Payroll work – Are you covered?
Does IME insurance cover you?
If a bookkeeper completes work on behalf of their client and errors were made which result in a financial loss to the client and subsequent claim for compensation, this is covered by the standard IME Professional Indemnity cover. If the negligent act is also a breach of government regulations the bookkeeper may incur a fine or penalty. This may include innocent breaches of government regulations including Federal, State, Local and Specialist Government bodies such as Fair Work, Tax Practitioners Board and the ATO.
An example of an innocent breach could be a bookkeeper not being aware of a new increased minimum wage rate or other employment benefits which are not applied and as well as the claim for financial loss a fine may be incurred by the bookkeeper.
When considering whether a claim may be covered under the additional cover of Statutory Liability Endorsement, one needs to consider the circumstances which may result in a claim.
It is a fine line between a professional indemnity claim due to negligence as opposed to negligence involving a breach of law that results in findings against the bookkeeper including a civil or criminal fine/penalty.
Statutory Liability (Fines and Penalties)
A breach which is considered criminal is not covered by the policy. An example of this could be where the bookkeeper is aware of circumstances where the data entered is untrue or misleading relevant to tax legislation or Fairwork obligations. They may be in a situation where the client advises them to enter data in a particular field in a particular way and you know it to be wrong. If you continue to follow the incorrect treatment rather than advising the client that you cannot assist, you would be considered compliant to the illegal act and if found guilty of a criminal offence the fine would not be covered by their Policy.
ICB Recommended Insurer – Insurance Made Easy
The Professional Indemnity insurance arranged by Insurance Made Easy and Chubb Insurance (for ICB members) now includes an automatic benefit of $100,000 for Statutory Liabilities (Fines and Penalties). This additional cover provides for innocent acts of negligence resulting in fines and penalties provided that the acts of negligence were unintentional.
Some further examples where our ICB members may face exposure to fines and penalties:
- Ongoing incorrect calculation of wage rate, benefits or other entitlements such as meal allowance, travel allowance, long service leave
- Workplace accidents, where you the bookkeeper has caused the accident and the relevant state workcover authority gets involved due to the serious nature of the accident
- TASA 2009
- Insolvent trading: incorrect payment/s to suppliers or staff has caused the company to be trading whilst insolvent
- Incorrect calculations of tax liabilities including BAS lodgements