There are some different types of scenarios for paying workers compensation payments

If the payment is ongoing and is part of OTE, it can be set up as an income type
If the payment is a lump sump reimbursement from WorkCover paid to the employer, it can be set up and paid to the employee as an allowance.

Setting up Workers Compensation as an Income Type

To set up Workers Compensation, you will need to follow the steps below to create a new income type.

Go to Setups, Payroll, Income Types, Income Types Maintain.
from the Income Type Code Details tab, In the Income Type Code field, type a new code i.e. 'WCOMP'.
Set the Income Category to Worker's Compensation and the Time Entry as Hours.
Set the Rate Multiplier to 1.000 and the Additional Amount as 0.0000.
Set the Hourly Rounding Method to Do Not Round.
Tick the relevant checkboxes for pay advices.
Tick the Include in OTE and Include in SG Threshold checkboxes.
Click the Page Down button to move to the Expense Account tab or click the tab.
Enter the required GL expense account in the Expense Account field and click the Consolidate checkbox if required.
Once done click Accept (F9) to save the new code.
For Single Touch Payroll Phase 2 (STP2), In Attaché Online, STP Setup, Setup Income Types tab, click the Sync income types from Payroll button to sync through the new Income Type. There should be no configuration needed to be done in this screen.
You can now enter a timesheet using this income type code and enter hours against it.
🤓Tip: In the Income Type Maintenance screen, press F1 or click the Help icon on the toolbar to read details about each field.

Setting up workers compensation payments to accrue annual leave

Please refer to Annual leave & sick leave during workers compensation for the regulations for the state your business resides in.

To set up AL to accrue on workers compensation payments:

Go to Setups, Payroll, Leave Tables, Maintain.
Select your Annual Leave table from the Leave Accrual Code field.
Select the Pay Elements tab.
📌Note: this tab will only be available if your leave table is set up to accrue by the hour. See the correct annual leave setup here: Set up an Annual Leave table.
Select Workers Compensation from the Elements of Pay to Accrue list.
Click Accept (F9) to save the changes. Leave should now start to accrue against any entered workers compensation payments.

Go to Setups, Payroll, Allowances, Maintain.
In the Allowance Code Details tab, enter a new Allowance Code i.e. 'WCOMP'.
Enter a Description of the Allowance Code.
Set the Type field as Value.
Set the Tax Status field as Before Tax.
Set the Tax Certificate Code field to Include in Tax Certificate Totals.
Leave the Amount field as 0.00 and Variable.
Leave the Include in OTE checkbox unchecked.
Leave all other settings on this tab unchecked and value fields as the defaults.
Click the Page Down button to move to the Expense Account tab or click the tab.
Enter the required GL expense account in the Expense Account field and click the Consolidate checkbox if required.
Once done click Accept (F9) to save the new code.
For Single Touch Payroll Phase 2 (STP2), In Attaché Online, STP Setup, Setup Allowances tab, click the Sync income types from Payroll button to sync through the new Income Type. There should be no configuration needed to be done in this screen.
The Disaggregation of Gross value should be Gross, and the Paid Parental leave value is No
You can now enter a timesheet using this income type code and enter hours against it.