How your workers' compensation premium is calculated

Workers’ compensation premiums can be confusing, but understanding where your premium comes from can help you develop practical strategies to reduce it.

Below we’ve outlined the factors that determine how premiums are calculated, and some tips for keeping premium as low as possible.

WorkSafe Victoria considers five key factors when working out your premium:

  1. Remuneration – your workers’ pay and other benefits.
  2. Industry classification – the category your workplace fits in, determined by the goods and services you provide.
  3. Business – if your total wages are less than $200,000 a year, your premium is based on the industry average. If your company’s total wages are above that amount you will pay based on your industry average and your claims history.
  4. Capping – WorkSafe caps any changes by 30%, so if your wages, industry average or claims amount lifts significantly, your premiums won’t jump up! This does not apply if the change is due to a change in industry classification or awards.
  5. Buy-outs – in most instances a business is responsible for the first 10 days of an employee's claim. However, you can remove this amount by paying a 10% increase in premiums.

The importance of past claims

To set premium rates, industry averages of past claim costs are taken into account.

However, businesses with a claims history will be given a rating, which also affects their premium if they have wages totalling more than $200,000 per year. This claims rating should be shown in the premium notice that you receive at the end of each financial year.

The rating is then factored into your premium amount, so if you have a good rating (or low claims) your premium will be reduced. This is why it is so important to take proactive steps to reduce injuries and intervene early when incidents occur.

Lowering costs by helping your employees return to work

The return to work rate is very important when estimating your claim. If a worker returns to the workplace, compensation will end, so the estimation of future costs will be reduced and thus so will your premiums. The longer they stay at work, the more that estimate continues to reduce.

The most effective way to get employees back to work is with a return to work plan, which outlines activities, remedial exercises and a pathway to being a productive member of the workforce.

Keeping up to date with medical and financial documentation means WorkSafe can amend your premiums accordingly. It’s not enough that your employee has returned to work, WorkSafe has to know about it! Because of its effect on our clients’ premiums, Gallagher Bassett works closely with our clients to implement sustainable and effective return to work plans.

Understanding how your premium is estimated can be tricky, what's important is to understand that your claims history and return to work rate can have a significant impact on your business. Make sure you speak to us for a review, so we can help you understand why your premium is what it is, and some steps you can take to reduce it.

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