2021 Levy Consultation > Should we decrease the average levy for work injuries?

Recommendations to the Minister

Should we decrease the average levy for work injuries?

Costs of covering injuries sustained at work have gone down more than expected, so we’re proposing to decrease the average work levy paid by employers.

Agree

Disagree

Responses

The Work Account

We propose decreasing the average Work levy rate for employers and self-employed from $0.67 to $0.63 per $100 of payroll for 2022/23, increasing this to $0.65 in 2023/24, and $0.67 in 2024/25.

The levy collected for the Work Account is used to support injuries to workers that occur at work. Over the past five years, there’s been good progress made in reducing the risks of a fatal injury at work. However, the overall risk of injury while working is increasing over time.

The proposed changes and background information are outlined below. For a more in-depth look at how we arrived at the recommended levy rates, see our detailed pricing report for the Work Account or information packs for each Levy Risk Group.

Work Account detailed pricing report

Levy Risk Group information packs

Workplace injury prevention

In response to this, we’ve increased our investment in workplace injury prevention by $12m per annum since 2017. An example of our new injury prevention investment includes the workplace injury prevention grants which provide $22 million over five years to help business groups:

establish harm reduction programmes targeting their sectors
grow innovation across the health and safety system.

Workplace Injury Prevention Grants

We’re also supporting WorkSafe NZ to expand their ability to develop and deliver additional education programmes by providing up to $15m per annum in additional injury prevention funding.

Increasing injury costs

The cost of injuries is expected to rise due to an increase in the:

numbers of injuries requiring time off work
length of the recovery period required before the worker can return to work.

For the Work Account, these cost pressures have been offset by the impact of economic changes on the Account and the lower funding position target introduced in 2019. The result is the proposed average levy reducing in 2022/23 and then slowly increasing.

Cost to support work-related injuries

A breakdown of the costs we expect for the 2023 to 2025 levy years are set out below.

Cost of supporting workplace injuries

Cost ($millions)	2022-23	2023-24	2024-25
Rehabilitation	133.1	138.0	143.2
Treatment	269.3	282.0	295.9
Compensation	678.9	722.8	767.7
Subtotal for supporting recovery	1,081.3	1,142.8	1,206.8
Savings from injury prevention	-16.4	-16.7	-18.9
ACC’s operating costs	44.5	62.8	64.4
Savings from management actions	5.8	-20.5	-28.6
New Year Claim Cost	1,115.2	1,168.4	1,223.7

Dividing the above numbers by our estimated liable earnings for each year results in the average levy rates for businesses. The table below shows how we have calculated the recommended levy rates to provide the necessary support for injured workers.

Calculating the recommended levy rate

Levy for	2022-23	2023-24	2024-25
Supporting recovery	$0.86	$0.86	$0.86
Investment to prevent injuries	-$0.01	-$0.01	-$0.01
ACC’s running costs (including savings)	$0.03	$0.05	$0.04
Savings from management actions	$0.00	-$0.02	-$0.02
*New Year Rate*	*$0.88*	*$0.88*	*$0.87*
Funding adjustment	-$0.25	-$0.23	-$0.20
Recommended levy	$0.63	$0.65	$0.67

The recommended Work Account levies are 29% lower than the full cost of supporting the new injuries we expect in 2022/23. The use of the Account’s surplus funds has reduced work levies by $907 million over the next three years.

Setting levies for individual businesses

Businesses pay different levy rates depending on how risky their primary business activity is (i.e. what the risk of injury is in relation to the type of work employees are doing).

After assessing this risk, ACC allocates all businesses into one of 539 ‘classification units’ (CU). These CUs are grouped into one of 142 ‘levy risk groups’ (LRG) based on their injury risk profiles (i.e. the frequency and severity of injuries, as well as how long it takes for injured workers to return to work - represented by the estimated total cost of claims, compared to wages paid).

ACC sets the levy rates for businesses at the LRG level.

This will mean levy rates for some businesses will increase when the average rate is decreasing or decrease when the average rate is increasing to avoid large changes in levies but allow CUs to move towards a fair rate and better reflect their risk profile over time.

The following business rules have been applied to the Work Account for the 2021 levy round:

If the aggregate rate decreases then:
- any CU levy rate increases are capped at 15%, or $0.04 if greater, per annum; and
- CU levy decreases are capped at a decrease of 25% per annum in addition to the decrease in the aggregate rate.
If the aggregate rate increases then:
- any CU levy rate increases are capped at 15% in addition to the increase in the aggregate levy rate, or $0.04 if greater, per annum; and
- any CU levy decreases are capped at 25%, per annum.
If the aggregate rate is not proposed to change then:
- any CU levy rate increases are capped at 15%, or $0.04 if greater, per annum; and
- any CU levy rate decreases are capped at 25%, per annum.
These rules apply to changes in the risk relativity for a CU within an LRG. The exception is where this change requires the CU to move to a different Levy Risk Group.
- If the CU moves to a higher Levy Risk Group, the above rules will apply. Levy rate increases will be capped at 15%, or $0.04 if greater. These rates may be subject to further correction in the next levy period (2025-2028).
- If the CU moves to a lower Levy Risk Group that requires a total movement of more than 25% per annum for three years, it will move towards the true levy rate in even steps over the three-year levy period.

The impact of this is showing in the following graph.

Differences in levy rates for CUs between consultations

Calculate what the Work levy changes could mean for you

Estimate how much your business levies will be for the year, so that you know what to expect when your invoice arrives.

Step 1 of 3

What type of work do you do?

Search for your type of work

Enter a keyword or your business industry description

Step 2 of 3

Your business structure

Are you a sole trader?

You work for yourself as a freelancer, contractor or as your own business.

Do you employ staff?

You or your business has staff that you employ.

Are you a shareholder employee?

You own part of a business and also work for that same business.

Step 3 of 3

Your income and payroll

How much will your liable income be for the year?

ACC doesn't store this information

Do you work full-time?

This field is required

Full-time is more than 30 hours a week on average over a tax year.

How much will your liable income be for the year?

Shareholder {{ index + 1 }}

ACC doesn't store this information

What are your estimated liable earnings (payroll) for the year?

ACC doesn't store this information

Sole trader

What you are currently paying:

Current total

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What we propose you pay:

2022/2023

Proposed total

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2023/2024

Proposed total

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2024/2025

Proposed total

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Structure: Sole trader

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Your projected income may be impacted by the full time minimum, or a threshold known as the Liable Earnings maximum. Read our liable earnings proposal for more information.

While we’re recommending that the average Work levy is decreased next year with small increases in the following two years, levy rates for each CU are also updated to reflect any changes in their claims patterns. This means levy rates for some businesses will increase when the average rate is decreasing or decrease when the average rate is increasing.

These results are estimates based on the proposed levy rates and will be subject to Cabinet's final decisions and any changes in your liable earnings each year.

The Minister for ACC is also consulting on changes to specific CUs for: retail and wholesale trade businesses; professional and community cricket; and prime contractors, which are not reflected in these estimates. You can find out more about these proposals here.

Shareholder

What you are currently paying:

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Current total

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What we propose you pay:

2022/2023

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Proposed total

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2023/2024

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Proposed total

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2024/2025

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Proposed total

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Structure: Shareholder employee

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These results are estimates based on the proposed levy rates and will be subject to Cabinet's final decisions and any changes in your liable earnings each year.

Employer

What you are currently paying:

Current total

What we propose you pay:

2022/2023

Proposed total

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to your {{ userInput.structure.employer.WL.l }}

2023/2024

Proposed total

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to your {{ userInput.structure.employer.WL.l }}

2024/2025

Proposed total

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to your {{ userInput.structure.employer.WL.l }}

Industry: {{ userInput.bic.text }}

Structure: Employer

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These results are estimates based on the proposed levy rates and will be subject to Cabinet's final decisions and any changes in your liable earnings each year.

Our recommended levy rates

Levy rates for each CU

Info packs for each LRG

The Minister for ACC is also consulting on changes to specific CUs.

Minister's proposals for CUs

Working Safer Levy

We also collect a levy on behalf of the Ministry of Business, Innovation and Employment (MBIE) for supporting WorkSafe’s enforcement, education and engagement activities across the country.

This is currently a flat rate of $0.08 per $100 of liable earnings and is not part of this consultation.

ACC levy products for business

We’re always making small adjustments to levy products, and looking for opportunities to improve these, to ensure they keep up with changes in workplaces.

Experience Rating Programme

The Experience Rating Programme is for medium to larger businesses who have paid more than $10,000 in annual Work Account levies in each of the last three years.

We're also consulting on changes to the Experience Rating Programme.

Provide your feedback on these changes

Accredited Employers Programme

Businesses in the Accredited Employers Programme act on behalf of ACC for their employees’ work-related injuries, including managing and paying the costs of claims and rehabilitation. Accredited employers can qualify for reductions of up to 90% in their Work levies.

Our co-designed vision for AEP was developed by bringing together unions, accredited employers, industry associations, treatment providers and other interested parties in 2019. The vision places AEP as a leader in injury prevention and injury and claims management. Operational improvements are well underway, and we will be engaging you further on Phase Two changes in 2022.

There are no proposed changes to the AEP Framework in this consultation. However, the review of the Work Account levy may have flow on effects to the Partnership Discount Plan discounts and AEP fees.

Co-designed vision for AEP

Impact of 2021 Work levy proposals for accredited employers

1 Sep 2021

Open for feedback

Tell us what you think about our proposals.

5 Oct 2021

Consultation closes

We’ll review and consider all feedback submitted to us.

Nov 2021

Recommendations to the Minister

Taking account of what you tell us, we’ll make recommendations on levy rates to the Minister for ACC.

Dec 2021

Final decisions by Government

The Government will make the decision on final levy rates, which will take effect next year and be in place for three years.

Agree

66%

Disagree

34%

66%

Agree

66%

Disagree

34%

As far as many of us are concerned you have not dealt fairly with claims calling degeneration as the reason for refusing claims. You should not be allowed to clip any tickets for ACC, you have prevented us sueing wrong doers as well. You have lost sight of what it was set up for looking only after your self intrests salaries and bonuses!

NO!. This is an oportunity to invest in improvements to the system. Instead of accepting longer and more expensive recoveries and passing the cost on you need to look at the way injuries and recovery are managed by the providers.
The default too often is to sign people fully unfit for work even when the employer attempts to engage in a light duties and early intervention return to work program.
Invest in integrating the providers into a wrap around care sytem that includes the injured person, their whanau and their employer. This needs to treat not just the physical but the psychological impact of an accident. Stats. indicate that after a two week absence their is a 50/50 chance of full rehabiliation. This is often as much psychological as it is physical and is quite frankly shameful. Use what appears to be a blip in the figures to build a system that supports the early, effective and complete return to work of minor injuries

It makes not sense to reduce the levy rate for WRI, given the number of actual injuries requiring sustained ongoing treatment has increased and will likely increase with an aging population. Using fatalities as a single measure for this is not a good metric on measuring severity rates in the industry nor reasonable grounds to reduce levy rates. This is key when considering the impact of work related disease and occupational illness in combination with injuries with notable hearing loss claims increases incurring and average of $11.23K in the first year of a claim according to ACC data for the ten years prior leading into 2016 for diagnosis and mitigation of NIHL. Add to this the increasing occurrence of Silicosis, Advanced Silicosis, and COPD being reported. In recent years the increased issue of manual handling sprain and strain related claims have become more evident as with the direction of ACC funding in IPG (Injury Prevention Grants), to ensure injury prevention and reduction gains are sustained this will require significant funding to continue in this area. On the basis of all of this it is more sensible to maintain higher levy rates to reflect the risk associated with and the workplace.