WORKCOVER CORPORATION

The Hon. J.A. DARLEY (15:18): I seek leave to make a brief explanation before asking the Minister for Industrial Relations a question regarding WorkCover.

Leave granted.

The Hon. J.A. DARLEY: In 1990, WorkCover introduced a bonus/penalty scheme as an incentive to employers to improve the safety of workplaces. The basis of this scheme was to either reward or penalise employers based on the cost of claims by their workers in a two-year period. It was thought that penalising employers with high cost claims and rewarding employers with low or no cost claims would encourage employers to improve and maintain high standards of safety in the workplace for their employees.

However, following a review in 2009, WorkCover made the decision to abolish the bonus/penalty scheme as it did not believe the scheme was operating effectively. Consultation from stakeholders was sought in late 2009 for alternatives, with the view that a new scheme would be operational as of July 2010. This would have ensured that there would be no period where employers incentives did not exist. I understand that WorkCover has suggested an experience-rated system as an alternative; however, I understand that, to date, no scheme has been implemented to replace the bonus penalty scheme which ceased to operate on 30 June 2010. My questions are:

1. Can the minister provide any details of what will replace the bonus/penalty scheme?

2. Can the minister advise when a new scheme will be introduced and when this will become operational?

3. Can the minister advise why there has been such a delay in implementing a replacement scheme when it was envisaged in WorkCover's consultation report from November 2009 that a new incentive scheme would be operational by 2010?

The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Industrial Relations, Minister Assisting the Premier in Public Sector Management) (15:20): I thank the Hon. Mr Darley for his important question. The bonus penalty scheme for WorkCover ceased on 30 June this year following a WorkCover board decision back in July 2008. The honourable member is correct: WorkCover has been carefully examining alternative schemes and considering a way forward.

The task of identifying an appropriate system to collect money from employers to cover the cost of the South Australian workers compensation scheme is not easy. The scheme needs to collect a set dollar amount each year to cover the estimated costs for that year. Any revised approach, including adjustments for individual employers, would be an allocation method aimed at distributing the cost of the scheme across all employers within the scheme.

The bonus penalty scheme was flawed. I think from memory there were a lot more bonuses than there were penalties. I think it was about $50 million a year. It was not a self-funding scheme where bonuses offset penalties; rather, it was about $50 million in deficit with more bonuses being paid than were recovered in penalties, so it was not a true revenue-neutral scheme in that regard.

While the scheme had its problems, I understand that WorkCover's new Chief Executive Officer, Mr Rob Thompson, believes that experience rating does have a place in workers compensation schemes based on his career in insurance and many workers compensation schemes. I understand that most Australian jurisdictions have an experience rating system of some kind.

In August 2010, the WorkCover board gave Mr Thompson imprimatur to canvass with employers their interest in an experience rated premium system as the future employment payment method in South Australia on the basis of the preliminary feedback from employers. The WorkCover board at its September meeting agreed that more detailed consultation on the features of a new employer payment system for South Australia is justified.

I understand that WorkCover commenced a staged consultation process in October and to date a total of nine workshops attended by close to 140 employers have been held to provide stakeholders with information regarding employer payment systems and to gain preliminary input into the design of such a system. I am advised that WorkCover hopes to release two discussion papers in December 2010, one on experience premium rating and the other on retro paid loss.

I recognise the employer community's desire for a timely replacement to the previous bonus penalty scheme. WorkCover will keep all stakeholders, especially employers, informed of developments as they occur. I conclude with this point: certainly it would be my expectation that any scheme like that would be revenue-neutral in the sense that it would not add additional costs to the scheme as the previous bonus penalty scheme did.