, is able to work 75% of his normal weekly hours will amount to 95% of his S19(2) calculation.
Note that incapacity payments, being income replacement and not a veteran's pension, is taxable at the tax rate indicated on the clients Tax Declaration form prior to payment to the client.
- The tax situation of reservists, for whom the reserves earnings portion only of their NWE is not taxable, is discussed at 31.2.3.
Subsections 19(2B), (2C) and (2D) of the SRCA are merely very detailed provisions relating to compensation in the balance of that week in which the period '45 times the employee's weekly hours' finally terminates, i.e. these subsections deal with the transition between the pre-and post 45-week periods. Nevertheless the practical result differs little or not at all from that which prevailed prior to 1 April 2002 and the complexities of 19(2B)–(2D) are handled by the existing rules in the Defcare Incapacity Calculator.