New South Wales Premier, Barry O’Farrell has proposed changes to the New South Wales Workers Compensation Scheme; in a recently released ‘Workers Compensation Issues Paper’ it is stated that, “the current Workers Compensation Scheme is failing the people of NSW, and [that] urgent action is required.”
The decision on rates for employers is set each year at 4pm on the 30th June, so the decision on whether to implement the changes will be made over the next few weeks.
The Paper claims that New South Wales pays significantly higher premiums (20-60%) than equivalent schemes in other states and that the rates will continue to increase if no changes are made. The changes to the scheme are proposed to benefit the NSW economy and should enhance, not inhibit the growth of jobs within the economy.
“Employers and workers are entitled to expect a workers compensation system that is efficient, cost effective and offers fair, timely assistance to employers and workers.”
What is a workers compensation policy?
Every employer must have a workers compensation policy for every employee earning more than $7,500 in wages per year, whether they are an employee, apprentice or trainee. Insurance can be obtained through the Workers Compensation Scheme, SICorp, through self-insurance or through specialised insurers.
The Workers Compensation Scheme is funded by the premiums paid by employer and is based on the employers industry; wage amounts; costs of any claims made; the dust diseases levy and the mine safety premium. The target premium collection rate for the scheme this year is 1.68% of wages.
“As at 31 December 2011, the Independent Scheme Actuary calculated the Scheme’s deficit at $4,083 billion, a deterioration of $1,720 million in six months. Its funding ratio is 78%, a deterioration of 7% in six months. This is the worst financial result incurred since the Scheme commenced in 1987.”
The current state (financial stability) of the scheme is expected to worsen with time with the largest three contributors to the Scheme’s outstanding claims liability are said to be weekly payments, medical treatments and work injury damages liabilities.
The current projections for the cost of the scheme in 2012-13 are estimated at $2,601 million, which means that the collected premiums will not be enough to cover the ongoing costs.
What will change?
Seven reform principles have been set to address the issues raised and attempt to reduce the premiums paid by NSW businesses:
- Enhance NSW workplace safety by preventing and reducing incidents and fatalities.
- Contribute to the economic and jobs growth, including for small businesses, by ensuring that premiums are comparable with other states and there are optimal insurance arrangements.
- Promote recovery and the health benefits of returning to work.
- Guarantee quality long term medical and financial support for seriously injured workers.
- Support less seriously injured workers to recover and regain their financial independence.
- Reduce the high regulatory burden and make it simple for injured workers, employers and service providers to navigate the system.
- Strongly discourage payments, treatments and services that do not contribute to recovery and return to work.
The reform aims to counter the findings that state a correlation between: “[E]arly return to work and improved health outcomes. Long term absence and work-disability are harmful to physical and mental health and well-being. Recovery and return to work should be the key objects of any workers compensation system.“ Other major aims are to reduce the amount of ‘red tape’ involved with the workers compensation process and improve on the low rate of payments to injured workers, as they currently bear no relation on the salary the employee has lost.
The proposed reform is looking at the measures adopted by other states and taking on the ones that look to be the most effective, the wish is to simplify the calculation process, make the entitlements more clear to understand, with greater encouragement to return to work to workers who are less seriously injured and improved benefits for those more seriously injured. The proposed changes also covers plans to encourage the return to work and the rehabilitation process, as the paper states that these issues are not addressed well in New South Wales, it is claimed to cost New South Wales far more to get an injured worker back to work than it does in Queensland or Victoria, and this cost will continue to increase.
Potential impacts include:
- Workers no longer being covered by a policy whilst on the way to and from work.
(Victoria, Western Australia and Tasmania already do not count the journey to work.)
- A step down point after 13 weeks of recovery period, including medical bills.
(Looking to bring the operations more in line with other states, who calculate payments according to average earnings and then introduce work capacity tests beginning of the 13 weeks mark, with the belief that the longer workers are away, the less likely they are to return.)
- Removing “pain and suffering” as a separate compensation category.
(This category is the measure of the financial impact of the worker’s injury remitted as a lump sum; the proposed removal of this category claims to reduce administration costs and disputation.)
As soon as more information is available we will update you via our news site.