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Experience Rating 

In April 2011 ACC introduced the experience rating system which is a more insurance-based model of adjusting individual business ACC worked levies based on their actual claims history. Experience Rating is intended to reward business owners who are able to achieve injury rates lower than the average for their Levy group, and achieve better than average return to work rates for their Levy group for employees actually sustaining injuries.

Experience rating applies to all employers, the self-employed, and non-PAYE shareholder employees who pay WorkCover levies to ACC. Employers who participate in the ACC Partnership Program are excluded. Experience rating is applied in two different ways based on the levies payable. The Experience Rating Program applies where the annual work levy exceeds $10,000 per annum over a three-year period; the No Claims Discount program applies where the annual work levy over the three-year period is less than $10,000.

In each program the levy can be adjusted upwards or downwards based on claims history.

In the Experience Rating Program employers who paid more than $10,000 per annum in levies over the three-year experience period could receive a discount or an increase of up to 50% of their work account levy.  Adjustments are based on the businesses own workplace safety record, with two components:

  • the number of weekly compensation days paid
  • the number of claims was medical costs greater than $500
  • any fatal claim
    These costs account for up to 35% of the increase or discount
  • the business’s performance is compared to the claim histories over the same experience period of similar sized businesses in similar industries.
    This accounts for up to 15% of the increase or discount

In the No Claims Discount Program (businesses, including self-employed, who paid a levy of less than $10,000 for all or part of the three-year experience period) adjustments are:

  • a 10% discount if no weekly compensation days paid
  • a 10% increase if more than 70 weekly compensation days paid, or any fatal claim
  • no change if between one and 70 weekly compensation days were paid
  • no comparisons are made with other businesses in the same levy group

There are many costs impacting on claims and payable by ACC that employers are often unaware of. This includes liability for earnings related compensation of 80% of all the earnings of the injured claimant including earnings from multiple jobs. All earnings are aggregated for the purposes of establishing the entitlement and recorded as a claim against the employer for whom the employee was working at the time of injury. This could amount in total to more than the actual earnings paid by that employer to the employee.

Claims costs associated with workplace fatalities include survivor grants and earnings related compensation (ERC) payments to dependents of the deceased. These include:

  • lump-sum survivor grant to spouse/partner of $4702 – payment is shared if more than one dependent spouse/partner
  • lump-sum survivor grant payment to each dependent child under 18 of $2351
  • lump-sum survivor grant payment to any other dependent, of $2351
  • 60% of ERC compensation payable to the deceased had they been incapacitated only and not died, payable to dependent spouse/partners for 5 years
  • 20% of ERC compensation payable to the deceased had they been incapacitated only and not died, payable to each dependent child until they turn 18 years or are no longer dependent.
  • Weekly lump-sum payments for dependent children for childcare until the child turns 14.
  • Funeral grants up to $4500.

ACC’s costs in meeting these claims are registered against the employer for whom the employee was working at the time of injury / death. This means long-term claims will continue to impact on employer levy loadings long after the initial event.

The rationale for the introduction of Experience Rating is to incentivise businesses to work proactively to prevent workplace injuries, and where injuries do occur to assist employees to return to work as quickly and safely as possible.

In addition to Experience Rating discounts employers can enter the levy discount incentive schemes WSMP and WSD to secure additional levy reductions.

WSMP

Small to medium sized enterprises (or larger) of approximately 20 FTEs or more are encouraged to enter the WSMP scheme. Injury prevention and health and safety management procedures that are assessed by audit as meeting AS/NZS 4801:2001 can receive 10%, 15%, 20% reduction in levy depending on the level of conformance with the standard they meet. Conformance is assessed by audit either by an ACC injury prevention consultant or an independent ACC approved auditor. The ACC auditor costs are met by ACC; the independent auditor costs are met by the employer. Reasons for paying an independent auditor as opposed to requesting an ACC auditor are a) the ability to your business type, and b) the likelihood that any recommendations for improvement made are more objective and relevant to on-site health and safety management rather than purely meeting audit standards. Entry to the programme is achieved through an initial audit, usually at primary or secondary level (10% or 15% rebate). Continuation is maintained through successful two yearly renewal audits where the discount level can increase to 20%, or be reduced if standards have slipped and evidence of best practice is not verifiable. Discounts are applied in the month following a successful audit.

WSD

Workplace Safety Discounts (WSD) is a scheme aimed at small businesses to encourage proactive health and safety management at a basic level. The scheme has recently been widened from 5 high risk industry sectors to include all industry sectors. Applicants need to submit documented evidence of Hazard Management processes, Employee Competency Training, Accident / Incident Recording, Reporting and Investigation, Emergency Procedures. Application can be made online. Accepted applications automatically qualify for a 10% levy reduction valid for three years. ACC randomly selects 5% of applicants to undergo a quality control audit conducted by an approved auditor either by telephone or site visit.

All businesses should consider entering a levy discount scheme appropriate to their size. Discounts received will typically cover Health and Safety System implementation costs within two years. Large enterprises could recover implementation costs in much shorter timeframes.

TriEx Health Safety and Wellness Ltd have the specialist expertise and resources to assist employers to develop, implement and review the health and safety processes, procedures and records necessary to enter the levy incentive programmes.

For further information please contact our Safety Manager Robert Acutt on (03) 343 2997 or rob.acutt@triex.co.nz