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WORCOVER: RULE CHANGE CAUSED EXTRA PREMIUM SLUG

News Release - Sunday, 8 April 2001

Analysis by the State Opposition of a Victorian WorkCover Authority submission to a Parliamentary inquiry has shown that a little-publicised change to the rules for setting WorkCover premiums has resulted in thousands of Victorian employers missing out on premium reductions to which they would otherwise have been entitled.

The same rule change has also meant that one quarter of all Victorian employers have been pushed into paying a much higher premium increase than they would have been required to pay under the previous rules.

Industries hit by the rule change include cereal grains, mining and exploration services, steel casting, bricklaying, grocery wholesalers, road freight, nursing homes, restaurants and dry-cleaners.

The Shadow Minister for WorkCover, Robert Clark, said that, as well as imposing an across the board 17 per cent premium increase, the Government had changed the rules for calculating premiums so that the industry rate - the assessed risk level for each industry - was rounded up to the next highest grouping, rather than being rounded to the nearest grouping as had happened previously. The industry rate is the prime factor in determining premium rates for small and medium size business.

Mr Clark gave the example of textile products manufacturing, where the true assessed risk of the industry was 4.80 per cent, but this had been rounded up to 5.78 per cent, whereas in the past it would have been rounded down to the nearest level of 4.78 per cent.

"The result of this rule change is that the typical textiles manufacturing employer has been slugged with a 39 per cent premium increase, whereas if the Government had not made this rule change the increase would have been 17 per cent.

"This is as outrageous as if supermarkets were allowed to round up a 96 cent grocery bill to $1 instead of down to 95 cents. However, here we are not talking about cents, but about thousands of dollars.

"For an employer with a $2 million payroll, this means an extra $23,000 cost. In a highly competitive industry, where Australian manufacturers are fighting for market share against imports, this could well make the difference between survival and going out of business with the loss of dozens of jobs.

Mr Clark also gave the example of child minding services, where under the previous rules the typical employer would have received a premium rate reduction from 2.70 per cent last year to 2.61 per cent this year, but instead under the new rules had been hit with a premium rate increase to 3.16 per cent - a 17% increase.

Mr Clark said that an analysis of the VWA's submission to the all-party Parliamentary Economic Development Committee inquiry into WorkCover premiums had shown that, of 518 different industry classifications in Victoria, more than 70 classifications would have had a fall in premium for the typical employer but for the rule change. For a further 152 classifications the submission disclosed that the typical premium rise had been increased from 17 per cent to 39 per cent.

The analysis comes as the Economic Development Committee prepares to again question the VWA about the massive WorkCover premium increases which have hit Victorian employers.