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The big dilemma over WorkCover Queensland

There is a huge decision that the State Government is going to have to make in relation to WorkCover Queensland.  So what is it?

WorkCover is a success story for all other Australian jurisdictions to follow.  WorkCover’s Annual Report for 2017-18 released earlier this month highlights what a fantastic financial position it is in.  Key points that can be discerned:

  • For the fourth consecutive year, WorkCover offered Australia’s lowest average premium rate at $1.20 per $100 of wages and for 2018-19 Queensland employers will continue to enjoy this rate. This is in addition to an ongoing apprentice discount and increased early premium payment discount of 5%;
  • WorkCover’s operating profit for 2017–2018 was $324 million after tax;
  • The net return on investments for the year was 7.56% (2016–2017: 9.96%);
  • WorkCover premium revenue was $1.451 billion for the year, increasing from $1.416 billion in 2016–2017 due to a larger Queensland workforce;
  • Net claims incurred were $1.322 billion for 2017–2018 (2016–2017: $1.264 billion); and
  • WorkCover is currently achieving both its legislative requirements and management’s aim of maintaining a funding ratio of at least 120% currently at 181%.

Through the hard work of progressive governments, Queensland’ workers compensation scheme is regarded as the best performing in Australia not only in terms of solvency but in delivering the lowest average premium for businesses now and across the past 10 years.  At the same time the benefits delivered to injured workers and their families across this period have also been regarded as both fair and reasonable. 

2010 reforms, which limited the size of common law payouts have brought greater balance to the workers compensation scheme in Queensland. These reforms have undoubtedly had a positive impact on average premiums payable by employers through the scheme, which ultimately encourages business in Queensland to invest in their business and employ more staff.  Queensland’s historically low workers’ compensation premiums have been a central element in our State’s efforts to keep our business operating environment competitive. 

However, the big question that needs to be resolved is what is the State Government going to do with this rapidly accumulating pot of WorkCover money.

In 2017-18 WorkCover had $5.467 billion in assets and only $3.026 billion in liabilities with a funding ratio of a whopping 181 per cent.  This has steadily risen since 2014-15 from 157 per cent.  To give an illustration of the cash available that can be put to use elsewhere, reducing the funding ratio to 120 per cent, which is the statutory requirement, would free up $1.836 billion.  Reducing it to WorkCover’s unofficial floor of 140 per cent would still free up $1.231 billion.

My fear is that this money will progressively become too tempting for a financially constrained State Government to ignore.  We only have to cast our minds back to the raid on public servant superannuation to see an example of ‘lazy capital being put to better use’.  Queensland employers need to get on the front foot on this issue and quickly as it is their money.

Option one would be to argue for a further reduction in premiums.  This has merit in terms of assisting business at a time when many other operational costs are increasing and enhancing competitiveness.  However, we already have the lowest premium in the country, and there is some merit to the argument that a price (or financial incentive) has to be placed on valuing safety.

The second option would be additional funding be allocated (over on top of existing funding from Workplace Health and Safety Queensland paid for by general taxes and revenue) for initiatives to improve safety outcomes in Queensland workplaces such as the very successful Injury Prevention and Management (IPaM) programs. 

I will take guidance from readers on what their preferred option is. But the key point is this ……. if Queensland businesses don’t start to get vocal about this issue they run the risk to the money being put to use in a manner that does not deliver a ROI in the area of workplace safety or business competitiveness.

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Great post Nick. Premium reduction would be best option in my view.

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