The industry that you operate in has a big influence on your WorkCover premium. Along with your remuneration and your claims performance, it is one of the three key drivers.
There are two ways it drives your premium. The first, and the topic of today’s post, is through the industry rate.
So what are industry rates?
Each year, WorkSafe has actuaries look over their data and make a prediction about how much they will need to collect to cover any claims that they will receive in the next year. Based on that, WorkSafe set their ‘Scheme Rate’. In 2018/19, the scheme rate is a nice, round 1.272%. That basically means that an average employer in Victoria will pay 1.272% of their remuneration in WorkCover premiums.
WorkSafe rightly determine that it wouldn’t be right to charge everyone the same premium rate. Some businesses are better at managing safety than others. And some industries are inherently more risky than other.
Think of bricklaying compared to an accountant. Bricklayers carry heavy loads, work on unlevel surfaces and spend a lot of time bending, lifting and stretching. These are all activities that can result in an injury. Then think of the accountant. The accountant will spend most of the day behind a computer or sitting in an office talking to clients. There is a relatively low chance of sustaining an injury.
WorkSafe look at the different industries that operate in Victoria, and for each of them, work out what the risks of having a work-related injury or illness, and how costly those claims can be.
How do they do that?
Good question, and I’m glad you asked. There is a bit of maths involved in the whole thing, but it essentially boils down to three pieces of information, taken from the previous five years:
• What is the remuneration in the industry
• How many claims came from the industry
• What was the cost of the claims from the industry.
This information is then combined to create the industry rate.
I know this sounds a bit like a, “take these three ingredients and abracadabra, here’s your industry rate”, or “pop these numbers in your calculator and let it simmer for 2 hours. Here’s one I prepared earlier” kind of answer.
If you are really interested in the nuts and bolts, get in touch and I can take you through it in as much detail as you like, but I won’t do it here because most people will be bored senseless.
The more interesting thing for most people is, what is the upshot.
WorkSafe gazette the industry rates each year. The 2018/19 rates are here.
Most of the industry rates make sense. For example, bricklaying has an industry rate of 5.568%, and accounting has an industry rate of 0.254%.
Others look to make less sense. Primary school education in the private sector is 0.475%, while in the public sector it’s almost double at 0.835% (discussed here). And offices in the recruitment industry are at 2.132%, while corporate head offices are at 0.379% (discussed here). If you’re in one of these industries I’d love to talk to you to discuss why.
So, what do you do with this information?
The first thing to do is make sure your business is assigned to the right industry. The industry you are assigned to is one of the three key drivers of your premium. Often the activities a business undertakes changes over time. You might have changed from manufacturing widgets to importing them, or to manufacturing doohickies.
BUT DON’T MAKE THE MISTAKE OF THINKING THAT A LOWER INDUSTRY RATE ALWAYS MEANS A LOWER PREMIUM
At the top I said there are two ways your industry drives your premium. The industry rate is only one of them. The other is in helping to assess your claims performance. I’ll take you through that in a future post.
If you think you might be assigned to the wrong industry, get in touch. I might be able to help you confirm it, and what a change might mean for your premium.