by Kevin Hague
There are quite a number of nasty legislative and regulatory provisions coming into force today. Among them are Nick Smith’s Experience Rating Regulations for ACC.
Experience rating will result in an individual employer’s ACC levies being adjusted up or down on the basis of their work injury record. The idea is supposedly that individual employers will respond to the prospect of increased or reduced levies by improving workplace safety.
On the face of it, that doesn’t sound like the craziest of ideas, until we look at how experience rating operated when ACC were last required to use it. When experience rating was in place in the 1990s it created perverse incentives both for employers and for ACC. The 1990s experience revealed:
- Experience rating had a negative financial impact on the financial performance of the ACC scheme – more funds were paid out in levy rebates resulting from positive experience ratings than received in loadings on levies due to negative experience ratings.
- The formula for experience rating changed each year in an attempt to address the above problem – resulting in year to year uncertainty for employers.
- Experience rating placed pressure on ACC staff to remove costs by moving claims from the work account to other accounts and increased the likelihood of employers contesting that an injury was a work injury, with resultant uncertainty and delays in cover and rehabilitation for the injured person.
- ACC were required to spend significantly more time and money in defending cost allocation through the dispute resolution process rather than focusing on rehabilitation of claimants.
Helen Kelly from the NZ Council of Trade Unions hits the nail on the head when she says:
Rewarding employers for a lower claims rate doesn’t reduce accidents but provides incentives for accidents to be covered up – either not reported, or misrepresented as having happened out of work, or bullying employees not to seek treatment. This will weaken health and safety practice by distorting the incidence of and reasons for accidents.
It will also lead to the end of industry-wide approaches on health and safety issues as employers focus on their own enterprise, reducing innovation and the sharing of learning across employers in a sector. Workers will suffer because their industry as a whole will not learn from the experiences of others.
And as the author of the ACC scheme, Sir Owen Woodhouse, has himself pointed out, experience rating runs counter to the community responsibility principle upon which ACC was founded.
This isn’t about reducing workplace injuries at all. It is about forcing ACC to behave more like an insurance company in preparation for its privatisation.
Published in Economy, Work, & Welfare by Kevin Hague on Fri, April 1st, 2011
Tags: ACC, experience rating, helen kelly, Kevin Hague, privatisation, Sir Owen Woodhouse
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So giving me lower ACC premiums if I don’t have accidents, and higher ACC premiums if I do, provides no incentive for me to try to reduce accidents – according to the unions.
Planet earth calling unions – come in unions…….
No answer – the light’s on but no ones home.
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The adjustment of levies is nothing to do with accidents, its to do with reported accidents. Currently, there is no disincentive to an employer to report an employees accident. But as of today, there is, by not reporting accidents the employer reduces the levy.
So there is scope for corruption with a beneficial outcome, whereas previously there was scope for fraud with no beneficial outcome.
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Photonz1, it encourages employers, not necessarily you, whom I am confident with your high ethical standards as an employer wouldn’t use 90 day fire at will trial periods either, to hide accidents.
Either they try to argue that the injury didn’t occur at work, or that there is no injury at all – just a degenerative condition which doesn’t attract ACC cover. And big employers will have company-contracted doctors in their pocket to back them up on those assertions.
Accredited employers like Telecom have done this for years, and experience rating will just encourage more employers to do it.
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toad – of course I’d use the 90 day law. I’m a small company and if I employ someone who doesn’t work out as intended, they can very easily pull the whole company down.
You’d be nuts to unneccessarily put everyone elses jobs at risk by not trialing someone.
It’s so risky not to do this, that in the past I’ve had to spend thousands of addtional dollars taking someone on first as a temp, and if they worked out, paying thousands more to buy them out from the agency.
Put simply, if I can trial someone, there will be a job for them if they can do it. If I have to take the risk of taking on a permanent employee with no idea of how they will turn out, then forget it.
So because a very small number of companies might try to hide accidents, you’d completely scrap a scheme that rewards safey and charges for accidents.
And instead you’d keep the current system which punnishes anyone spending more time and money on safety, which makes them less competitive and also make them subsidise accident costs for their competitors who save money by cutting corners on safety.
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