Lower Return To Work premiums - how can SA afford them and what can your business do to minimise the cost of claims?

In his review of the operation of the Return To Work Act, the Hon. John Mansfield AM QC reported in June 2018 that the Return To Work (RTW) Scheme is financially sustainable and that the average 1.7% premium rate set for 2018/19 will be the lowest in the Scheme’s history.

Unlike its predecessor, the RTW Scheme is designed to punish non-seriously injured workers who don’t get back to work within two years.  The RTW insurance premium is designed to reward employers whose employees spend limited time in receipt of income support.

South Australia can afford lower RTW premiums because:

  1. Benefits for non-seriously injured workers are less generous under this Scheme; and
  2. Employers who promote work, health and safety (WHS) and proactively manage the cost of RTW claims pay less than others.

How do I minimise the cost of RTW claims?

RTW premiums are calculated according to a standard formula that multiplies your estimated annual employee remuneration by your nominated industry premium rate.  You might assume that all industry premium rates in construction are high and all industry premium rates in professional services are low, but it’s more complicated than that.  For example, in 2018/19 rates vary across industries in agriculture from 2.021% to 5.543%.  Rates in manufacturing vary from 0.397% to 9.786%.  This provides an obvious incentive for employers to invest in WHS to keep industry rates down, but there’s more that employers can do.

Take, as an example, a transport business that has estimated its annual employee remuneration for 2018/19 at $1m.  Multiply that by the industry premium rate of 6.127% to get a base premium of $61,270.  Varying discounts are applied to the base premium according to the size of the employer.  A 15% discount applies for this employer, bringing the premium payable to $52,080 + claim costs + GST + WHS fee.

The claims costs relate to income support only; not medical expenses – and they are capped.  The maximum claims costs payable by this employer in 2018/19 are 3x the discount rate x the base premium  = $27,572.

So there are potential savings of up to $27,572 in 2018/19 for this employer if its employees did not claim income maintenance in 2017/18  for work-related injuries which occurred within the last three years.

To manage the cost of RTW claims employers should:

  1. Proactively manage WHS;
  2. Keep in mind that the costs of some work-related injuries should not be taken into account when calculating premiums. These include:
    • Costs associated with the first two weeks of incapacity when you have forwarded a claim to your claims agent within five days;
    • Claims for unrepresentative injuries (before and after work, during breaks, attending an educational institution or medical service or travelling to/from home, an educational institution or medical service);
    • Secondary injury claims with a date of injury prior to 1 July 2015; and
    • Successfully prosecuted fraud claims;
  3. Support injured employees and get them back to work as soon as possible.  If claims agents are not assisting in a timely manner, support workers by following up medical assessments and rehabilitation and mediation services yourself; and
  4. If there is a risk that injured employees cannot return to work safely and productively, obtain good quality evidence to support your decision as to whether they should RTW or seek work with an alternative employer.

Under the new RTW Scheme, employees who run out of income support after two years will have added incentive to RTW, whether or not they are fit to do so.  Employers will need to balance their duty to provide work, with their duty to ensure their employees are safe at work and their interest in minimising premiums.

RTW decisions made about an employer’s duty to provide work, about employer premiums and acceptance of claims generally are reviewable.  There is a government subsidy to help with the cost of legal representation and most applications for review must be lodged within a month of the relevant decision, so seek legal assistance early if you have a concern. 

Please note that some aspects of the scheme have been simplified for the purpose of this article. For further information or assistance with RTW queries or disputes, please call a member of our employment law team on 8414 3400. 

This article was written by Senior Associate Thea Birss

Practice Area: Corporate, Commercial & Business , Employment

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