Labor’s ultimatum on WorkCover: Pass reforms or impose higher premiums

Small businesses could be hit with additional costs as high as $6500 a year to prop up Victoria’s workers’ compensation scheme if state parliament fails to pass contentious laws limiting mental health claims, according to the government’s own modelling.

A protracted battle over the future of WorkCover will return to parliament this week when the Allan government tries to push through a bill that would restrict claims for stress and burnout and those receiving weekly payments after 2.5 years. The changes have been opposed by Victorian Trades Hall Council and do not have the support of the Greens or Coalition, meaning they would be defeated in an upper house vote.

WorkSafe Minister Danny Pearson faces resistance from opposition parties to the WorkCover reforms.Credit: Martin Ollman

If the scheme is not reformed, WorkSafe is forecast to record annual deficits as high as $1 billion. The opposition wants the issue referred to a parliamentary inquiry before backing the legislation, but the government insists the laws must be passed quickly to accompany a 42 per cent increase to business premiums introduced in July.

Updated advice provided to government has warned that if Labor’s bill does not get through and changes are delayed, the government would have to raise funds quickly to keep WorkCover afloat through another premium hike. The charges are calculated as a percentage of the total cost a business pays in wages and benefits.

The advice forecasts average premiums of 1.8 per cent would need to rise again to be between 2.4 and 2.5 per cent, making Victoria the state with the highest rate in the country.

The government will seek to use the prospect of higher premiums to push for the bills to pass this week, the last sitting period for 2023.

Estimates on the impact of these potential changes, obtained by The Age, show they would add thousands of dollars on top of this year’s hike. They indicate a local butcher would expect to pay more than $25,000 in 2024, an extra $6500 more than the year before. Small fruit and vegetable stores could expect an increase of about $4500 while hairdressers would pay more than $1600 extra on average.

Premium rates vary across industries depending on the likelihood of injuries that will need to be covered by the scheme. The highest increases modelled were in manufacturing, in which some sectors could pay as much as 24 per cent of their total wages and benefits as insurance costs.

Small pubs and restaurants would also face a hike in 2024, between $2500 and $3000. Medium-sized construction companies such as bricklayers and plasterers would have premium hikes in the tens of thousands.

WorkSafe Minister Danny Pearson said passing the changes would help ensure the insurance charges do not rise further.

“The leader of the opposition is blocking sensible reform to the scheme which will hurt Victorian businesses and lead to a significant increase in premiums,” he said.

Large unions representing white-collar workers have called on the government to back away from its plans to restrict stress and burnout claims, arguing they are just as legitimate as those for physical injuries. The state indicated that the increased number of mental health payouts was contributing to the scheme needing regular bailouts.

“We fundamentally believe that any worker that gets injured on the job should have the support of the WorkCover system to get better, and to get back to their work,” Trades Hall secretary Luke Hilakari said in October.

Australian Hotels Association Victoria chief executive Paddy O’Sullivan said the uncertain future of the WorkCover bill should be resolved before the end of the year.

“Victoria’s pubs and hotels urge all parliamentarians to work together to break the stalemate in respect of the passage of the bill,” he said.

“If this matter remains unresolved, further significant WorkCover premium increases could be expected, which in the current economic environment is unacceptable to all businesses.”

Australian Industry Group boss Tim Piper said increases to the charges created more anxiety to businesses across the board than any other levy because they were spread across all industries.

“If there was another hike, beyond the 42 per cent … It will start to impact on employment,” he said.

“Inevitably if there is an increase in premiums, there will be price increases across the board.”

Victorian Chamber of Commerce and Industry chief executive Paul Guerra urged political parties to come to a resolution. But he said the government should not pass the cost on to business if the bill failed.

“Business can not and will not absorb another exorbitant WorkCover increase,” he said.

Earlier this month, Opposition Leader John Pesutto said the changes were “half-baked” and said premiums would rise even if the reforms were not implemented.

Get the day’s breaking news, entertainment ideas and a long read to enjoy. Sign up to receive our Evening Edition newsletter here.