Workers Rehabilitation and Compensation (Employer Payments) Amendment Bill 2011

October 14, 2011 / Workers Compensation & Self Insurance

A very significant Bill intending to make far reaching amendments to the Workers Rehabilitation and Compensation Act was introduced into Parliament on 28 September 2011 with the intent that it be rushed through the Parliament before Christmas.

The Minister, Jack Snelling when introducing the Bill concentrated upon the amendments which introduce a new employer payment scheme and justifies the introduction of the scheme by asserting that “the current levy system offers little financial incentive for registered employers to focus on work health, safety and claim outcomes as individual employers have little influence on the amount they must pay .… (and)…. the new legislation will provide a financial incentive for employers to improve their claims experience through good health and safety practices and return to work management.  …  It will see employers who have a good claims experience pay less and those with a poor claims experience pay more”.

In fact the Amendment Bill goes far beyond the introduction of an experience rating system and it is entirely arguable that the current legislation would have allowed for the introduction of the new system without an Amending Bill.  The current provisions of Section 67 of the Act allow for experience rating and it supported WorkCover’s bonus penalty scheme which was introduced in 1990 and was in operation until it ceased on 30 June 2010.  The object of the bonus penalty scheme was also to provide a financial incentive for employers to improve their claims experience whilst requiring those with a poor claims experience to pay more.  Arguably the current legislation would also support the optional retro-paid loss scheme which the Amending Bill also seeks to introduce as an option for large employers.

In fact the Amendment Bill introduces a number of changes quite apart from those seen to be necessary to introduce a new employer payment system.

Some of the changes are subtle and some are of no moment but others will have a significant impact and the impact of a further class of changes will not be known until regulations which the amendments support are put in place.

All employers should be concerned that the Amending Bill:

• allows the Corporation to prescribe in regulations classes of decisions that are not reviewable by an employer as they relate to statutory payments, penalty interest or a fine;

• provides for the payment of a lump sum death benefit to a deceased worker’s estate where there are no dependents.  The provision appears to be a penalty because it will impact upon claims experience while providing a windfall gain to beneficiaries who otherwise would not be financially impacted by the death of the worker.

• provides the Corporation with a broad and unfettered power to demand an employer provide any information specified by the Corporation.

Registered employers should note that the Amending Bill:

• repeals the statutory levy cap of 7.5% and replaces it with power to set a cap by regulation;

• repeals the statutory maximum levy cap of 20% and replaces it with power to set a cap by regulation;

• provides for the calculation of premium at employer level rather than at location level as is currently the case.  This will have potential implications for registered employers who work in different classes of industry; (For example aged care providers should be concerned about this change).

• introduces the concept of grouping for the purposes of fixing the premium rate and has the potential for some members of a group to pay more in premium than their own experience would otherwise require;

Self insured employers should be concerned that the Amending Bill:

• allows the Corporation to charge for additional prescribed costs and to fix a minimum fee payable by a self insurer.  This raises the prospect of WorkCover setting a very high minimum as a way of discouraging self insurance;

It is surprising that the amendments do not include changes to the definition of compensability for secondary disabilities, as it was expected that the costs associated with secondary disabilities (which are now excluded) would be included in the premium calculation for individual employers and this would be partly offset by toughening up the definition of injury by requiring that employment be a “significant” or “substantial” contributing factor.

Similarly, it is surprising that there is nothing in the amending Bill to address the use of claims estimates in the calculation of premium.  The inclusion of claim estimates was considered a high level design feature by WorkCover as was the inclusion of the cost of secondary disabilities.

The lack of any mention in the Bill about a change in the treatment of secondary disabilities and the use of claims estimates raises a suspicion that these issues will be dealt with by regulation.  As is so often the case the “devil” may well be in the detail which we are yet to see!

Overall the Bill allows WorkCover to set premiums, fees and the like with limited opportunity for review.

If the amendments become law they will greatly increase the ability of WorkCover to influence the scheme through the content of premium orders, gazette notices and regulations in circumstances that would not attract the scrutiny of Parliament in the same way as would legislative change.

It is to be hoped that the Amending Bill will be subjected to very close scrutiny to ensure that the balance of power does not shift any further than necessary towards the corporation and against the other stakeholders.

For more information, please contact:

This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this article, or what it means for you, your business or your clients' businesses, please feel free to contact us.