We’ve spoken already about what claim costs are included when calculating your WorkCover premiums . Now we move on to what claim costs are excluded.
Some costs are excluded for taxation reasons, some for claim management reasons, and others to allow for significant claim costs.
According to WorkSafe Victoria’s Premiums Order, “the sum of the amounts of all input tax credits and decreasing adjustments within the meaning of A New Tax System (Goods and Services) Act 1999 of the Commonwealth” in relation to compensation, common law settlements or expenses are excluded from the costs of claims.
I’m not an accountant, so will not pretend to understand, let alone explain that, sorry.
When I wrote about costs included in calculating premiums, I mentioned excess payments, which are the first 10 days of weekly compensation, and the first $707 of medical and like expenses. These are excluded from the cost of claims.
Some employers take out premium “Buyout”. This is a fee on top of your premium, currently set at 10% of your premium, which effectively removes your excess, so WorkSafe start paying your claims from the get go. If you’ve done this, anything that would normally be paid under the excess will still be excluded from the cost of claims.
Another option open to some, is to make a payment to your agent to manage the excess payments on your behalf. Again, these costs are excluded from the cost of claims.
Significant Claim Costs
Finally, as I wrote previously, WorkSafe make allowances for claims with significant costs overall, and significant legal costs in particular. Anything paid or estimated to be paid over and above $390,600 are not included in your claim costs. The same goes for anything paid or estimated to be paid in legal expenses over and above $73,100. These clams are said to be ‘capped’.
An allowance for significant costs
The third component allows for significant expenses on individual claims. The most serious WorkCover claims can incur significant expenses for years on end, and legally complex claims can incur large legal costs. WorkSafe take the view that individual employers should not bear the full costs for these types of claims. Each claim has an overall cap, as well as a legal cost cap. Any claim that has fully developed costs (paid to date plus SCE) of more than $390,600 will be capped at that amount. So, at a maximum, the first $390,600 for an individual claim will be used in the premium calculation.
Claims with significant legal expenses are also capped. If the amount paid or estimated to be paid in legal costs exceeds $73,100, the legal costs will be capped at that amount.
The take away
The exclusions relating to claim management are worth keeping in mind. Many smaller employers could benefit from taking out the premium buyout. At the lowest end of the scale, it would cost less than $25 per year, and if one of your workers is injured at work, can cover you for two weeks of compensation, and $707 of medical and like expenses. Many claims won’t exceed these two benchmarks. Worth thinking about.
If you have any questions, make sure you get in touch.