Workers’ Compensation and OHS Costs and Liabilities Breakfast Seminar July 2008
Objectives of the Session <ul><li>Understand why the SA scheme is poorly performing and how the new legislative changes in...
South Australian Scheme <ul><li>It is widely acknowledged that in its present state the SA scheme is the worst performing ...
Scheme Comparison Scheme Comparison 2005/06 Scheme Comparison 2006/07 [1]   Campbell Return to Work Monitor 88% 85% 87% 78...
Impact of Unfunded Liability <ul><li>The impact of unfunded liability is </li></ul><ul><li>Direct cost to employers – levy...
Registered versus Self Insured Employers 21% 7,470 34,770 TOTAL 19% 2,430 37% 12,750 40% Self-insured 23% 5,040 63% 22,020...
New Scheme Changes <ul><li>A raft of changes introduced in June 2008. Some are: </li></ul><ul><li>Work capacity reviews at...
Scheme Changes (continued) <ul><li>The changes to the scheme have not been received favourably by all </li></ul>Courtesy o...
Scheme Changes (Continued) <ul><li>The top four for employers and why: </li></ul><ul><li>Provisional liability </li></ul><...
Effective OHS and WC Systems  <ul><li>An effective OHSMS consists of strategies for developing: </li></ul><ul><li>Continuo...
Effective OHS and WC Systems (cont.) <ul><li>Documentation </li></ul><ul><li>Feedback from senior management </li></ul><ul...
Components of OHS and WC Systems <ul><li>Human Resources </li></ul><ul><li>Risk management </li></ul><ul><li>Injury Manage...
Influencing your levy rate <ul><li>Levies are calculated as follows: </li></ul><ul><li>Remuneration x  Levy Rate </li></ul...
Influencing your levy rate <ul><li>Cannot influence remuneration </li></ul><ul><li>Cannot influence SAWIC </li></ul><ul><l...
Effect of Bonuses and Penalties Food manufacturing (per $1M wages) Agriculture NEC (per $1M wages) Construction NEC (per $...
Safework Incentive Scheme <ul><li>Larger employers can qualify for additional bonus: </li></ul><ul><li>Achieved through th...
Cost Benefit Analysis <ul><li>Executive support will be required to implement changes: </li></ul><ul><li>Provide finances ...
Selling your Proposal Internally <ul><li>Stage 1 – The Business Improvement Concept </li></ul><ul><li>The executive sanity...
Selling your Proposal Internally <ul><li>Stage 2 – Preliminary Assessment </li></ul><ul><li>A more rigorous assessment, bu...
Selling your Proposal Internally <ul><li>Stage 3 – Detailed Assessment </li></ul><ul><li>A tactical, lower-level assessmen...
Selling your Objective – Key Stages
Example of Cost Savings $359,000 $10,000 $16,000 $27,000 $153,000 $153,000 NET CASH FLOW $345,000 $45,000 $50,000 $50,000 ...
Indirect Costs and Factors <ul><li>OHS and workers’ compensation law compliance </li></ul><ul><li>Absenteeism </li></ul><u...
Directors’ Liabilities in OHS <ul><li>Recent amendments to the  Occupational Health, Safety and Welfare Act 1986  effectiv...
Continuous Improvement <ul><li>Quality standards provide the model for continuous improvement: </li></ul><ul><li>Objective...
Setting Objectives and Targets <ul><li>Link objectives to broader business goals </li></ul><ul><li>Are targets based upon ...
OHS and RTW Policies <ul><li>Is there an OHS and RTW Policy clearly outlining: </li></ul><ul><li>Management accountability...
Planning <ul><li>Setting up systems prior to implementation: </li></ul><ul><li>Business case, cost benefit analysis, white...
Implementation <ul><li>Planning means nothing until there has been effective implementation: </li></ul><ul><li>Is the syst...
Measurement and Evaluation <ul><li>You must be able to demonstrate the system’s benefits and flaws: </li></ul><ul><li>Bala...
Management Review <ul><li>Is the success of interventions communicated to senior management?  </li></ul><ul><li>Does senio...
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Workers Comp and OHS Costs And Liabilities Seminar SA

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Seminar presented to SA businesses regarding the reduction in OHS and wc costs and strategies for building an Ohsms

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  • Workers Comp and OHS Costs And Liabilities Seminar SA

    1. 1. Workers’ Compensation and OHS Costs and Liabilities Breakfast Seminar July 2008
    2. 2. Objectives of the Session <ul><li>Understand why the SA scheme is poorly performing and how the new legislative changes introduced in June 2008 will help turn it around </li></ul><ul><li>Learn how the scheme directly impacts your business’ bottom line </li></ul><ul><li>Directors’ and Senior Managers’ liabilities under OHS legislation </li></ul><ul><li>Planning essentials for reducing workers’ compensation costs </li></ul><ul><li>Work out the costs of having a poor system and gain support from senior management </li></ul><ul><li>Integrating payroll and HR systems with workers’ compensation to ensure transparency on the general ledger </li></ul>
    3. 3. South Australian Scheme <ul><li>It is widely acknowledged that in its present state the SA scheme is the worst performing in Australia </li></ul><ul><li>$911M unfunded liability as at 31/12/2007 </li></ul><ul><li>64.7% funded through levy revenue </li></ul><ul><li>Average levy rate 3% - the highest in Australia </li></ul><ul><li>The lowest return to work rates – 77% compared to national average of 87% </li></ul><ul><li>Continuous growth in claims frequency and severity rates over the last 20 years </li></ul><ul><li>No major reform for 20 years </li></ul>
    4. 4. Scheme Comparison Scheme Comparison 2005/06 Scheme Comparison 2006/07 [1] Campbell Return to Work Monitor 88% 85% 87% 78% Return to work rate [1] 1.43% 1.62% 1.99% 3% Average levy rate QLD VIC NSW SA 85% 85% 86% 77% Return to work rate 1.2% 1.49% 1.77% 3% Average levy rate QLD VIC NSW SA
    5. 5. Impact of Unfunded Liability <ul><li>The impact of unfunded liability is </li></ul><ul><li>Direct cost to employers – levy rates cannot decrease in the short term </li></ul><ul><li>Additional cost to the community – re-allocation of Government funding and WorkCover investment </li></ul><ul><li>Indirect cost to employers – higher levy rates may cause re-allocation of corporate funding, in some cases, funding for injury prevention and OHS initiatives </li></ul>
    6. 6. Registered versus Self Insured Employers 21% 7,470 34,770 TOTAL 19% 2,430 37% 12,750 40% Self-insured 23% 5,040 63% 22,020 60% Registered % Time Lost Claims Time Lost Claims % Scheme Claims Number of Claims Scheme Ratio
    7. 7. New Scheme Changes <ul><li>A raft of changes introduced in June 2008. Some are: </li></ul><ul><li>Work capacity reviews at 130 weeks </li></ul><ul><li>Weekly payments – new step downs in place </li></ul><ul><li>Permanent impairment maximum and 5% threshold </li></ul><ul><li>Redemptions limited </li></ul><ul><li>Provisional liability – 13 weeks </li></ul><ul><li>Dispute process and capped legal costs </li></ul><ul><li>Medical panel to be introduced for all medical disputes </li></ul><ul><li>RRTWC required in designated workplaces </li></ul><ul><li>Rewards for reporting injuries in the first 48 hours </li></ul>
    8. 8. Scheme Changes (continued) <ul><li>The changes to the scheme have not been received favourably by all </li></ul>Courtesy of the Advertiser
    9. 9. Scheme Changes (Continued) <ul><li>The top four for employers and why: </li></ul><ul><li>Provisional liability </li></ul><ul><li>Dispute process and capped legal costs </li></ul><ul><li>RTW Coordinators mandatory </li></ul><ul><li>Rewards for early reporting </li></ul>
    10. 10. Effective OHS and WC Systems <ul><li>An effective OHSMS consists of strategies for developing: </li></ul><ul><li>Continuous improvement frameworks </li></ul><ul><li>Effective goal setting and planning </li></ul><ul><li>Consultation </li></ul><ul><li>Legal Requirements </li></ul><ul><li>Managing change </li></ul><ul><li>Defined roles and responsibilities </li></ul><ul><li>Culture- leadership and employee opinion </li></ul><ul><li>Measurement and evaluation </li></ul><ul><li>Communication </li></ul><ul><li>Understand what hasn’t worked </li></ul>
    11. 11. Effective OHS and WC Systems (cont.) <ul><li>Documentation </li></ul><ul><li>Feedback from senior management </li></ul><ul><li>Report everything – know the state of your real data </li></ul><ul><li>Avoid disputes through early resolution of conflicts </li></ul><ul><li>Stay in touch with injured workers from day one </li></ul><ul><li>Avoid worker disconnection </li></ul><ul><li>Active participation in RTW </li></ul>
    12. 12. Components of OHS and WC Systems <ul><li>Human Resources </li></ul><ul><li>Risk management </li></ul><ul><li>Injury Management </li></ul><ul><li>Employee education and training </li></ul><ul><li>Recruitment </li></ul><ul><li>Claims Management </li></ul><ul><li>Premium Management </li></ul><ul><li>Payroll </li></ul><ul><li>Insurer relationship </li></ul><ul><li>Provider relationships </li></ul>
    13. 13. Influencing your levy rate <ul><li>Levies are calculated as follows: </li></ul><ul><li>Remuneration x Levy Rate </li></ul><ul><li>+ </li></ul><ul><li>Buy-out Option </li></ul><ul><li>+ </li></ul><ul><li>GST </li></ul><ul><li>+ </li></ul><ul><li>Health, safety and welfare fee (0.7%) </li></ul>
    14. 14. Influencing your levy rate <ul><li>Cannot influence remuneration </li></ul><ul><li>Cannot influence SAWIC </li></ul><ul><li>Can achieve bonuses (or incur penalties) against levy rate through good (or poor) performance </li></ul><ul><li>Bonuses up to -30% and penalties up to 50% </li></ul><ul><li>Other Factors Which Influence Levy Rate </li></ul><ul><li>Participation factor to protect against impact of single large claims </li></ul><ul><li>Rating factor to ensure there are added incentives for larger employers </li></ul>
    15. 15. Effect of Bonuses and Penalties Food manufacturing (per $1M wages) Agriculture NEC (per $1M wages) Construction NEC (per $1M wages) $55,793 $48,818 4.41% $104,611 9.45% 6.3% Difference Levy -30% bonus Levy 50% penalty SAWIC $61,992 $54,243 4.9% $116,235 10.5% 7% Difference Levy -30% bonus Levy 50% penalty SAWIC $99,630 $24,907 5.25% $124,537 11.25% 7.5% Difference Levy -30% bonus Levy 50% penalty SAWIC
    16. 16. Safework Incentive Scheme <ul><li>Larger employers can qualify for additional bonus: </li></ul><ul><li>Achieved through the Safety Achiever Business System </li></ul><ul><li>All business locations must achieve all 5 SABS Performance Standards </li></ul><ul><li>Base levy of greater than $100K in FY 2005/06 </li></ul><ul><li>Employer has paid monthly levy within 7 days of the end of each month </li></ul><ul><li>Penalties remain at 50% </li></ul><ul><li>Bonuses of up to 50% of the levy rate are achievable </li></ul>
    17. 17. Cost Benefit Analysis <ul><li>Executive support will be required to implement changes: </li></ul><ul><li>Provide finances </li></ul><ul><li>Agree to the allocation of resources </li></ul><ul><li>Support project champion </li></ul><ul><li>Support project objectives </li></ul>
    18. 18. Selling your Proposal Internally <ul><li>Stage 1 – The Business Improvement Concept </li></ul><ul><li>The executive sanity check – how does it look from the air? </li></ul><ul><li>How does this business improvement concept fit or rank with other strategic priorities? </li></ul><ul><li>Is it a low risk, high ROI proposition? </li></ul><ul><li>Objective: Receive sponsorship to the next phase </li></ul>
    19. 19. Selling your Proposal Internally <ul><li>Stage 2 – Preliminary Assessment </li></ul><ul><li>A more rigorous assessment, but still above the issue </li></ul><ul><li>What are the high level current state business problems, implications or pain points? </li></ul><ul><li>Would this solution add significant financial value to a high priority strategic initiative or business objective? </li></ul><ul><li>Objective: Receive sponsorship to the next phase </li></ul>
    20. 20. Selling your Proposal Internally <ul><li>Stage 3 – Detailed Assessment </li></ul><ul><li>A tactical, lower-level assessment where the operational design, options, risks and financial benefits are explored </li></ul><ul><li>Credibility is developed by working collaboratively and committing a greater level of resources to this process </li></ul><ul><li>The business improvement assessment has changed in nature from strategic to tactical to operational </li></ul>
    21. 21. Selling your Objective – Key Stages
    22. 22. Example of Cost Savings $359,000 $10,000 $16,000 $27,000 $153,000 $153,000 NET CASH FLOW $345,000 $45,000 $50,000 $50,000 $80,000 $120,000 SUB TOTAL $10,000 $5,000 $5,000 Training programs $10,000 $5,000 $5,000 Increased administration $55,000 $15,000 $10,000 $10,000 $10,000 $10,000 Pre-employment Screening $270,000 $30,000 $40,000 $40,000 $60,000 $100,000 Personnel (tec) OUTFLOWS $704,000 $55,000 $66,000 $77,000 $233,000 $273,000 Levy – increased cash flow 5% 5% 5% 15% 20% Penalty/bonus improvement at TOTAL Year Five Year Four Year Three Year Two Year One INFLOWS
    23. 23. Indirect Costs and Factors <ul><li>OHS and workers’ compensation law compliance </li></ul><ul><li>Absenteeism </li></ul><ul><li>Impact on productivity </li></ul><ul><li>Directors’ liabilities </li></ul><ul><li>Consultation </li></ul><ul><li>Additional related costs – recruitment, training </li></ul><ul><li>OHS not linked to broader business goals </li></ul><ul><li>Business reputation </li></ul><ul><li>Poor or highly combative workplace culture </li></ul>
    24. 24. Directors’ Liabilities in OHS <ul><li>Recent amendments to the Occupational Health, Safety and Welfare Act 1986 effective 1 st January 2008 </li></ul><ul><li>Increases in penalties for corporations </li></ul><ul><li>New offence “reckless endangerment” </li></ul><ul><li>Corporate liability clarified </li></ul><ul><li>Personal liability of officers clarified </li></ul><ul><li>Kumar v Aylmer (NSWIR Commission) </li></ul>
    25. 25. Continuous Improvement <ul><li>Quality standards provide the model for continuous improvement: </li></ul><ul><li>Objectives and targets </li></ul><ul><li>OHS policy </li></ul><ul><li>Planning </li></ul><ul><li>Implementation </li></ul><ul><li>Measurement and evaluation </li></ul><ul><li>Management review </li></ul>
    26. 26. Setting Objectives and Targets <ul><li>Link objectives to broader business goals </li></ul><ul><li>Are targets based upon improvements that can be made to existing data </li></ul><ul><li>Do objectives and targets how successful you are in setting up an OHS and workers’ compensation management system </li></ul><ul><li>Set up lag data to tell you where you are </li></ul><ul><li>Use lead indicators to tell you where you want to be </li></ul><ul><li>Don’t rely on one or the other </li></ul><ul><li>Design targets with a balanced scorecard for measurement and evaluation </li></ul>
    27. 27. OHS and RTW Policies <ul><li>Is there an OHS and RTW Policy clearly outlining: </li></ul><ul><li>Management accountability </li></ul><ul><li>Key measures for hazard identification, risk assessment and control </li></ul><ul><li>Outlines consultation arrangements </li></ul><ul><li>Outlines key organisational responsibilities for OHS at all levels </li></ul>
    28. 28. Planning <ul><li>Setting up systems prior to implementation: </li></ul><ul><li>Business case, cost benefit analysis, white papers </li></ul><ul><li>Analysis of data – reports and recommendations </li></ul><ul><li>Recognition of key risks and methodologies for identifying, assessing and controlling </li></ul><ul><li>The ability for the system to adapt to change, new work practices, acquisition, new risks </li></ul><ul><li>Clearly shows how the system stays up to date with the organisation and external factors such as legislation </li></ul><ul><li>Management reporting </li></ul><ul><li>Evidence of consultation and decision making </li></ul>
    29. 29. Implementation <ul><li>Planning means nothing until there has been effective implementation: </li></ul><ul><li>Is the system being actively used? </li></ul><ul><li>Are tools that have been developed being used correctly? </li></ul><ul><li>Are employees aware of who represents them and what consultation measures are in place? </li></ul><ul><li>Are hazards identified, risks assessed and controlled efficiently? </li></ul><ul><li>Is there evidence of an OHS culture where there is accountability for OHS at all levels of the organisation? </li></ul>
    30. 30. Measurement and Evaluation <ul><li>You must be able to demonstrate the system’s benefits and flaws: </li></ul><ul><li>Balanced scorecard that demonstrates lag indicators versus lead indicators </li></ul><ul><li>Lag indicators: </li></ul><ul><ul><li>LTIFR </li></ul></ul><ul><ul><li>AIIR </li></ul></ul><ul><ul><li>MTIFR </li></ul></ul><ul><ul><li>Claims data </li></ul></ul><ul><li>Lead Indicators: </li></ul><ul><ul><li>Workplace Inspection scores </li></ul></ul><ul><ul><li>Committee meetings held </li></ul></ul><ul><ul><li>Other positive factors showing what you are doing </li></ul></ul>
    31. 31. Management Review <ul><li>Is the success of interventions communicated to senior management? </li></ul><ul><li>Does senior management in turn provide feedback and continued support in relation to the systems in place? </li></ul><ul><li>Essential to ensure that the original business objectives established during the cost benefit analysis and business case phase are still on track </li></ul><ul><li>Keep those funding and providing support for interventions in the loop </li></ul><ul><li>Are directors and senior executives aware of the potential penalties for failing to act? </li></ul>

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