Dairy farmers get injured. A lot. But how many of us think about workers compensation until there’s a serious incident?
I invited the author of “WorkCover that Works”, Mark Stipic, to bust some of the myths for dairy farmers. I highly recommend the book, which is packed with practical information yet easy to read, even after a long day in the paddock!
Thanks very much, Mark!
Recently, I had a conversation with Milk Maid Marian thanks to an introduction by our mutual colleague Kevin Jones from SafetyAtWorkBlog.
We discussed WorkCover in the context of the dairy industry. The more we talked, Marian discovered there could be many dairy farmers out there sharing some misconceptions about how WorkCover works.
Dairy farming is what I’d call a pretty high-risk industry. In Victoria the WorkCover Industry Rate for ‘Dairy Cattle Farming’ is 4.546% in 2018/19. This means many dairy farmers are paying more than 4.5% on top of their labour costs in WorkCover insurance alone. The average premium rate across all employers in the state is 1.272% so by comparison, you guys pay quite a lot.
Here are 5 common myths (and 5 harsh realities) about WorkCover in Victoria.
Myth 1: WorkCover is just another type of commercial insurance
The reality: WorkCover is more like taxation than insurance
First let’s compare WorkCover insurance to car insurance. When insuring your motor vehicle, you can browse the market, negotiate rates and compare the benefits of different policies. You can usually change insurers as often as you like. Once you have a reasonable claims history, you can request a lower rate or threaten to switch providers.
However, when it comes to WorkCover, each year the Victorian Government releases industry rates that are used to determine how much you’ll pay. Legislation determines your level of coverage. You cannot negotiate a better deal, not even through an insurance broker. Restrictions are in place that affect how often you can move your policy to another provider.
The WorkCover scheme is heavily regulated and WorkSafe Victoria has the authority to audit your business at any time. They even share information with the Australian Taxation Office and State Revenue Office to target employers who aren’t paying their fair share of WorkCover premiums. That’s all very different to other forms of insurance.
Myth 2: There are 5 WorkCover insurers in Victoria
The reality: There is only one insurer – WorkSafe
WorkSafe Victoria is the trading name of the Victorian WorkCover Authority. This is the state government agency responsible for OHS matters, employers’ WorkCover premiums, and claims for compensation by injured workers.
WorkSafe has appointed five agents to administer premium- and claims-related matters on their behalf. These are Allianz, CGU, Employers Mutual Limited (EML), Gallagher Bassett (GB) and Xchanging. These companies are often referred to as ‘the insurer’. But don’t be mistaken, they are not insurers. They are agents of WorkSafe.
When you pay your annual WorkCover premium, the money goes to the WorkSafe scheme, not to your WorkSafe agent. Even though the notices will display a logo from one of the five companies listed above, the agent is merely the administrator of the premium collection process. So be aware that, for WorkCover purposes, you are not dealing with an insurer per se, but with the third-party administrators of a state government agency.
Myth 3: I don’t need WorkCover insurance because I’m the only person working in my business
The reality: You don’t get to decide whether or not to take out a WorkCover insurance policy – either you’re required to have it, or you’re not eligible for cover
As I stated above, WorkCover is much like taxation. And you don’t get to decide whether or not to pay taxes – if you meet certain criteria, you must pay. Well, the same goes for WorkCover.
With regard WorkCover insurance, if WorkSafe finds out that you were uninsured for a period of time, they may audit you and sting you with back-payments and penalties.
So, if you’re the only person working in your business, how do you work out if you should have a policy or not?
Generally, if you are a sole trader or a partner in the business and have no other employees then you cannot take out a WorkCover insurance policy. This means you don’t have to pay, but it also means you aren’t covered in the event of an injury.
However, if you have a Pty Ltd company, you could be an employee of the company (even if you are the only employee and the business owner). In this case it is likely that your company should have a WorkCover policy. Regular payments made to you would need to be declared to WorkSafe and used in your premium calculation.
The best thing to do is contact one of the five WorkSafe agents and explain your business structure, including how you pay yourself. They will guide you through the policy registration process if appropriate or confirm you are ineligible for coverage.
Myth 4: WorkCover insurance will protect my business from the costs of an injury claim
The reality: Some employers will experience premium increases that significantly outweigh the actual amounts paid on the claim
If your business pays over $200,000 rateable remuneration (which is basically WorkSafe’s term for ‘labour costs’) then the costs paid on your WorkCover claims will be used in calculating your premium. If you have higher claims costs than the average for your industry, you can expect to payer higher than the average rate applied to your sector.
Having worked with hundreds of employers in many different industries I have observed that the system doesn’t treat every business fairly. Generally, small businesses in low risk industries (eg. A local real estate agency) will be well protected from the costs of a claim. For example, if an injured worker received $10,000 in WorkCover payments, the employer’s premium might go up a total of $1000 over the life of the claim.
But medium-to-large employers, especially those in higher risk industries, often experience premium increases that outweigh the actual costs paid on a claim. $10,000 paid to an injured worker could result in $40,000 additional premium over the life of the claim.
It’s difficult for me to explain the nuances of this risk in this relatively brief blog post. In the dairy industry I’ve found the tipping point is that if you pay more than $400,000 labour costs, you face a risk that a single WorkCover claim could lead to significant additional premiums to be paid. And that can decimate your bottom-line profits. You would be well advised to grab a copy of my book and pay close attention to the section on ‘sizing factor’ where I further unpack this topic.
Myth 5: I don’t need WorkCover for contractors
The reality: Some contractors are considered ‘deemed workers’ by WorkSafe. They attract additional premiums for your business, plus they could be eligible to lodge a claim against you
Generally, payments to employees are used to calculate how much WorkCover premium you’ll pay and payments to contractors don’t need to be declared.
While a person might be a genuine contractor for all intents and purposes regarding taxation and benefits, if they earn 80% or more of their income from a single source, they may be considered by WorkSafe to be a deemed worker. And payments to deemed workers are included in rateable remuneration (meaning they count towards your WorkCover premium).
There are many contractors out there who only provide contracting services to just one business. It is likely that the hiring business would be required to declare payments to this contractor as a deemed worker. If you engage contractors, you should brush up on WorkSafe’s guideline around contractors and workers.
Furthermore, WorkSafe has specific guidance around when a sharefarmer would be considered a worker or contractor. I understand this is a common working relationship in the dairy industry and you can read WorkSafe’s position on the topic here.
My advice to you
The dairy industry is an incredibly important part of the Australian economy and it’s my privilege to have been invited to share some helpful advice. Here are my top tips for dairy farmers:
- If you’ve made an error on your WorkCover policy – or perhaps you forgot to set one up when you went into business – sort it out sooner rather than later. The longer you leave it the bigger the problem could become. Plus, WorkSafe is generally more lenient when you self-disclose an error as opposed to when they discover it following an audit.
- Get to understand your WorkCover risk now and start taking steps to prevent injuries. Often it is cheaper, less time-consuming and more rewarding to proactively invest in injury-prevention strategies now than to deal with the fallout of a single claim.
- Don’t be afraid to seek independent advice. Most employers rely solely on their WorkSafe agent regarding claims strategies. But remember, they are an agent of WorkSafe. They must also provide advice to your injured worker and they may be working towards targets that don’t benefit the goals of your business.
About the author
Mark Stipic is #TheWorkCoverGuy and managing director of Mark Stipic Consulting. He is the author of WorkCover that Works, the only book of its kind written specifically to help employers reduce their injuries, claims and WorkCover premiums.
When you’re ready, here are two ways Mark can help you and your business take control of your WorkCover situation:
- Get a copy of his book WorkCover that Works. It will show you how to reduce your injuries, claims and WorkCover premiums.
- Request a free, no obligation 30-minute strategy call. Mark will help you address your most pressing challenges and connect you with potential solutions if appropriate.