2023/24 New Gazette Rules: 75% Capping and 1.8% Industry Rate - How Will Your Premium Be Affected?

WorkSafe has recently released the 2023/24 Victorian Government Gazette for Premiums Order and Gazette rates. You can download a copy of the Premiums Order (No.31) and the Gazette rates below.

Premiums Order: 2023/24 WorkCover Premiums Order (No. 31)

Victoria Government Gazette Rates: Gazette Rates (2023)

The Premiums Order (No. 31) is applicable to WorkCover insurance premiums for the 2023–24 years. It outlines the methods for calculating premiums that employers need to pay for their WorkCover insurance. The Order also includes industry classifications and rules assigned to employer workplaces.

The premium rates for all employers in Victoria will increase from an average of 1.27% to an average of 1.8% of the remuneration. This means that employers will have to pay a higher premium for their workers' compensation insurance. The increase in premium rates is due to the increase in industry rates, which have also been adjusted.

In addition to the increase in premium rates, the capping rule has also been changed. The capping factor has increased from 30% to 75%, which means that the maximum amount an employer must pay for their premium has increased. The capping ratio, which is the ratio of the cap amount to the average premium paid by all employers in a particular industry classification, has also been adjusted.

To manage premiums, employers can focus on achieving prompt and sustainable return-to-work outcomes in the event of injury or illness. This can help keep premiums down. Early payment of premiums can also provide discounts of 3% or 5% depending on certain dates.

Employers should also review their OHS policies and ensure compliance with regulations. They can also contact myWorkCover for a free confidential health check on their Workers' Compensation program to ensure they are paying the correct premium.

For the 2023-24 period, the Victorian Government has set the average premium rate at 1.8%. However, it's important to note that this average rate is a general figure. Actual premium rates for employers will vary depending on industry, size, and workers' compensation claims history.

WorkSafe Victoria has recently implemented significant changes to the management of workers' compensation premiums and claims. These changes have several implications for employers and workers in Victoria.

Summary:

1. The minimum premium: $330 plus charges.
2. Increase in Industry z:?WorkSafe Victoria has announced an increase in industry rates, which will impact the WorkCover bill starting in July 2023. Most industries will have a significant increase in their premium up to more than 150%. Labour hire services have increased by 145% while others such as House Construction have an increase of 32%.
3. Premium Capping Increase: Premium capping is the maximum limit on the amount an employer needs to pay for workers’ compensation premiums. The search results state that premium capping has increased from 30% to 75%. This means that employers’ premium payments are limited to a maximum of 75% of the potential premium amount.
4. Claim Capping Increase:?Claim capping refers to the maximum limit on the amount of compensation a worker can receive for a claim. According to the search results, the claim capping has increased from $438,300 in 2022/23 to $450,500 in 2023/24. This means that the maximum compensation amount for workers’ claims has been raised.
5. Increase in Premium Percentage:?The search results mention that organisations will experience a 42% increase in premiums paid. The premium percentage paid by employers will rise from 1.272% to an average of 1.8% of the remuneration. This increase in premiums aims to ensure the ongoing financial sustainability of the WorkCover Scheme.
6. Changes to Workers’ Compensation Test:?The test for workers receiving WorkCover weekly payments beyond two-and-a-half years will be changed. To conform with the policies of other states and territories, WorkSafe will modify the assessment for individuals who have been receiving weekly benefits for two and a half years. The new assessment will more objectively evaluate the extent of physical and mental impairment in conjunction with work capacity. Following the implementation of this change, a Whole Person Impairment of over 20% will be necessary, in addition to the capacity test, for a worker to continue receiving weekly benefits after two and a half years. Return to Work Victoria will offer injured workers various options for finding appropriate employment, such as training and incentives for job placement.
7. The sizing factor value for 2023/24: the sizing value has increased from 600,000 to 1,700,000 and is used in the calculation to determine the premium rate for the industry. This value is a key factor in determining the premium rate, and it is used in conjunction with other factors such as the industry classification and the estimated wages of the business. The sizing value is set by the relevant authority and is subject to change over time. The sizing value of 1,700,000 is a crucial component in this calculation, as it helps to standardise premium rates across different industries and ensure that businesses are paying a fair and appropriate amount for their workers' compensation coverage. The formula: Size adjustment factor = XT ÷ (XT + sizing value), where XT is the sum amounts produced by applying the formula IR (industry rate) x RCOV (remuneration of coverage) to each experience period workplace of the employer for each relevant period of coverage.
8. Eligibility for Stress and Burnout Claims:?Workers experiencing stress and burnout will no longer be eligible for weekly benefits. Instead, they will receive provisional payments for 13 weeks to cover medical treatment. This change may reflect a shift in the eligibility criteria for mental health-related claims.
9. Splitting of Industry Classifications:?WorkSafe Victoria has further categorised industry classifications between the public and non-public sectors. Public industries are typically associated with higher industry rates compared to private industries. The growing list of industries now includes Primary Education, Secondary Education, Special School Education, Combined Primary and Secondary Education, Ambulance Services, Other Social Assistance Services, Hospitals, Technical and Vocational Education and Training, Rail passengers, Correction/Detention Services, and General Insurance.
10. Indexation to Medical and Like Services:?The employer initial liability threshold amount for?medical and like services effective 1 July 2023 will increase from $763 in 2022/23 to $824 for 2023/24.
11. Indexation to maximum entitlements to weekly payments:

• For claims where payments?commence from 5 April 2010 - $2,660
• For claims received before 5 April 2010 but made after 12 November 1997 - $1,960
• For claims made before 12 November 1997 - $1,550

Recommend reading: Statistical Case Estimation (SCE): A Comprehensive Guide to WorkSafe Victoria SCE Model & Premiums

How Does the Average Industry Rate of 1.8% Affect Your Premium?

As announced in the Gazette on May 19, 2023, the average industry rate will increase from 1.272% to 1.8%. If you want to calculate the increase in premium rate from this year to the next year, you can use the following formula:

Premium Increase = (Next year's rate - This year's rate) / This year's rate * 100

By plugging in the provided values:

Increase = (1.8% - 1.272%) / 1.272% * 100

Increase = 0.528% / 1.272% * 100

Increase ≈ 41.55%

Therefore, the premium rate in 2023/24 will increase by approximately 41.55% for the upcoming year.

Let us compare the lowest industry classification

WorkCover Industry Classification (WIC) M69320 Accounting Services and see the impact. Accounting services have had the lowest industry rate for many years. However, in the 2023/24 financial year, there will be significant changes affecting all sectors due to the modernisation efforts in the WorkCover scheme.

Let us compare the impact on premiums.

WorkCover Industry Classification (WIC) M69320 Accounting Services and see the impact.

Assuming that there are no WorkCover claims.

Based on the analysis above, employers in the accounting industry will pay 41.55% more than their previous low rates. For example, an employer with $1,000,000 in remuneration will end up paying an extra $1,147.93 in next year's premium, as shown in the comparison above.

Comparison of Capping at 30% and at 75%

Unforeseen events can disrupt safety and WorkCover, despite our best efforts. The costs of claims directly impact WorkCover premiums, and a significant increase in costs can lead to higher premiums. The capping policy aims to prevent significant increases in premiums when there are substantial changes in wages, industry averages or claims amounts. When these factors experience significant upward movement, WorkSafe caps the premium increase at a level to ensure that premiums remain manageable for employers. This means that even if your claims performance rapidly deteriorates and doubles your premium rate, the increase will be limited to the capping threshold, express in percentages. However, a 75% increase from the previous threshold of 30% can still impose substantial costs on your business. The cap applies to the premium rate, not the dollar amount, so if you expand your workforce or increase wages and benefits, the actual premium amount in dollars may exceed the 75% cap.

The increase in industry rates and capping threshold may have a significant impact on the Statistical Case Estimation (SCE), yet to be seen.

Recommend reading: Victorian Employers with Small Claim Costs Set to Reap Benefits from 2023-24 Industry Rate Surge!

Let's consider WorkCover Industry Classification (WIC) - C22210 Structural Steel Fabricating

Based on the information provided, employers in Victoria need to calculate their Employer Performance Rating (EPR) and Capping Ratio before determining their premium rate. The table above shows that capping at 30% would result in a premium of $49,006.74 while capping at 75% would require an additional premium of $16,964.41. The increase in premium rates and changes to the capping rule will have a significant financial impact on businesses.

It's important to note that the increase in premium rates will affect all employers in Victoria, as it is based on the average industry rate. Premium rates for the 2023-24 period will become effective from 1 July 2023, and employers will receive their premium renewal notices via mail or the Online Employer Services (OES) portal.

Premiums are calculated as a percentage of the annual remuneration paid to workers. If the total remuneration is $200,000 or less, employers will pay a premium based on the industry rate. There are over 500 WorkCover industry rates determined by the relative risk profile of each industry. If the remuneration exceeds $200,000, the individual workers' compensation claims experience will also be considered.

To manage premiums, it is advisable to focus on achieving prompt and sustainable return-to-work outcomes in the event of injury or illness. This can help keep premiums down. Early payment of premiums can also provide discounts of 3% or 5% depending on certain dates.

Multiple payment options are available for businesses with premiums over $1000, and these details will be provided in the premium renewal notice. Depending on the premium amount, employers may have the option to pay monthly, quarterly, or annually. It's recommended to contact a WorkSafe agent to discuss available options.

Employers should take this opportunity to review their OHS policies and ensure compliance with regulations. They can also contact myWorkCover for a free confidential health check on their Workers' Compensation program to ensure they are paying the correct premium.

See the 2023/24 WorkSafe Victoria Workers’ Compensation Renewal Guide for premium calculations, key dates and other factors that can influence your premiums.

Author: Yon Ta, updated 24 May 2023.

Disclaimer:

The information presented in this post, article or book is intended solely for informational and educational purposes and should not be considered legal advice. It does not express specific opinions on individual cases. It is strongly advised to seek additional professional advice before taking any action based on the information provided. This information should only be used to gain a better understanding of how Workers’ Compensation insurance functions and is purely illustrative. My WorkCover Solutions Pty Ltd disclaims any liability for any losses or damage resulting from the use of or reliance upon the information provided. The information in this article is believed to be accurate as of its publication date. However, please note that changes in applicable laws may affect its accuracy. This article provides general information and does not take into account any specific person’s circumstances. It may contain information about Workers’ Compensation insurance regulations in your State or Territory. To ensure compliance with legal obligations, it is recommended to refer to the current legislation in force in the State or Territory where your business operates. Up-to-date legislation can be found on each state's respective WorkCover Authority websites or by contacting myWorkCover for updated information.

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