Calculating Premiums
The amount of premium that needs to be collected in Victoria is based on projected claims and operational costs.
The average premium amount has been cut by 5% to 1.387 per cent of the state's remuneration, or wages bill, for insured employers (effective from 1 July 2008). This is the second lowest rate of all Australian states. Insurance premium rate reductions have resulted in total employer savings in excess of $1 billion since 1 July 2004.
Each year, the amount of premium needed to adequately fund the scheme is set based on independent actuarial advice. This covers benefits to injured workers, health and safety activities, cover future liabilities and administration costs.
These costs are then spread across all employers in the scheme. This means if some employers avoid their insurance premium responsibilities, others must pay more to ensure the scheme is adequately funded. Insurance costs are distributed based on an employer’s health and safety performance, and their ability to achieve safe, sustainable return to work for their injured workers.
What factors influence how much premium I pay?
- Remuneration - we use the total amount of the wages, salaries, superannuation and certain benefits you pay to your workers to measure the size of your business. Note that whether you are considered to be a small employer (annual remuneration under $200K) or not has an effect on how your premium is calculated. Find links to premium FAQ's & the latest publication in further information. To determine what is remuneration, view the remuneration section.
- Workplace Industry Classification (WIC) is a reflection of the industry in which your workplace operates. There are 518 different classifications or groups and each has a premium rate, expressed as a percentage. These rates are calculated according to that industry’s claims experience. More information: Industry Classification & Rates.
- Experience - for medium and large businesses, your claims experience influences the premium you pay. We look at how your claims costs compare to your industry’s costs – if you perform better than your peers you will pay less than your industry’s rate. The reverse is also true.
- Capping to protect businesses from dramatic fluctuations in the premium rates from year to year a capping system is used to limit the size of most premium rate increases. For workplaces that continue into the new policy period (current risk) with the same classification, premium rates will not increase by more than 30% a year. For new workplaces or changes in classification, rate changes will not be capped.
Your claims costs
In early June, your WorkSafe Agent sends you a statement outlining any WorkSafe Injury Insurance claims reported by your workers between 1 April 2005 and 31 December 2007. This period is referred to as the Claims Reporting Period.
Note: if you did not have any claims in this period you will not receive a claims statement.
The statement shows the actual costs of these claims as well as an estimate of any future costs. You should review this statement carefully and discuss it with your WorkSafe Agent if needed.
In September you'll be sent another statement which will outline the claims used for the calculation of your insurance premium.
What else can affect my premium?
Taking over existing workplaces or starting a business (Succession)
Succession occurs when one workplace inherits the claims history of another workplace. Succession can affect your premium. If you take over part or all of another employer’s business, you may inherit the claims history of that employer unless you can demonstrate that you, the new employer, are not associated with or connected to, the previous employer. Since 1 July 2003, succession has no longer applied where an employer acquires a business, or part of a business, and it is established that the new employer is unrelated to the previous employer. This change has been made to make it fairer for employers who acquire a new business, it also reinforces that the new owner(s) is responsible for the workplace’s health and safety performance.
This means that the claims history of the previous business will not be applied to the relevant workplace of the new employer. Thus succession is not applied if there is no relationship of control – i.e new employer is at arm’s length to previous employer.
Note: Employers can not be at arm’s length if a “relationship of control” exists between them
- at any time during the test period; or
- since the start of the test period
The test period is made up of both the Predecessor period and the Successor period.
- Test period for “predecessor”
From one year prior to the beginning of the policy
year in which the transfer took place to the end of
that policy year. i.e. 2 years - Test Period for “successor”
From beginning of the policy year in which the
transfer took place to the end of the following policy
year. i.e. 2 years
There are specific controlling interest tests which establish if a relationship of control exists. Controlling interest includes both direct and indirect controls. They consider interests held directly by an entity and indirectly by an entity’s associates.
If you require more information about succession rules, contact your WorkSafe agent.
Goods and Services Tax
Under the changes introduced by the Federal Government in July 2000, your Workplace Injury Insurance premium is subject to the Goods and Services Tax (GST). The 10 per cent GST is added after the premium is calculated. The vast majority of businesses can claim the GST from the Australian Tax Office as an input tax credit.
If you choose to pay your insurance premium in advance to get the discount on your premium, your initial annual invoice is a tax invoice for GST purposes.
If you pay by instalments, the invoices issued to you are also tax invoices for GST purposes.
Further information and assistance:
• Choosing the buy-out option
• Download Your WorkSafe Injury Insurance 2007.08 publication
• download and view about premium for small employers (under $200k)
• Premium calculation and remuneration FAQs
