At its heart, WorkCover is insurance. And one thing we know about insurance is that you pay premiums. Just like your car insurance or your house and contents insurance.
Like other types of insurance, the premium you pay is related to the risk of you making a claim. We assume that an 18 year old driving a supercharged V8 every day is more likely to make a claim than an older person who only drives their 1978 Morris Minor to church on Sundays. That is why the 18 year old will pay a higher premium.
So, what factors determine the workcover premium you pay?
There are basically three factors that determine your premium. The first is the remuneration you pay. Effectively, that’s your labour costs. In insurance terms, your remuneration is your exposure. The higher your wage costs, the more people you employ, the higher the likelihood that someone will get injured and make a claim.
What you pay in premium will be a percentage of your remuneration.
The second factor is the industry you operate in. Your industry gives WorkSafe an indication of the underlying risk of your business. Some industries are inherently more risky than others. Abattoirs are more risky than ice cream manufacturers, ice cream manufacturers are more risky than florists, and florists are more risky than banks. The industry risk is measured using an Industry Rate. The higher the industry risk, the higher your premium will generally be, and vice versa.
The third factor is your claims history. More specifically, how your claims history compares to what is expected of your industry. WorkSafe measure this with the EPR, or Employer Performance Rating. The better your claims history is relative to your industry, the lower your premium will be, and vice versa.
The second and third factors, your industry, and your claim performance relative to your industry, combine to form your premium rate. Your premium rate is multiplied by your remuneration to give you your premium.
WorkSafe publish a 360 page book each year that explains all the ins and outs, but this explains it in a nutshell.
Your Premium = Remuneration x Industry Rate x Employer Performance Rate
If you’re mathematically inclined, you’ll see that improving your employer performance rating will lower your premiums. And you do that by improving your claim performance. Plus, you’ll have happier and safer employees. Win-win.