‘It will be the last straw for some businesses and they will go broke’: Paul Guerra, VCCI

Victorian businesses will be slugged almost $18bn over a decade because of government changes to WorkCover, with warnings costs will be passed on and lead to closures and job losses.

Victorian businesses will be slugged almost $18bn over the next decade as a result of the government’s changes to WorkCover premiums.

It has prompted dire warnings from business groups that changes to the scheme will see the cost passed on to consumers, increased job losses and business closures.

Changes to the scheme include an already announced 42 per cent hike to premiums, with the average premium to rise from 1.2 per cent to 1.8 per cent.

An independent analysis from the Parliamentary Budget Office has found the changes will cost businesses $17.8bn by 2033-34.

The changes would see a $1.4bn increase to the state’s bottom line next year, increasing to $2.2bn by 2023-24.

Benefits paid to injured workers are now exceeding the premiums paid by business to fund the scheme by $1.1 billion every year.

The WorkSafe head office. Picture: Alan Barber

Paul Guerra, CEO of the Victorian Chamber of Commerce. Picture: Andrew Henshaw

The government has been forced to spend at least $1bn in bailouts to prop up WorkSafe over the past two years to cover the shortfall.

In May the state government announced an average 42 per cent increase in WorkCover premiums to apply to Victorian businesses.

It will see the premiums paid by some small to medium sized businesses increase by tens of thousands of dollars a year.

Other changes to the scheme include the limiting of some mental health claims, with stress and burnout no longer eligible for weekly WorkCover payments.

Instead there will be 13 weeks of provisional payments made available for medical treatment and other costs.

WorkCover has been described as “fundamentally broken” by the state.

Opposition spokesperson for WorkCover, Ann-Marie Hermans, said the PBO analysis followed damning new ABS data that showed more than 7,500 businesses left Victoria last financial year.

“Like Victoria, WorkCover is broke and it is Victorian businesses and workers who are paying for the incompetence of the Andrews government,” she said.

“It’s little wonder businesses are fleeing Victoria and it’s workers and families who will suffer as a result of Labor’s incompetence.”

Victorian Chamber of Commerce and Industry chief Paul Guerra said many businesses had reported increases above the predicted 42 per cent average.

“We know the WorkCover system needs to evolve, it needs to be maintained, and it needs to be sustainable, but we can’t just expect business to pay for it,” he said.

Paul Guerra warns costs will “absolutely” be passed on to consumers. Picture: NewsWire

“One of three things is going to happen: the costs will absolutely be passed on to customers where it can, for those who can’t pass it on they will reduce their employment, and unfortunately it will be the last straw for some businesses and they will go broke.”

Mr Guerra said it was critical the government fast tracked the establishment of the new Return to Work Victoria, to help people get back into the workforce.

“We’re looking at a situation where before we know it we’re back at budget time, and what have we done to change the WorkCover system to make it more sustainable next year,” he said.

Australian Retailers Association chief Paul Zahra said increasing WorkCover premiums added further pressure to businesses at a time where they needed support.

“The retail sector is currently experiencing unprecedented challenges- a consumer spending slowdown coinciding with increased operating costs across the board – including rent, energy and labour,” he said.

Australian Retailers Association chief Paul Zahra. Picture: Supplied

“Many businesses have been very proactive in reducing their level of work injuries, in an effort to reduce their operating costs and will be disappointed that they may not get the full cost benefit due to this significant increase in premiums.”

Government data shows WorkCover claims have tripled since 2010.

Injured Victorian workers were also taking longer to get back on the job than colleagues in any other state or territory, which critics argued the scheme’s billion-dollar blowouts.

The new 1.8 per cent average premium makes the Victorian scheme among the most expensive in the country.

In Queensland the premium rate is 1.23 per cent while NSW sites at 1.48 per cent.

Tasmania and the ACT both charge well above other states with rates of 2 per cent while Western Australia is just above Victoria with a rate of 1.82 per cent.