ACC levy change will see employers with history of fatalities pay more

ACC minister Carmel Sepuloni has made changes that will add costs to employers with a poor safety record. Photo / Michael Craig

Employers with a bad safety record will pay significantly more in ACC levies thanks to a rule change by the Government, with businesses that have a history of accidental workplace fatalities to be hit the hardest.

The changes will increase the maximum additional levy paid by businesses with a history of ACC claims, and add a new, separate calculation to add levy costs for businesses where an employee died.

The rule changes were first mulled in 2018, but Cabinet could not agree on them. Changes were subsequently agreed at the end of last year, following consultation.

Employers currently pay levies to ACC which part-fund cover for injuries their staff might have on the job.

Part of ACC's funding comes from levies on businesses. Each business pays a different levy, which is based on each business's industry and, since 2011, medium and large businesses have had their levies adjusted to reflect their claims history.

This adjustment is called an experience rating, and it applies to all businesses that pay $10,000 or more a year in ACC levies

Businesses in accident-intensive industries pay higher levies, reflecting the fact their employees are more likely to claim. Businesses with a history of workplace accidents pay more again, reflecting the fact they place additional burdens on the system.

Part of the thinking behind the experience rating system is to create an incentive for employers to reduce workplace accidents. Workplaces with a high experience rating would face additional ACC levy costs of up to 75 per cent, while those who had no accidents could have their ACC levies discounted by as much as 50 per cent.

But a regulatory impact statement from MBIE, published by Treasury argued, using an analysis from 2014, that experience ratings did not "appear to be delivering a material reduction in claims, and in some instances was not equitably reflecting the costs of employers' poor performance, to the detriment of better performers".

Essentially the experience ratings were not encouraging better behaviour and the worst offenders were getting a free ride thanks to the levies paid by the best performers.

Changes were agreed in 2018 and rolled out in 2020, but these did not address the issue of the worst offenders getting a good deal out of the best performers.

At the time of those proposals, Cabinet was "not fully agreed" on how to "strengthen consequences of unwanted performance" from businesses with poor safety records.

At the time, there was a concern about the lack of information on likely consequences of any regulatory change. That has subsequently changed, and ACC Minister Carmel Sepuloni has agreed to two changes that will ratchet up fees for businesses that perform poorly.

The first change increases the "loading" on the experience rating - effectively the penalty for poor safety performance - from 75 to 100 per cent. This increases the maximum amount that businesses who perform worse than the average business in their industry will have to pay.

The second change is to introduce a "fatality modifier" which will increase the levy paid by employers who have had a fatal accident occur at work.

Those businesses will now face an additional 20 per cent loading on their levies in the year the fatality is "assessed", this will drop to 10 per cent the year after.

This provision split MBIE and ACC - MBIE did not want a fatality adjustment, but ACC did.

ACC welcomed the change with chief risk and actuarial officer Herwig Raubal saying the decision "to bring the assessment of fatal injuries into a separate step in the experience rating assessments ensures that the presence of a fatal injury in a business's claim experience has the same impact regardless of the size of the business"

The Regulatory Impact Statement on the change said that the change would treat "fatalities more equitably than the status quo", noting that prior to any changes, fatalities were treated "the same as minor injuries".

Nevertheless, MBIE is still "uncertain" whether the changes will lead to behavioural change on the part of employers making their workplaces safer for employees.

Raubal said ACC welcomed the changes to maximum loading.

"ACC believes a combined approach of education (how to prevent injuries and support injured workers return to work), and a levy where the price paid is related to how well an organisation manages the safety of its workers, will support businesses to improve their safety management practices and,, as a result, their productivity," Raubal said.