From premium rate hikes to cap changes: What we know so far about Victoria’s WorkCover reforms

In 2003/04 WorkSafe Victoria recorded a profit of more than $1.2 billion. Twenty years on, WorkSafe is reporting unprecedented losses.

A major contributor to this is the year-on-year increase in accepted mental injury claims. Currently at 16% of all claims, WorkSafe is predicting mental injury claims will account for 30% of all claims.

The Andrews government is making significant changes to the Scheme — to increase revenue and reduce costs. However, this will come at a massive cost to Victorian businesses.

The first move will be to increase the premium rate (effective July 1, 2023) from 1.272% of payroll (where it has remained since 2014) to 1.8% in 2023-24 — a 41% increase.

The other kicker is to increase the premium ‘cap’ from 30% to a whopping 75%. What this means is — a premium, no matter how high the claims costs for an individual employer, could not increase more than 30% per year. The effect of a 30% increase could double a premium over a claim life of three years. A 75% cap could take a $100,000 premium to over $500,000 in three years.

For employers, a focus on returning injured workers back to work will be more important than ever before in order to prevent that hike in premiums.

Apart from making employers pay more, the government is proposing to exclude claims (i.e. not pay weekly benefits) to employees suffering from stress and burnout. Instead, these employees will be actively encouraged to return to work and will be eligible for provisional payments for up to 13 weeks to cover medical treatment costs. What will occur after 13 weeks is unclear.

A new ‘Return to Work Victoria’ will be created after seeking input from unions, employers and the medical profession. One hopes this can only be a positive move, as statistics show employees recover more quickly at work than at home, and the longer an employee remains off work, the less chance there is of a return to work.

The value for employers is undeniable as it should result in less time off work/interruption to productivity, and lower WorkCover claim costs, so less impact on premium. However, will employees lodge claims for bullying, instead of being overworked, to overcome the exclusion?

Careful management of employees, monitoring psychological health and creating good workplace culture will be key to mitigate the effects of these changes.

Kim McLagan is a principal lawyer and head of workplace relations at FCW Lawyers. This article was first published on the FCW Lawyers website.