Calculating Premiums

How is my premium calculated?

The amount of premium that needs to be collected in Victoria is based on projected claims and operational costs.

The average premium rate for Victorian employers in 2009/10 remains at 1.387 per cent of the state's remuneration, or wages bill, for insured employers.

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 $200K or less) or not has an effect on how your premium is calculated. See Small Employers and Medium & Large Employers. 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 over 500 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. For more information see: 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, the premium rate will not increase by more than 30% from the employer's comparative premium rate subject to the minimum capping factor. The minimum capping factor is 59.1716%. For new workplaces or changes in classification, rate changes will not be capped.
• Minimum Capping Factor - If an employer's premium rate is less than 59.1716% of their true potential premium rate, the 30% cap does not apply. Instead the minimum capping factor of 59.1716% is applied, meaning the employer's premium rate will automatically be raised to 59.1716% of their true premium rate (even if it increases the premium by more than 30%).

Your claims costs

In early June, your WorkSafe Agent sends you a statement outlining any WorkSafe Injury Insurance claims reported by your workers over the past 2 3/4 years. 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.

• Download and view the Claims Reporting Period FAQs
• Download and view the Claims Estimates FAQs

What else can affect my premium?

Choosing the buy-out option
Under normal circumstances, an employer is responsible for the first 10 days of weekly benefits for an injured worker who is off work, and an annually indexed amount of medical and related expenses the first $546* (indexed annually on 1 July) of reasonable medical and related expenses.

However, you can remove this cost by taking up the buy-out option by paying an additional loading of 10% on your insurance premium. This means that your claims are managed and paid for by your WorkSafe Agent from day one. This makes it easier for employers, especially small businesses, to manage the early stages of a claim. The buy-out option is available to all employers. If you intend to take up or remove this option for the coming policy period, you must notify your WorkSafe Agent by 31 August. The buy-out option must apply for a whole policy term for an employer. An employer cannot opt in or out of buy-out part way through a policy term.

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% 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
• Small Employers
• Medium & Large Employers

Remuneration

Your WorkSafe Injury Insurance premium is determined, in part, by the size of your remuneration. This is made up of the wages and certain other benefits you pay to your workers.

To calculate your premium, your premium rate (or percentage) is multiplied by your remuneration.

Definitions of remuneration on this website apply for the policy years since 2002/03. If you require definitions for prior years, please contact your WorkSafe Agent.

How do I record my remuneration?
Complete the Declaration of Rateable Remuneration form either online or in paper format to certify your remuneration for the policy year and estimate the amount of remuneration you expect to pay in the coming policy year.

It is important that you complete this form by 1 August so that your premium can be finalised and your premium for the coming year can be calculated.

If you do not certify your remuneration by this deadline, it will be deemed by increasing the most recent certified remuneration by at least 20%.

If you do not return your form, we will use an estimate of your remuneration to calculate your premium. This estimate is based on the most recent available data on your business plus 10%. This amount is added to cover such things as wage increases and business growth (extra staff).

However, even if you have not returned the form by 1 August, you should still provide a remuneration estimate to your WorkSafe agent as soon as possible, so that your premium can be adjusted to reflect the correct remuneration.

Please be aware that WorkSafe conducts regular audits of employers to determine the accuracy of the information provided.

What if my remuneration changes?
If, at any time, you become aware that:

• what you expect to pay in remuneration is above your current estimate, or
• what you have actually paid in remuneration at any time prior to 30 April is greater than your current estimate

You must provide your WorkSafe agent with a revised estimate within 28 days. If you fail to do so, you may be penalised up to 100% of the premium difference.

You may also advise your agent if your actual remuneration during the policy period will be less than your latest estimate of remuneration. Your future premium instalments can then be adjusted in line with the reduced remuneration. However, you need to be sure that your expectations of reduced remuneration are realistic.

Remuneration deductible
Employers who operate for a full financial year have the first $15,500 of their total remuneration automatically deducted before their premium is calculated. Those who operate for part of the year receive a pro-rata amount of this deduction. Employers whose annual remuneration is between $7,500 and $15,500 are still required to pay at least the minimum premium.

Further information
All the items you need to include in your remuneration is detailed at what to include.
A quick guide to remuneration - the Remuneration checklist.

Compliance Support
WorkSafe has set up a dedicated in-house compliance support, monitoring and enforcement activities - find out more about compliance support.