Experience rating for ACC

Brian Fallow writes in the Herald:

ACC has reintroduced experience rating to the calculation of levies for employers and the self-employed.

ACC Minister Nick Smith says it will make ACC levies fairer and provide better incentives for business to improve workplace safety.

The Council of Trade Unions, Labour and the Greens argue that it will encourage employers to pressure workers to lie about whether an accident occurred in the workplace or somewhere else.

I really wonder why the professional politicians of the left hate business so much. They smear and defame basically the entire business community with their claims that employers are criminals who will break the law in return for a small cash incentive. They do the same with their opposition to allowing employees to choose whether or not to trade in one week of leave for cash. They claim employers will break the law and coerce employees into taking the money instead of the leave.

Experience rating ACC premiums provides an incentive to employers. For “good” employers the incentive is to have a safer workplace, to reduce their ACC premiums. For “bad” employers the incentive is not to make their workplace safer but to break the law and “bully” staff into lying about where their accidents happened.

Now if one had to divide all employers into one of those two categories, how many would actually break the law and bully their staff into lying? 5% perhaps, if even that? Yet Labour and the unions want all employers punished and treated as if they are all criminals.

For smaller firms – with an annual ACC bill below $10,000 – there will be a no-claims discount of 10 per cent if they generate no compensation claims. If they generate more than 70 days’ compensation claims they will incur a 10 per cent loading on their levies. For those in between there is no change.

The vast majority of employers will have ACC bills of below $10,000 – this is a wage bill of under around $5 million.

Your ACC premium is around 2% of your wage bill. A 10% reduction means that a company will save 0.2% of its wage bill, if it gets the no claim bonus. Does Labour really think scores of businesses will break the law just to save $2 on every $1,000 of wages.

For firms with an ACC bill larger than $10,000 the system is more complex and could mean adjustments of up to 50 per cent, up or down, in their levies. There are two layers to the adjustment.

The more important, the experience rating modification, compares the firm’s performance with the other firms in its levy risk group, with a 75 per cent weighting for rehabilitation costs, including income compensation, and 25 per cent for medical costs.

That could result in adjustments of up to 35 per cent either way in a firm’s levies, depending on their relative performance.

Now consider you are a larger employer, and you have ACC experience rating. Here the incentives are larger to keep claims down. However it would be near impossible to “fiddle” the system with a larger number of employees making claims.

In a small business, it is conceivable that you might get one employee to claim an accidient happened outside the workplace, and get away with it.

But in a large workplace, you’d need to have many injured employees agreeing to break the law and file false details on their claim (remember the employee files, not the employer). And it takes just one employee to blow the whistle and say their employer asked them to lie.

Also the employer needs to have a corrupt safety officer on staff, who will falsify the accident log, and not record workplace accidents if the employees agrees to lie about where it happened.

Now sure there may be a handful of venal and corrupt employers who will risk criminal penalties by engaging their staff in a conspiracy to defraud ACC. But that is no reason to not provide incentives to the vast majority of employers, which rewards them for having safer workplaces.

The average employer reacts rationally to incentives. Oh if we have fewer accidents, we pay less to ACC. So what can we do to minimise accidents. Labour and the unions are defneding a system where an employer with no workplace accidents at all pays the same premium as a company (same size and industry) that has multiple workplace accidents.