A higher rate of compensation for incapacity is automatically paid during the first 45 weeks of payment. Beyond 45 weeks the rate of compensation is dependent on the number of hours the person is working.
The DRCA and MRCA contain provisions for calculating the rate of payment, depending on whether the person has accumulated less or more than 45 weeks of incapacity payments due to their accepted condition/s. Essentially, a person receives payment at a rate equal to 100% of their NWE/NE (with reductions for earnings and Commonwealth-funded superannuation) for the first 45 weeks of payment (this is called a maximum rate compensation week (DRCA) or maximum rate week (MRCA)).
After 45 weeks in payment an adjustment percentage is applied to the NWE/NE between 75 and 100% depending on the amount of hours the person is in employment. Employment may be paid or part of a work trial via a rehabilitation plan.
Under the DRCA, any period of incapacity for which the person receives compensation contributes to the calculation of their first 45 weeks. This includes periods in service and after discharge.
Under the MRCA, only periods of incapacity for which the person receives compensation after the person has discharged from service contribute to the calculation of 45 weeks. The person must be considered a ‘former’ member (i.e. ceased to be a member) to start calculating the person’s 45 weeks.
The 45 weeks is a cumulative total, and not necessarily derived from a continuous period of incapacity. Periods that are less than a week contribute also to the total period of incapacity.
Under DRCA a person may have an entitlement to 45 maximum rate weeks for each injury, (e.g. where the incapacitating effect of one condition has resolved, and another condition subsequently causes incapacity). Generally, under MRCA a person only ever gets a total of 45 maximum rate weeks, irrespective of which injury causes their incapacity for work. However, in circumstances where a person has discharged from more than one period of ADF service (and becomes a 'former member' again), and the incapacity is due to a different injury, the person may have an entitlement to a further 45 maximum rate weeks period.
Section 19 (2A) [1] of the SRCA refers to a ‘maximum rate compensation week’ and section 129 [2] of the MRCA refers to a ‘maximum rate week’.
The definition of each is similar i.e. it is a week during which:
the person's incapacity prevents the person from working either his or her normal weekly hours, or working at the level he or she worked before the incapacity; and
the total number of hours in that week and all previous maximum rate weeks during which the person's incapacity has prevented him or her from so working does not exceed 45 times the person's normal weekly hours.
The amount of compensation that the Commonwealth is liable to pay for a maximum rate (compensation) week is: NE-AE
The Safety, Rehabilitation and Compensation and Other Legislation Amendment Act 2001 [3], which commenced on 1 April 2002, included amendments to section 19 that introduced new terminology and additional calculations for a part of a week and including an ‘adjustment percentage’.
The new provisions apply to all determinations made on or after 1 April 2002. The overall effect of the provisions was largely unchanged to the earlier legislation and policy.
The Military Compensation Act 1994 [4], which commenced on 7 April 1994, provided that clients continue to receive weekly compensation at 100% of normal weekly earnings for the first 45 weeks of incapacity, in respect of payments made under Ss20, 21 and 21A. This beneficial amendment applies only to clients who were discharged on or after 7 April 1994.
If a client was discharged before 7 April 1994, compensation paid under Ss20, 21 and 21A is reduced to 75% of NWE immediately upon discharge from the ADF, though the percentage of NWE may be higher if the person engages in suitable employment.
The calculation of a person’s maximum compensation weeks is only applicable once the person has discharged from all forms of ADF service. In some scenarios where a person may not be discharged, but is not actively serving i.e. standby Reservists or Cadets, section 10 [5] provides for Defence to specify a date from which a person is taken to have ceased to be a member for the purposes of MRCA, even though they may not have been formally discharged. The 45 week calculation commences from this specified date.
When a week should commence is not defined by either the SRCA or MRCA. A week should be considered to be:
'A period of seven consecutive days commencing on the first day the period of incapacity commences.'
Once the commencement of a week has been determined, the week should remain constant for that period of incapacity.
When a person is incapacitated for part of a week or their incapacity falls over a period of a whole week/s plus a part of a week i.e. a week and 1 day, then compensation is calculated using the following formula:
This formula has the effect of applying a pro-rata to the amount of compensation. Though we consider the person’s NWE/NE and AE in terms of a week the resultant compensation is only paid for the part of the week that they are incapacitated for i.e. 1/5 of a week.
This part week compensation formula is only applicable for finite periods of incapacity i.e. the person does not have an ongoing incapacity and does not receive an ongoing incapacity payment. This formula is not applicable if the person has an ongoing incapacity and receives an ongoing payment but has taken a day/s off due to their condition during that same period of incapacity.
The formula for compensation for a part week is contained in Section 196 [6] of the MRCA.
Although not legislated under the SRCA, the same formula is used to calculate compensation for part of a week. This method is in line with how compensation is calculated for a part of a week when calculating maximum rate compensation weeks under section 19(2)(C).
7.11.1.1Example:A former Permanent Forces member paid under the MRCA is prevented from working for one day due to a simple medical procedure (related to their accepted condition). The person does not have an ongoing incapacity and does not receive an ongoing incapacity payment. The person usually works 5 days per week earning $25 per hour or $200.00 per day i.e. 8 hours per day. They also receive an MSBS Superannuation pension equal to $408.30 per week. Normal Earnings: $1,265.00 Remuneration Amount: $158.16 Total = $1,423.16 Actual Earnings are: $800.00 (32.00 hours) As a former Permanent Forces member normal weekly hours (NWH) are 37.5 in accordance with subsection 132(2) [7]. The adjustment percentage is 95% as the person is still able to work 32 hours in the week. Compensation = 1/5 x ((95% of $1,423.16) - $408.30 - $800.00) = $28.74 |
A person may be compensated for a part-day, however usually the outcome in this scenario (compensation for just a few hours) is that the payment amount is very small or nil.
For example, where a person has taken 1.5 hours of a 7.5 hour day (0.2 of a day) to attend an appointment for treament, the calculation is as follows (assuming in this scenario, the maximum rate weeks period has expired and there is no superannuation pension);
NE = $2,000 per week
AE = $1850 per week
0.2 days/5 days x (95% of $2,000 - $1,850) = $50
0.2/5 x $50 = $2.00
Incapacity payments are based on NE - AE in a week, and it is not possible to aggregate a number of part-days over several weeks into one day to be compensated.
Whether a person is continuously incapacitated affects the calculation of the maximum rate (compensation) weeks. When a person is only incapacitated for part of a week, i.e. one day, then the person is not continuously incapacitated. Only that part of the week that they are incapacitated for is counted in the calculations of the maximum rate (compensation) weeks (the rate of entitlement though is based on a weekly figure and is calculated over a weekly period).
A continuous period of incapacity for work includes any period where the person has been or will receive incapacity and the person is:
If a person is working at a level equal to or greater than their pre-injury/incapacity level but only for part of their normal weekly hours for the week, they are not continuously incapacitated.
7.2.1.1 ExamplesExample 1 – Time off work due to medical appointmentA person takes time off (2 hours) from his civilian employment to visit his GP concerning the compensable condition. The 2 hours is counted towards 45 weeks. Example 2 – Full-time employment but not at the same levelA person may have capacity to engage in full-time employment after discharge but with less earning capacity than in their pre injury employment. A Sergeant with an annual salary of $45,000 in the Army is medically discharged because of an accepted injury. After participating in a rehabilitation program, the person is able to earn $35,000 in another occupation commensurate with his or her skills and physical limitations. The Sergeant is able to work full-time in the new job but because of the injury remains unable to work at the pre injury earning capacity, and receives weekly compensation. Although working full-time and not actually taking time off work, any period during which the person is receiving weekly compensation will count toward the 45 weeks. Example 3 – Graduated return to workA person is on a Graduated Return To Work plan, attending work 3 days per week. Each week the person is receiving incapacity payments counts as a full week toward the 45 weeks. |
The underlying principle is that each hour for which compensation is payable either in full i.e. when the person is not working or by way of a payment when a person is in employment (employment at the same level but less hours or in employment at a lower level) is counted towards the calculation of maximum rate compensation weeks.
In practice delegates would not be required to manually calculate maximum rate (compensation) weeks but should be aware of whether a person is considered continuously incapacitated for a period of incapacity.
7.3.1.1 ExamplesExample 1 – Person continuously incapacitated for a periodDuring a period of incapacity where the person is not working and incapacity is being paid, the entire period is counted toward the maximum rate (compensation) weeks. Where: Normal Weekly Hours (NWH) are 37.5; Maximum rate compensation weeks = 37.5 x 45 = 1687.5 hours; Person has been discharged; The person is incapacitated for the period 9/1/20017 to 31/1/20017 and returns to their pre-incapacity work on 1/2/2017; That person was incapacitated for 17 days; and have used 17 x 7.5 = 127.5 hours from their 1687.5 hours (maximum rate compensation weeks); Their remaining maximum rate compensation weeks are equal to 1687.5 - 127.5 = 1560 hours. Example 2 – Person is in employment at pre-injury level but not working their full pre-injury hoursIf a person is able to work 20 hours in a week, at their pre-incapacity level and incapacity paid for the remaining period of a week up to their normal weekly hours (17.5 hours if NWH are 37.5) then only the remaining hours are included in the calculation of maximum rate compensation weeks. NWH are 37.5 hours per week; Maximum rate compensation weeks = 37.5 x 45 = 1687.5 hours; A former Sergeant with an NE (including remuneration allowance) of $1000 per week is medically discharged on 31/12/2016; The former Sergeant commences part time work (20 hours per week) on 1/1/2017 as a Consultant earning $600 per week; On a pro-rata basis the former Sergeant has a higher rate of pay ($30 ph compared to $26.67 ph) as a Consultant. So it can be said that she is working at a higher level than she was prior to discharge and becoming incapacitated; Therefore only 17.5 hours per week counts towards the maximum rate compensation weeks. If the former Sergeant’s circumstances remain unchanged she will have 96.43 maximum rate compensation weeks, as only 17.5 hours per week are being counted towards her maximum rate compensation weeks. Example 3 – person is in employment but at a lower level then their pre-injury employment and not working their pre-injury hoursIf a person is able to work 20 hours per week and that 20 hours is at a lesser level than their pre-injury or pre-incapacity earnings, we count the entire period (37.5 hours if that is NWH) in the calculation of maximum rate compensation weeks. Normal Weekly Hours (NWH) are 37.5; Maximum rate compensation weeks = 37.5 x 45 = 1687.5 hours; A Sergeant has an NE (including remuneration allowance) of $1000 per week and is medically discharged on 31 December 2016. The former Sergeant commences part time work (20 hours per week) as a Car Park Attendant on 1 January 2017 earning $400 per week. As they are employed at a lower level than their pre-injury employment and the incapacity payment they receive is for every hour of the week, 37.5 hours per week are counted towards the calculation of their maximum rate compensation weeks. |
The period for which a person has received incapacity payments while in service are counted toward the person’s maximum rate compensation weeks.
Any weekly incapacity payments made to serving Permanent Forces members will normally be made in respect of a medical downgrading, resulting in loss of pay level, or for the loss of allowances due to an inability to perform a certain activity or function. A week for PF members is taken to be 7 days.
The calculation of maximum rate weeks is only started once the person has discharged. Any periods for which the person was incapacitated in service (and received payment) does not count toward the first 45 weeks.
For incapacity claims received prior to 1 July 2011, advice was sought from Defence on the number of days the person took as sick leave from service due to the injury or illness. The amount of sick leave was then counted toward the person’s calculation of maximum rate compensation weeks.
Advice from the respective service personnel authority will normally express time off in terms of days or weeks. A week is taken to be 7 days. Any remaining days after conversion to weeks should be expressed as a percentage of a week (e.g. 2 days – 2/7 – equals 28.57% of a week).
For claims for incapacity payments received on or after 1 July 2011, there is no longer a requirement to seek information about the amount of sick leave taken from service due to an incapacity. This is because the member continued to receive their normal pay while they were on sick leave. The time taken off work due to an incapacity, while still in service, should not be included in the calculation of maximum rate compensation weeks.
A week only counts as a maximum rate compensation week where compensation has been paid (or will be paid) under section 19 of the SRCA. Compensation will only be paid for periods when the discharged former member actually experienced a loss of pay.
Compensation paid for lost allowances or loss of rank and pay level due to an injury or illness must still be counted in the calculation of maximum rate compensation weeks. However, periods when the member continued to receive their normal pay, including allowances, when on sick leave should not be counted.
On occasions, a person will also claim for periods of intermittent incapacity as short as a day or an hour or two for attendances for medical treatment or when they are unable to attend work.
In order to accurately and fairly calculate the effect of reserve force incapacity on the 45 weeks entitlement it is necessary to express the 45 week entitlement as a total dollar liability. This assists in overcoming the conceptual difference between normal weekly hours in civilian employment and normal weekly hours in Reserve employment. A detailed example of this calculation method (demonstrated under the SRCA legislation) can be found in DCI 6, Attachment C, paragraph 14 [8].
Once the maximum rate week period ceases the person is paid a reduced compensation amount. If the maximum rate week period ceases during a week, the person is paid at the maximum rate amount for part of that week (corresponding to the days remaining in the maximum rate period) plus the reduced rate amount for the remaining period.
Subsection 19(3) [1] of the SRCA and section 131 [9] of the MRCA provides that after 45 weeks of incapacity the compensation entitlement are multiplied by an adjustment percentage. The value of this percentage is dependent on the % of NWH actually worked in that week.
The normal weekly hours for which the person is employed is relevant to the operation of Section 19(3)(b)-(f) of SRCA and section 131(2)(b)-(f) of MRCA. These subsections provide for a higher rate of total earnings (earnings from employment plus compensation) where the person is engaged in actual hours of employment during a week.
The formula for the post-45 week entitlement is:
(adjustment percentage x NWE or NE) – AE
After 45 weeks of incapacity compensation, the entitlement of a person who is not working at all (0% of normal weekly hours) because of the injury, reduces to 75% of the person’s NWE/NE.
The following table gives the adjustment percentage:
Percentage of normal weekly hours (NWH) being worked: | Adjustment percentage: |
Nil | 75% |
25% or less | 80% |
More than 25 % but not more than 50% | 85% |
More then 50% but not more than 75% | 90% |
More then 75% but not more than 100% | 95% |
100% or more | 100% |
The intent of this is to provide a financial reward, or incentive, for a return to full working hours by a person.
Where a person is participating in an approved Apprenticeship, they are considered to be working full-time hours, and there is no requirement to consider it as 'study' in order to base payments on 100% of NE for the duration of the apprenticeship. The person's actual earnings continue to be held as per normal incapacity calculations.
Normal weekly hours (NWH) are defined in the SRCA as the number of normal weekly hours worked by the employee (person) before his or her incapacity.
Normal Weekly Hours (NWH) are defined in subsection 132(2) [10] of the MRCA and section 158 [11] for part-time reservists.
After 45 weeks, the normal weekly hours (NWH) worked by a person in a week is relevant to the amount of incapacity compensation received for that week. Where a person is actually employed for part or all of a week, their payment is increased according to a scale set out in S19(3) of the SRCA or 131 of the MRCA based on the number of actual hours worked as a percentage of normal weekly hours.
During the first 45 weeks of incapacity, compensation is paid at 100% of NWE/NE, making it unnecessary to compare actual hours of employment with normal weekly hours.
NWH (as defined in S4) is based on average number of hours the person worked during the relevant period used to derive the person’s NWE. The relevant period is taken to be the 'latest period of 2 weeks before the date of the injury'.
There are no 'standard' working hours as a condition of service for members of the ADF. The default NWH of 36.75 hours per week is a standard derived from the APS.
Where NWE for a Reservist is based on 7 x the Reserve daily rate (plus allowances), NWH is set at 36.75 hours. Similarly if the person’s civilian component of NWE has been deemed, NWH is set at 36.75 hours.
NWH is defined in section 132 [10] and is dependent on the person’s type of service before ceasing to be a member.
Where NE is based on permanent forces ADF pay, NWH are set at 37.5 hours per week. Where NE is based on CTFS or Reserve service NWH is based on an average of the hours the person worked during the example period used to derive the person’s NE.
Where NE for a Reservist is based on 7 x the Reserve daily rate (plus allowances), NWH is set at 37.5 hours.
The ADF Pay and Conditions Manual (PACMAN) states that members of the Reserve Forces on Reserve service, apart from those officers who hold special appointments, shall be credited with pay as follows:
for a period of not less than six hours – one day's pay
for a period of less than six hours but not less than three hours – one-half day's pay
for a period of less than three hours but not less than two hours – one-third day's pay, and
for a period of not less than one hour but less than two hours – one-sixth day's pay.
7.8.4.2 ExampleExample 1 – Calculating Reserve Normal Weekly HoursReserve NWH = (6 hrs x Annual Parades) x 6/313 Annual Parades = the number of parades attended during the past 12 months Example – NWH for a member who attended 70 parades: (where each parade is not less than 6 hours) = (6 x 70) x 6/313 = 420 x 6/313 Reserve NWH = 8.05 hours Civilian NWH = 36.75 hours TOTAL NWH = 44.8 hours |
There is no discretion to vary a person’s NWH through the life of a claim. NWH is based on the hours the person was working during the relevant/example period that gives rise to their NWE or NE (the case of Comcare v Heffernan [2011] FCAFC 131 [12] refers).
Current full-time serving members of the ADF will have their incapacity payments calculated on a 7-day week. All part-time serving members and former members, including Cadets and Declared members, have their incapacity payments calculated on a 5-day week.
Actual hours should reflect the amount of hours the person is actually working in employment. Where a person is participating in a graduated return to work plan, the actual hours the person is working should be confirmed.
Where a person is undertaking a paced return to work, they are to be regarded as being employed for the hours of workplace attendance. In a paced return to work the person would usually attend for a full work day but their time is alternated between periods of productive activity and periods of rest.
Hours undertaken as part of an approved work trial under a DVA rehabilitation program should be regarded as hours worked for the week and are recorded on a work trial diary authorised by the employer.
Links
[1] https://www.legislation.gov.au/Details/C2017C00207
[2] https://www.legislation.gov.au/Details/C2017C00214/Html/Text#_Toc487202436
[3] https://www.legislation.gov.au/Details/C2006C00126
[4] https://www.legislation.gov.au/Details/C2004C00869
[5] https://www.legislation.gov.au/Details/C2017C00214/Html/Text#_Toc487202261
[6] clik://LEGIS/MRC-ACTS/MRCA/S196
[7] clik://LEGIS/MRC-ACTS/MRCA/S132
[8] https://clik.dva.gov.au/military-compensation-reference-library/historical-information/dcis-defence-compensation-instructions/current/dci-6-calculation-normal-weekly-earnings-and-weekly-incapacity-benefits-members-adf-reserve-and-ready-reserve-forces-console
[9] https://www.legislation.gov.au/Details/C2017C00214/Html/Text#_Toc487202438
[10] https://www.legislation.gov.au/Details/C2017C00214/Html/Text#_Toc487202439
[11] https://www.legislation.gov.au/Details/C2017C00214/Html/Text#_Toc487202480
[12] http://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2011/2011fcafc0131