In what signals one of the most significant workers compensation reforms in recent years, NSW employers have shifted to a new premium framework from 1st of July 2015. The move was precipitated by the need for a clearer more straightforward process offering more certainty around premiums for employers, and to encourage safer workplaces and enhanced return to work (RTW) after injury for employees.
From Konekt’s perspective, the role of the rehabilitation provider as a facilitator of early return to work plays an even more important role in reducing the cost of premiums. With the major contributor to an employer’s Claims Performance Rate being paid weekly benefits (alongside lump sum, death and common law benefits), there is a strong incentive for employers to achieve early return to work and then maintain suitable employment to receive further cost savings. Of further note, medical, rehabilitation and legal expenses are no longer included in the cost of claims and future liabilities in the form of claims estimates have been removed altogether.
It will make sense for medium and large employers to engage guidance and support in the rehabilitation process from the earliest possible opportunity and to ensure appropriate treatment is provided – these costs will not affect an employer’s premium and claims that have no premium impact will contribute to the Employer Safety Reward.
The changes introduce a sliding scale of claims cost discount for early and sustained return to work. This constitutes a 15% discount if the worker returns within 13 weeks, 10% for 13-25 weeks and 5% for 26-52 weeks. Return to work is defined in the NSW Insurance Premiums Order 2015-16 as suitable employment for a period of at least three consecutive months before the commencement of the period of insurance concerned. Suitable employment can be suitable or normal duties.
To demonstrate the cost savings, an employer can now impact their workers compensation premium in four different ways by returning injured workers to work early, or in the case of the ESR (Employer Safety Reward) by keeping employees at work. Firstly, a 10% ESI (Employer Safety Incentive) discount off the Average Performance Premium (APP) if all injured workers have returned to work on full hours within four weeks of injury; a 5% ESR discount if the employer can prevent premium impacting claims for four years; up to 15% off the cost of individual claims for achieving RTW in less than 13 weeks; and of course, the impact of reducing claims costs, primarily from weekly benefits, on the Claims Performance Rate. No other scheme in Australia places this much emphasis on early and sustained return to work.
However, there are some potential areas that may create challenges.
The comparison of an employer’s claims performance against the overall scheme average will likely impact employers in high risk industries where injuries are more common. Pressure will be on large and high risk employers to avoid weekly benefits, and one potential pitfall may be the act of getting injured workers to stay at work on full hours without make-up pay to avoid claiming weekly benefits and therefore impacting the worker’s ability to recover appropriately.
Overall, the changes must be seen as a positive move by the NSW Government, and like all significant reforms in workers compensation, will take time to determine how effective those changes have been in reducing the scheme’s deficit, lowering premium rates and creating safer workplaces.