COMBINED EMPLOYER GROUP
SUBMISSION TO
REVIEW OF PREMIUMS AND
IMPLEMENTATION OF GROUPING
PROVISIONS
AUGUST 2003
Combined Employer Group – Submission
Review of Premiums and Implementation of Grouping Provisions – August 2003
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REVIEW OF PREMIUMS AND IMPLEMENTATION OF GROUPING PROVISIONS
COMBINED EMPLOYER GROUP RESPONSE
 COMBINED EMPLOYERS – WHO AND WHY
The Submission is made by the following organisations.
Australian Business Limited
Australian Business Industrial
Australian Meat Industry Council
Australian Retailers Association
Baking Industry Association (NSW Employers)
Civil Contractors Federation
Group Training Association of NSW Inc.
Housing Industry Association
Institute of Chartered Accountants
Local Government Association of NSW & Shires Association of NSW
Motor Traders’ Association of NSW
Master Plumbers & Mechanical Contractors Association of NSW, The
NSW Road Transport Association Inc.
Printing Industries Association of Australia, The
Timber Trade Industrial Association, The
Timber and Building Materials Association
Collectively these organisations have membership in excess of 30,000 employers in New
South Wales (NSW), a significant percentage of NSW workers compensation policy holders.
If the employment offered by these organisations and their members is taken into account
their participation in the NSW workers compensation system is even greater.
A number of the participating associations are also making additional Submissions to
highlight issues specific to their industries.
Introduction
 COMBINED EMPLOYER GROUP’S OVERVIEW
WorkCover’s Review of Premiums and Implementation of Grouping – Discussion Paper
invites comment on a number of aspects of premium setting and coverage and on
implementation of the recently enacted grouping provisions. The Combined Employer Group
welcomes the review and the opportunity to comment.
The NSW workers compensation system has been the subject of a number of significant
changes over the past few years. The most recent of these were introduced in the Workers
Compensation Amendment Act 2002. Given the far reaching impact of the redefinition of
wages and the revised grouping provisions it is important that premium calculation and
grouping are reviewed.
At the heart of the state’s workers compensation and injury management system are scheme
performance and its cost. For employers the scheme must operate to support safe
Combined Employer Group – Submission
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workplaces and, where there are instances of injury or disease arising out of work, to provide
effective timely rehabilitation. Scheme cost is felt as premium.
The Combined Employer Group, other employer groups and NSW employers take the NSW
workers compensation and injury management system very seriously.
In the lead-up to the 2003 NSW election ABL surveyed 400 businesses in NSW to prioritise
State-based issues of concern to them. Workers compensation and OH&S compliance
issues were near the top of the list of priority issues for business.
Premiums are a significant cost of doing business. Premiums and fluctuations in premium
levels impact on what businesses can do. Excessive premium can severely constrain
businesses1.
Premium which is, or seems, excessive when compared to a company’s safety record gives
rise to a lack of confidence in the scheme and to cynicism. Costs, which employers have
difficulty understanding, combined with a lack of transparency about scheme operation fuel
frustration and anger2.
This dynamic gives rise to two general points.
First, where an alteration brings with it significant increases to premium level serious
consideration needs be given to phasing-in mechanisms or other forms of mitigation.
This approach appears to have worked reasonably well with the introduction of the WIC
system.
Second, changes need to be explained and understood well in advance of implementation.
Information, explanatory and guidance material must be available and known about in good
time before the change comes into effect.
More recent experience has not given cause for comfort about these two prerequisites for
orderly change.
For example, conditional transfer of liability for contractor premium default to principals
contractors was introduced without proper consideration, and seemingly without a full
understanding, of its impact on businesses and of its relationship to similar provisions in
other legislation. To this day there are serious deficiencies of authoritative material about the
operation and parameters of the legislation.
A second example is the new definition of wages. Employers were and are generally
unconvinced that the stated objective of revenue neutrality has been achieved. This view
persists notwithstanding the fact WorkCover adjusted both tariff rates and “F” factors. While
it may be possible for WorkCover to demonstrate that at the system level the impact has
been neutral, this is not the case at the individual enterprise of at the industry level.
p 15 NSW Business Priorities 2003 “71% of businesses respondent to the NSW Business Priorities 2003 survey
said that workers compensation was impacting ‘highly’ on business operations. Of this figure, 42% rated the
impact to be ‘extremely important’..”
2
p 15 NSW Business Priorities 2003 – when discussing the 2001 reforms, noted – “Employers remain frustrated
by perceived over-servicing by medical and related service providers, and service providers’ reluctance to
become actively and constructively involved in return-to-work initiatives. Employers also consider that the
scheme is complex, and remains unreasonably biased toward injured employees.”
1
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Doubt remains about revenue neutrality. The treatment of superannuation provides an
example. Industry tariff rates were varied by 10.3% in total which included a 9% reduction in
rates for superannuation. Except for a very small number of all employees, all employees
receive at least 9% superannuation. Many receive more, and some receive considerably
more.
Consequently, the wider definition of wages has impacted differently on different firms and
appears to not be revenue neutral over the scheme. One sector hit hard by the inclusion of
superannuation contributions in wages is the small family business. Many of these firms
‘pay’ considerably more in superannuation than the guarantee, particularly where there are
DIY funds.
Similarly there is significant employer discontent about the grouping amendments. There is
a perception amongst many employers and their organisations that there was inadequate
consultation about grouping. While it is true that there have been opportunities for
discussion about its implementation it is also true that there was little consultation about the
legislation and none about the terms of reference for the Review of Employer’s Compliance
with Workers Compensation Premiums and Pay-Roll Tax in NSW.
Apart from the concern about its impact on particular employers and industries grouping is
not well understood. The impact should not be underestimated. Even where a newly
grouped entity retains multiple industry classification the wages expansion considerably
increases its exposure to experience. Where the group has high risk industries amongst its
components this may mean significant premium increases despite the fact that the group’s
cost to the system has not altered.
It is our understanding that the intent of the grouping provisions is to close-off a strategy
used by some organisations to limit their exposure limit to claims experience on their to
workers compensation premiums. In this way they effectively enjoy a continuing cross
subsidy from other employers.
Cutting off this engineered cross-subsidy is a principle most employers would endorse.
Nonetheless employer groups remain deeply concerned that many businesses which have
not pursued this deliberate premium cost management strategy will be negatively affected.
Nor should the technical detail raised by grouping be underestimated. As evidenced in the
discussion paper there is a significant amount of detail to be finalised. It is imperative that
the impact from any final form of grouping which is decided upon be cushioned or phased in
with information about how it will work and transition mechanisms be available well in
advance of implementation.
The final point to be made in our general observations concerns the review itself. The
review is welcome and necessary but the discussion document is inadequate. It has not
been supplemented with supporting information.
This point was made by ABL and other employers at the employer briefing sessions. It may
have been made by participants at the other parties’ sessions. Even if not, it must be pointed
out that employers are unhappy about making proposals on issues affecting scheme
balance, and the impact on employers, without any material which helps to assess the
impact of various proposals on the scheme.
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Workers compensation systems are complex. It is evident that making a change in one part
of the system will have effects elsewhere. It is our expectation that as a consequence of the
consultation process WorkCover will access the necessary technical and actuarial services
necessary to evaluate proposals.
We believe it is important that the results of that work be shared with interested parties so
that the reasons for WorkCover actions can be understood and so that any subsequent
consultation and debate may proceed on an informed basis.
We would also emphasise that generally the suggestions and propositions raised in this
submission are just that. They are intended to promote thinking about the issues and, in the
absence of information on which to fully assess their impact, this submission should not be
construed as endorsing any of the proposals advanced.
Finally, we note that the timetable for the review:
1.
2.
3.
4.
envisages collection of submissions in October and Ministerial approval in December;
commits the first half of 2004 to preparation of the premiums order;
proposes gazettal of the 2004-2005 premiums order in mid-June 2004; and
allows January – June 2004 for the development of a grouping compliance strategy.
With respect, these timings are inappropriate.
Employers seek the opportunity to comment on the proposed changes because of the
potential impact on classes of premium payer in the scheme and because this submission
was prepared without information about impact. That comment should be assisted by
information about the impact of proposals.
The 2004-2005 insurance Premiums Order should be gazetted well in advance of its coming
into effect. Supporting explanatory information including information on transitional
arrangements should be prepared and in the public domain at the time of gazettal.
Material explaining the approach to grouping and its implementation which is finally decided
upon needs to be in the public domain well in advance of commencement.
The Combined Employer Group would be pleased to comment on drafts of explanatory
material.
Review of Premiums and Implementation of Grouping –
The Discussion Paper identifies four principles for pricing premium. They are:
Premiums should be fair – they should reflect an employer’s risk and experience.
We do not believe that the current premium setting conforms to this principle.
Further it is unlikely that the system will ever fully satisfy this principle. However, we do
believe that it is possible to get closer to this ideal. Perhaps more importantly we believe it is
possible to develop a system that employers believe more fairly reflects risk and experience
than is now the case.
Combined Employer Group – Submission
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Premiums should encourage improved health and safety performance and injury
management.
For most employers, i.e. those with small premiums, there is no readily discernable link
between OHS, injury management and premiums. For larger employers the relationship is
often not well understood. In our view the time has come to drop the pretence that improved
OHS and injury management materially affects premiums for most employers. We need
different and understandable incentives to influence behaviours.
Employers need to be confident that both injured workers and employers have the services
they need when they need them. In this context we note the recommendations of the
McKinsey Review concerning case management. We believe they are substantially directed
to this second point. As the changes arising from the compliance review confirm, where the
system is seen to be unfair, unreasonable and/or unworkable, some larger businesses
pursue strategies which achieve the outcomes they need without changing the real cost
drivers in the system. When systems are viewed as unreasonable the motivation to seek
alternative solutions will be higher.
Premiums should be affordable and relatively stable for small employers so they are not
excessively impacted by a single large claim.
This Principle seems to be at odds with the first Principle above. However it is also
manifestly evident that a pure application of the first principle would not be reasonable. It
also seems arguable that no employer should be excessively impacted by a single large
claim. Arguably penalties for an employer’s contribution to a worker’s accident or disease
are better left to the Occupational Health and Safety Act 2000.
For small to medium enterprises premiums should be balanced between “user pays” and
insurance principles.
Currently small businesses (i.e. those with basic tariffs below $3,000) are accommodated
within this principle, however this is not the case for medium businesses. The rapid
application of claims experience to premiums means businesses at the lower end of the
experience curve (smaller businesses) are exposed to substantial experience based
premium increases even allowing for the two times rule. That exposure is not matched by
meaningful premium reductions when those businesses achieve low claims costs.
The Combined Employer Group notes that small employers are individually unlikely to have a
large claim in any year and that even in low risk industries there is some likelihood of an
individual small employer having a large claim once in a while.
The Combined Employer Group accepts the principle, that particularly for small and medium
employers, premium should be balanced between ‘user pays’ and insurance principles
although (as noted above) this is not currently the case.
REVIEW OF PREMIUM CALCULATION
 PREMIUM THRESHOLDS
Claims Threshold
Combined Employer Group – Submission
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The claims experience threshold of $3000 has remained constant since 1996 despite wages
growth and the expanded definition of wages.
Independent of any other changes that many have happened within the scheme there seems
a prima facie case for the real value of the threshold to be restored to its 1996 value.
Proposition 1: Restore the real value of the threshold to its 1996 value.
In the lead-up to the possible introduction of private underwriting in NSW the (then) Ratings
Bureau proposed tariff rates be struck on the basis of small (T<$10,000 pa), medium
($10000<T<$500,000 pa) and large (T>$500,000 pa) businesses. (T= basic tariff premium).
Without endorsing the appropriateness of the Bureau’s suggested premium ranges for each
class there seems a case for setting the experience rating threshold at a higher level if it is to
be retained.
In conjunction with a higher threshold we believe there may be merit in striking tariff rates for
small business which are different from those applying to medium and large employers.
It is understood that the loss ratio for smaller businesses is higher than that for larger
businesses. It may follow therefore that separate small business tariffs would be higher than
those which currently apply and increase differently between industry classifications. The
size of any increase would have a material affect on the acceptability of this proposition.
In addition to striking different rates for this group, on the basis that rates should better reflect
the cost to the scheme, consideration should also be given to the introduction of an incentive
scheme for these employers.
Most employers within this category will not experience claims frequently. A “no-claims”
discount, while easily understood, may not really reflect the OHS performance of the
business.
The Small Business Premium Discount Scheme currently delivers discounts to participating
employers who satisfy program requirements. It is time consuming for most small employers
and not particularly attractive. While it is true that the accident that doesn’t happen is the
least expensive (in both social and economic terms) in reality it is difficult to draw a clear link
between preventive action and occurrences in smaller businesses.
Consideration could be given to introducing financial incentives based on the post accident
behaviour of smaller employers. Rewarding properly targeted behaviours should generally
result in lower claims costs. Rewards would tend to pay for themselves, and be
understandable. They would be legitimate.
Also by limiting the application of the incentives to specific events the “affordable” level of
incentive may be higher than that achievable under a more broadly based scheme.
Proposition 2: Expand the definition of small business and provide with separate
tariff rates and meaningful incentives based on the post accident behaviour of the
employer.
Proposition 3: Apply claims experience ratings to all employers.
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An alternative view would be to remove the original distinction between “small” and “other”
employers by eliminating the experience rating threshold.
 Two Times Rule
The two times rule is intended to limit the impact of catastrophic claims events on employers.
Its value has diminished over time because of rising wage costs and its value should be
adjusted annually to reflect movement in AWE.
Proposition 4: Restore the real value of the two times rule threshold.
 The weighting of employer experience.
Essentially the premium formula is a set of rules for allocating shares (premiums) of a
predetermined outcome, the target premium for the year. The question that arises from this is
whether or not the current formula and the weighting between basic and experience
premiums results in a fair and equitable distribution.
In our view it is inadequate to consider the allocation of premium between basic and
experience premiums without considering other factors influencing the final outcome.
Experience rated formulae are calculated on the final estimated cost of the claim (subject to
the large claims limit). These estimated costs are then further inflated by the application of
“F” factors. “F” factors diminish over the claims experience period of three years.
Thus under current arrangements the highest “F” factors are applied at the time when
uncertainty about the final claim cost is greatest.
As well, employers’ experience premiums are not recalculated in the event that a claim is
resolved for less than the estimated cost at some time after the policy renewal date.
Employers faced with this situation believe they have been unreasonably dealt with.
It could also be argued that currently employers are protected from any deterioration in
claims costs that occur once a claim is excluded from claims experience. That is true, and
from a scheme perspective aggregation of the “unders and overs” may balance. However if
one of the objectives of an experience rated premium system is to encourage improved OHS
performance and if employers do not believe the basis on which their premiums are
calculated is credible that objective is difficult to achieve.
In this context McKinsey’s recommendations about catastrophic and long tailed claims are
noted.
Proposition 5: Calculate claim costs on the basis of incurred cost not estimated cost.
Proposition 6: Retrospectively adjust employer experience premiums when the final
cost of a claim is less than the claims estimate used to calculate that employer’s
premium.
As noted above the highest “F” factors are applied at the time there is the greatest
uncertainty about the final cost of a claim. Employer premiums are most strongly affected in
the first year of a claim. After the first year the financial incentive for employers to facilitate a
resolution of the claim diminishes. In our view the current weighting of “F” factors acts as a
Combined Employer Group – Submission
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disincentive for return to work outcomes where there is an extended absence for normal
duties.
Proposition 7: Change the weighting of “F” factors so as to give greater emphasis to
years 2 and 3 rather than year 1.
We do not know the rationale for the current balance between basic tariffs and experience
ratings. Whatever the rationale, the fact is that the weighting given to claims experience
penalises those employers towards the bottom of the curve.
Proposition 8: Flatten the experience curve. There seems no practical reason for
expanding the years of experience to be included in the premium calculation.
Proposition 9: Retain claims costs in the experience formula.
 Claims costs
Journey Claims
Proposition 10: Journeys to and from the workplace, and recess claims should
continue to be excluded from the cost of claims.
Large Claims Limit
The large claims limit is intended to protect businesses from the effect of a catastrophic
claim. This is one of the few “insurance” characteristics remaining in the scheme for larger
employers who are substantially experience rated. It is unclear how effective this limit is for
employers in properly managing large claims costs when WorkCover can apply such “F”
factors it determines necessary to raise the required premium revenue.
Proposition 11: Cap large claim limit at $150,000.
It can also be argued that larger employers are in a better position to manage claims and
therefore as businesses get larger the need for a large claims limit diminishes.
Proposition 12: Implement a variable large claim limit related to the size (basic tariff
rate) of the employer.
Slow Onset Injuries
Employers are often confronted by workplace injuries that are the consequence of many
years of work with a number of employers although the claim is made on them. Sometimes
recoveries are possible from former employers. Where this isn’t possible the full weight of
the cost of the claim falls on the current or last employer.
Proposition 13: Proportion the cost of slow onset injuries across the relevant period
of the employee’s work life. Where previous employers cannot be identified the
relevant proportion of the claims cost be excluded from the employer’s cost of claims
and the cost carried within the relevant industry sector.
Stress Claims
Combined Employer Group – Submission
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There are claims accepted by the scheme where factors outside the workplace may be
reasonably presumed to have a significant influence on both the occurrence and progress of
the condition. Stress claims are a prime example of this type of claim. While it is recognised
that there are statutory conditions that have to be satisfied for a claim to be accepted
employers believe they are being required to carry the costs arising from factors which, in
many instances, are beyond their control.
Proposition 14: Exclude stress claims from the calculation of experience premiums.
Fraudulent Claims
Employers are entitled to expect the scheme to protect them from fraudulent claims.
Proposition 15: Exclude costs associated with a fraudulent claim from claims costs.
Retrospectively adjust premium for relevant years when claim is proven to be
fraudulent after the three year experience period.
Employer Excess
It is our understanding that the Injury Management Pilot Project run a few years ago
demonstrated that employers did notify injuries earlier when there was a positive incentive for
them to do so. If this is correct then the penalty proposal outlined in the discussion paper
seems seriously flawed. It has no positive incentive and proposes a rapidly imposed
negative incentive.
Apart from the preference for punishment over incentive the proposal seems to ignore the
fact that there are multiple pathways for reporting claims. Employers are not always first to
know that a workplace injury has occurred and an effective and fair excess system should
recognise this.
Currently about 35% of claims are reported within 48 hours. We are unaware of what would
constitute an acceptable level of early reporting. In practice about 40% of claims do not
involve time lost. If the aim is to ensure that claims that are, or may become, serious are
reported quickly so that injury management can commence as early as possible then a figure
of around 60% would seem to be a reasonable target - provided it is the right 60%.
Proposition 16: Where the first advice of lost time injury is lodged with an employer:
- when the employer notifies the injury in 48 hours – no excess;
- when the employer notifies the injury after 48 hours but
before 7 days - $500 excess; and
- when an employer notifies the injury after 7 days - $1000
excess
Proposition 17: When the first advice of an injury is lodged with a person other than
the employer and the injured worker has asked that person to notify the injury:
- when the person fails to duly notify that injury within 48 hours
that person shall be guilty of an offence and subject to a
penalty of $500; and
- when the notification occurs after 48 hours but within 7 days
and $1,000 where the notification occurs after 7 days.
Combined Employer Group – Submission
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Assuming a 60% early reporting rate was achieved this proposal has a potential cost to the
scheme of about $30 million p.a. However the net cost should be less because of better
claim costs due to earlier intervention and some additional revenue from the proposed
additional excess for late reporting.
There are now multiple channels for reporting workplace injuries. Employers cannot be
reasonably held accountable or penalised for events which are not brought to their notice or
when they are informed some time after the event.
Proposition 18: Measure the obligation to notify within prescribed timeframes from
the time the employer, or other reporting party, first becomes aware that the
workplace injury has occurred.
The capacity for smaller employers to insure their excess payments raises some questions
as to how Proposition 13 might be applied to this group. If the above proposal was applied
generally it would follow that small employers who notify early (within 48 hours) would need
to decide if they wanted to pay the premium surcharge. On the other hand, employers who
notified late (after 7 days) should not be able to rely on their excess insurance to cover the
additional cost.
Proposition 19: Consider integrating reporting incentives into a sub-set of the
workers compensation scheme specifically designed for smaller businesses as set
out in Proposition 2.
Introduction of a ‘no-claims discount’
Category A employers currently enjoy “discounts” when their claims costs are less than the
average for their industry sector. However, it is clear that many employers are unaware that
they are receiving premium discounts because of their better than average cost of claims.
Proposition 20: Specific ‘no claims discounts’ are not necessary for category A
employers.
Proposition 21: Investigate the effect, if any, of common “F” factors on cross industry
subsidisation and the merits of industry specific “F” factors.
Proposition 22: Redesign premium notices so that the fact and quantum of a change
in premium level resulting from claims costs is clear.
Proposition 23: Integrate discounts for small business into an single incentive regime
as outlined in Proposition 2.
Combined Employer Group – Submission
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Labour Hire company premium rating
Labour Hire companies present additional challenges to workers compensation systems.
The sector constitutes an important and legitimate part of the economy that meets both the
needs of business and those seeking employment. Nonetheless labour hire is understood to
impose a disproportionate cost to the scheme relative to the premiums collected from labour
hire companies.
Additional scheme costs seem attributable to a combination of factors including the nature of
the tasks undertaken by some lent workers and additional difficulties in securing staged
return to work programmes. In this context it is understood there is legislation proposed
identifying a responsibility for the rehabilitation of an injured labour hire employee on the host
where an injury took place.
Applying the first principle that premiums should be fairer and better reflect an employer’s
cost to the scheme there seems a prima facie case to investigate whether labour hire
businesses should be subject to some differential pricing with respect to premiums.
However it is also evident that simply ramping-up premiums is not likely to be a particularly
effective solution to the underlying causes of additional costs. Thus any investigation should
identify what’s causing increased costs and proposals be properly targeted at bringing down
significant cost contributions.
We also note that the labour hire grouping, also includes Group Training Companies (GTCs).
GTCs, most of whom are “Not For Profit” are an important contributor to training young
apprentices and trainees. Any solution to ‘Labour Hire’ must not unreasonably impose costs
on GTCs. Their ability to provide training opportunities for around 15% of all apprentices and
trainees in NSW should not be undermined. In this context the Treasurer’s recent Budget
announcement concerning workers compensation premiums for trainees is noted.
Responses from labour hire members suggest there is a diversity of views in the sector
about industry specific tariffs. Whilst, as in any industry, not all companies perform equally
well differences in view are not simply attributable to firms’ OHS capacity.
Simply adding a premium to tariff rates for labour hire companies may only serve to penalise
the good over the poorer performers.
Proposition 24: Investigate alternative strategies for labour hire. Those strategies
should include, but not be limited to surcharges on industry tariff rates, labour hire
specific tariff rates, differential experience rating weightings. Premiums should better
reflect the performance of individual companies while, at the same time, their fair
share of the cost to the scheme is met.
Grouping of related entities
It is our understanding that the intent of the grouping provisions is to provide a response to
businesses that have deliberately adopted corporate structures to limit the sensitivity of their
premiums to claims experience. Entities seek to confine high risk areas and/or retain the
protection of the two times rule.
Combined Employer Group – Submission
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Premiums paid by companies adopting this strategy are considerably below their claims
costs and as noted above these companies enjoy cross-subsidisation from other companies
in their sector.
It is also clear that there are businesses that have expanded over time into a multi-enterprise
corporate structure. This structure is a consequence of growth, not an intent driven by
workers compensation. As well, in some industries, licensing or registration is required on an
establishment basis. Each establishment must comply with the conditions of license.
Requirements of this kind are often associated with industries where there is government
funding. Sometimes OHS and workers compensation performance is itself a licensing
variable for the establishment.
The concern with the application of grouping provisions is there will be a diverse and
unknown number of businesses which will be impacted and which will be subjected to
excessive and commercially unsustainable premium increases.
Mechanisms need to be found to best ensure the intended compliance targets are affected,
and other businesses that become caught-up in the changes are reasonably protected and
given adequate time to respond.
Proposition 25: Apply grouping provisions only where it can be shown the business
has deliberately adopted corporate structures to minimise workers compensation
payments.
Proposition 26: Apply grouping provisions only where multiple business entities are in
the same, or related industries, (e.g. all business units are in the cleaning industry)
and the business entity is not subject to a relevant establishment based licensing
regime.
Proposition 27: Apply grouping for workers compensation purposes only where the
business group is liable for the payment of payroll tax.
Proposition 28: Adjust the claims experience curve (S factor) to take into account the
inflationary effects of aggregating claims costs across multiple businesses, i.e. flatten
the experience curve.
Proposition 29: Use additional revenues arising from grouping to reduce tariff rates
not to reduce the Scheme deficit. Legislative changes and the McKinsey review are
directed towards deficit reduction.
Employers exempt from or not liable for payroll tax
It is not clear how many entities, their employment levels and cost to the scheme are
included in this category. These entities enjoy certain benefits because of the nature of the
activities they undertake. As a general proposition this position should be maintained.
However in some cases these entities also undertake commercial activities and compete
with businesses that do not enjoy any relief. Competitive neutrality needs to be established
and maintained.
Combined Employer Group – Submission
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Proposition 30: Exempt organisations from payroll tax from grouping provisions
except where they engage in undertakings which are commercially focussed. Those
parts of the organisation that are commercial in their nature should be grouped for
workers compensation purposes.
Specialised insurers and self-insurers
In principle the introduction of grouping should not invalidate properly established selfinsurance. Grouping should not operate to expand the reach of specialist insurers beyond
their defined sector.
There are a limited number of self insurers in NSW. It is not known to what extent grouping
provisions will impact self-insurers. However in the event there are consequences it would
be our expectation WorkCover engage with self insurers to develop sensible protocols and
practices to address current and future circumstances.
In this context it is not clear how the McKinsey recommendations will impact on specialist
insurers.
Proposition 31: Specialised insurers should not be able to use the introduction of
grouping to expand their coverage beyond their authorised scope.
Proposition 32: Decision rules be established to accommodate those circumstances
where part of a grouped enterprise falls under the scope of a specialised insurer and
the rest of the grouped enterprise does not.
Premium discount scheme (PDS)
Proposition 33: Continue the Premium Discount Scheme.
Certificates of Currency
The purpose of Certificates of Currency is to give certainty to others that the business
covered by the certificate is appropriately insured. Businesses using contractors are
concerned to ensure that the entity they are engaging is covered. Businesses may choose
to maintain multiple policies notwithstanding the fact those policies are grouped for purposes
of calculating premiums.
Proposition 34: Issue certificates of currency in the name of the business entity not
the grouped entity.
Combined Employer Group – Submission
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