WORKERS REHABILITATION AND COMPENSATION (EMPLOYER PAYMENTS) AMENDMENT BILL

Committee Stage

In committee.

(Continued from 29 November 2011.)

Clause 1.

The Hon. R.I. LUCAS: The Liberal Party put some questions on clause 1 yesterday in relation to concerns the MBA had raised in relation to the new bonus penalty scheme, and the minister late yesterday provided some responses from WorkCover. Overnight, we have been in touch with the MBA and they have raised some further issues, which I intend to pursue with the minister at this clause. The first part of the minister's response on the bonus penalty scheme yesterday was in response to questions I had raised about caps to premium discounts. The government's response was:

I can also confirm that, consistent with the position paper released by WorkCover in July 2011, it is envisaged that transitional arrangements will apply for the first four years of the new approach and that any increase or decrease in an employer's premium rate will be capped at 125 per cent of the previous year's rate in the period 1 July 2012 and 30 June 2016 subject to any changes agreed to during the consultation process.

On consultation with the MBA, they provided the following comments to me, which I asked the minister to respond to:

Yes, we know there will be transitional arrangements, and we know that at the end of the transition poor performers will have a maximum cap of 1.5 to 2.5 times their premium rate. What we don't know—

and they say it is still not provided for in the minister's response—

is how low the ceiling will go on discounts for good performance at the end of the transitional period. Previous discussions stated one-third per year transitional. The position paper actually states from 1 July 2012 to 30 June 2016, if there is an increase in an employer's premium rates, the increase will be capped at 125 per cent of the previous year's rate for the first four years. To help offset the cost of providing this protection, there will also be a cap on decreases in premium rates due to good claims experience. This will also be set at 75 per cent of the previous year's rate for the first four years of the new approach.

My question to the government is: is the government in a position to respond to the MBA's question? Obviously, they have had some discussions with WorkCover officers and they say that 'previous discussions stated that one-third per year transitional'. But their question is: what we do not know is how low the ceiling will go on discounts for good performance at the end of the transitional period.

The Hon. G.E. GAGO: I refer the honourable member and the MBA to the WorkCover SA position paper that was circulated in July 2011. I understand it is on the public record and has been for some time. On page 20 there is a summary of the parameters which shows that the minimum premium will be set at $200 plus GST plus occ. health and safety fee.

The Hon. R.I. LUCAS: Can I clarify that what the government is saying is that is post the transitional period: that is, there is this transitional arrangement through to 30 June 2016 and that quote the minister has taken from page 20 of the position paper is the government's current position for the post 2016 arrangements?

The Hon. G.E. GAGO: I have been advised yes.

The Hon. R.I. LUCAS: Further in the government's response, the minister said:

In relation to the queries from the MBA about the impact of those employers just encapsulated in the experience rating scheme, it is correct that for such an employer the amount of premium based on their own experience will be limited.

The MBA's response to that was:

Employers would like to know the expected limits of weightings for experienced based assessment so that they can calculate the true nature of how much discount could be achieved for good performance or, alternatively, how much of an increase would be expected based on the experience adjustment factors. Given the nature of the economic downturn, employers are reluctant to support an approach weighted towards higher costs without the ability to significantly reduce financial premium liabilities via good performance.

Is the government in a position to add anything further than the quote that the minister has already given from page 20 of the position paper; and is the government in a position to add anything further in response to that response provided by the MBA?

The Hon. G.E. GAGO: I have been advised that, in relation to when employers will know what impact this will have on them, approximately 91 per cent of employers will see no change to the way their premium is calculated. These are the registered employers who will be classified as small employers in the new approach.

The information required for experienced rated employers to get an accurate idea of the impact on them will not be available until May 2012. This information includes the industry claim cost rates which are aligned to the industry rates.

To assist employers, WorkCover is currently developing a premium calculator that will use proxy industry claim cost rates. The calculator will be made available around March next year, and the calculator will include proxy information.

The Hon. R.I. LUCAS: I thank the minister for that. Later in the government's response, the government said:

Smaller employers are significantly less likely to experience a claim, therefore their claims experience is not an appropriate lever to significantly influence behaviour or impact on the amount they pay.

I certainly understand that response from the government in general, but the MBA's point is (and, clearly, the MBA represents people in the building and construction industry) that this is not the case for building and construction employers who have a higher rate due to the nature of the work undertaken.

I guess that the issue the MBA is raising is: does WorkCover believe that, in the scheme that it is about to implement, it is possible to differentiate? Whilst in general it might be true that smaller employers are significantly less likely to experience a claim, clearly some industries, such as building and construction, certainly believe that that is not the case, and that the issue of greater incentives for smaller employers in this industry may, for that industry, have a greater impact if an incentive for good performance over a period of time might provide them with greater incentive in terms of better occ health and safety and better WorkCover claims experience in their area.

Does the government believe that it is possible for its scheme to be designed to cater for that, or is it just not possible to be able to differentiate between industries, such as the construction and building industry, as opposed to a range of others? This is in relation to small employers as opposed to larger employers.

The Hon. G.E. GAGO: I have been advised that the simple answer to the question is, no. Obviously, a line needs to be drawn somewhere. The threshold has been modelled in consultation with the scheme actuary and it has been modelled in a way to achieve the fairest outcome for all employers.

The Hon. R.I. LUCAS: I can understand the first part of the minister's response, and I suspected that that would be the case. I do not necessarily agree that it is necessarily the fairest outcome for all employers because, clearly, when you have to do this inevitably some will be potentially advantaged and some will be potentially disadvantaged. The point that the MBA may well be making on behalf of small employers in its industry is that they might be the ones in general that might be disadvantaged by such a scheme. I understand, as I said, the first part of the minister's response in terms of how the actuaries and others might want to structure such a scheme.

Finally, it is on the same issue, so I am not seeking a response but putting on the record the MBA's response. The government, in its response, said that the larger an employer is the more influence they have over injury prevention and injury management, therefore it is appropriate that their claims experience is a larger component of their premium calculation. Consistent with the MBA's previous position, their response to that is that small employers can have a significant direct influence as well in terms of proactive injury management. The WorkCover awards highlighted what small business could do and were doing.

I think the point that the MBA are making is that, whilst the actuaries and others instructing these schemes, from my viewpoint, understandably are having to make the sorts of judgements, the MBA are indicating that in terms of injured workers, as they say, small employers can have a significant direct influence, and if they are provided under a scheme with greater incentive to do so they believe there will be better performance overall.

One would obviously hope that whatever the structure of the scheme employers would take the directions that were required to lower the number of work injuries within their worksites anyway. With that, I thank the minister and the government for the response to the issues that have been raised by the MBA on this scheme.

Clause passed.

Clauses 2 to 9 passed.

Clause 10.

The Hon. D.G.E. HOOD: I move:

Page 20, after line 26—Insert:

(1a) Subsection (1) does not apply if—

(a) the employer has not, with in the period of 12 months immediately before the date on which the statutory payment was required to be paid, been in default for failing to pay a previous statutory payment in accordance with the requirements of this act; and

(b) the employer pays the statutory payment within 14 days after the date on which the statutory payment was required to be paid under this act.

This is a very simple amendment, and I will not speak for very long because I understand the government has indicated that it will not oppose the amendment, or maybe even support it—a nuance of words there. This amendment fixes what I think is a pretty significant issue for employers who aim to do the right thing. Quite simply, under the current regime (if I can put it that way) companies or businesses that pay their WorkCover premiums on time and have a good payment history are in no way rewarded or even acknowledged for that.

Currently, if they are late for almost any reason, they will be automatically slapped with a fine from WorkCover if a monthly payment for WorkCover premiums is late. In fact, in the last week or so my office has had contact with a constituent who runs a small business and who claims that he has never made a late payment in the entire time he has operated his business but, due to a direct debit mishap with bank—a problem over which he had no control; it was the bank's error and the bank since acknowledged that it was their error—his premium for a recent month was, I understand, just 24 hours or so late; despite that, he was slapped with a fine of 80 per cent of that monthly premium from WorkCover, no questions asked.

I think that is unacceptable. This amendment rectifies that. What it puts in place is that good payment histories will be recognised. Specifically, that means that where a business has had a flawless history—that is, a perfect, payment history; they have paid on time, in full—in the preceding 12 months and if there is a hiccup, WorkCover cannot impose a fine on them if that particular business pays the outstanding premium in full within 14 days from the due date.

So, it requires 12 months of a perfect payment history, and then it gives them a 14-day grace period, which will allow for these sorts of issues that do come up from time to time, such as direct debits not occurring as they should. It is a pretty simple amendment, and I ask for the support of the chamber.

The Hon. G.E. GAGO: The government supports this amendment. The amendment applies to proposed section 72K of the amendment bill which closely replicates current section 71 of the Workers Rehabilitation and Compensation Act 1986. This section applies to employers who fail to pay statutory payments when or as required by the act, and allows the corporation to charge penalty interest on the amount in arrears, or to impose a fine on the employer.

The proposed amendment has the effect of limiting WorkCover's administrative powers by preventing the corporation from charging penalty interest on the amount in arrears, or imposing a fine on the employer, as long as the employer has not defaulted in the previous 12 months and makes the payment within the following 14 days.

The government appreciates the intent behind this proposal. Although legislative change is not necessary, the most appropriate or effective avenue with which to deal with such an administrative matter is not an amendment which will negatively impact on the implementation or functioning of the new approach to employer payments. As such, the government supports this amendment.

The Hon. R.I. LUCAS: As we outlined in the second reading, we support the amendment as well, and we congratulate the Hon. Mr Hood for raising the issue.

The Hon. T.A. FRANKS: The Greens also congratulate the Hon. Dennis Hood for raising this issue, and suggest that, if the government has a preferred method of making this amendment, it should put that forward. Again, this is a good example of how the Legislative Council actually improves legislation.

Amendment carried; clause as amended passed.

Remaining clauses (11 to 15), schedules and title passed.

Bill reported with amendment.

Third Reading

The Hon. G.E. GAGO (Minister for Agriculture, Food and Fisheries, Minister for Forests, Minister for Regional Development, Minister for Tourism, Minister for the Status of Women) (10:33): I move:

That this bill be now read a third time.

Bill read a third time and passed.

The Hon. J.M. GAZZOLA: Mr President, I draw your attention to the state of the council.

A quorum having been formed: