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Workers’ Compensation Premiums: How do they work? Jan 24th, 2014

The cost of workers’ compensation premiums are driven by three primary factors:

  1. The industry you work in (and therefore the gazette rate for your industry);

  2. Your wage roll; and

  3. Your claims costs.

The first two factors are largely set in stone. WorkCover WA estimates the total cost of the scheme for the next year and determines the overall amount of premium that must be collected to cover these costs. The gazette rate for each industry is calculated based on the total amount of premium required and the historical performance of individual industries within the scheme.

Therefore, your understanding of claims costs and how to control them is your only opportunity to impact on the cost of your workers’ compensation premium. Claims costs are the actual dollars spent by the insurer when an injury occurs, plus the insurer’s estimate of what the total cost will be by the time the injury has resolved and the claim is closed.

As the employer, you can make decisions about and have legislative control over the following areas:

  1. Medical treatment – refer injured workers to consultant doctors with excellent communication skills;

  2. Wages – you may choose not to recoup wages;

  3. Rehabilitation – in many cases, you are capable of overseeing this with internal resources.

Your understanding of these factors, your approach to injury management and your relationship with your insurer to communicate this will impact on outstanding reserves and can ultimately reduce the cost of the claim. However, the establishment of preventative strategies and a consistent, proactive support system for your injured workers is critical to achieving the above outcome.

Claim Cost Image

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