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NSW Workers Compensation Premium Changes – June 2015


WorkCover are set to announce the biggest changes to how Workers Compensation premiums are calculated since the current formula was unveiled in 1987. Although the premium formula has had some variations over the years the new premium calculator will be completely different.

Taking effect on 30th June 2015, the new emphasis will be on return to work and will focus on what employers can influence and control rather than other costs that an employer cannot change.

The promise is for a fairer, more stable and easier to understand premium system that compares an employer to how they are performing against the scheme average. Although final details are expected to be announced in early June it is clear that early return to work and prevention will be the main thrust of the changes.

Premium Calculation

Average Performance Premium (APP)

The initial aspect of the premium calculation will still be wages multiplied by an employer’s industry Classification (WIC) which results in the Average Performance Premium (previously known as Basic tariff Premium). This will provide the initial band that an employer will fall into and will also determine the potential discount or penalty loading to be applied depending on the employer’s performance.

Employer Safety Incentive (ESI)

This initiative was previously introduced for small employers and is now being introduced to medium and large employers. The incentive is effectively a percentage discount off the Average Performance Premium. The ESI is a way of assisting employers in investing in improving safety in the workplace.

Employer Safety Reward (ESR)

This initiative is available to employers who do not incur any premium impacting claims for four consecutive years. The reward will be in the form of a further discount from an employer’s Average Performance Premium.

 Claims Performance Measure (CPM)

This will be how your performance is measured in relation to claims. It will be calculated by dividing the total costs of claims for three years by the total Average Performance Premium for three years as a percentage. This will give you your CPM. This measure will then be aligned with the Scheme Average resulting either on a discount or loading onto your Average Performance Premium.

Other Changes  

A number of other significant changes will be part of the new premium calculation system outlined as follows;

Premium Adjustments

Premiums at the end of the policy year will only be adjusted to reflect any fluctuation between the actual and estimated wages. This will give much needed certainty to employers for budgeting purposes.

Return to Work Incentive (RTWI)

This will be a reward to employers who return injured workers back to the workplace. It is applicable for claims after 30th June 2015 .It will provide an incentive by way of a percentage discount at individual claim level.

  • 0 < 13 Weeks – 15 % Discount
  • 13 < 26 Weeks – 10 % Discount
  • 26 < 52 Weeks –   5 % Discount

Claims Costs

Our understanding is that claims estimates will no longer apply to the cost of claims that will be applied to premium calculations. In fact we understand that the predominant cost that will be included for premium calculation purposes will be paid weekly compensation.

This is another incentive for employers to get injured workers back to the workplace. Those who return workers back quickly and successfully will be rewarded and those that do not will be penalized.

What can Employers do to reduce their premiums?

  • Return to work, return to work and return to work. Emphasis must be on getting injured workers back to work either at same workplace or elsewhere as quickly and safely as possible.
  • Invest in Risk Management, safety and training. The new system gives employers incentives to spend money on prevention which were not previously available.
  • Review your Workers Compensation processes and resources. Do you have the right people and assistance to operate in the new environment?

We are here to help

We will keep all of our clients informed every step of the way as the changes are announced. We will also of course let all of our clients know what impact these changes will have on their premiums. Our intention is to run seminars in a number of locations in July in order to assist our clients in the transition of the changes.

In the meantime if you have any questions feel free to contact Ed, Trent or Chey at the Affida office on 9432 2943 or contact your nearest branch on 1800 AUSTBROKERS (1800 287 827)

We have also included the link to the WorkCover media release for your information. Click here to read the WorkCover NSW Media Release

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