Information about the 2015/16 levy rates for Levy Risk Group 724: Business support services

Transcription

1 Information about the 2015/16 levy rates for Levy Risk Group 724: Business support services Call centre operation Credit reporting and debt collection services Document preparation services Educational support services Employment placement and recruitment services (no on-hired staff) Labour supply services (on-hired staff office workers only) Taxi and other vehicle scheduling operations

2 Contents Introduction... 4 The levy setting process... 4 About this document... 4 Levy components... 5 Employers... 5 Self-employed people... 5 Why do levy rates change?... 6 Work levy rates... 7 What are the 2015/16 Work levy rates?... 7 Capping the changes to Work levy rates current portion... 7 Levy for pre-1999 claims residual levy portion... 8 How can I work out my ACC levies for 2015/16?... 8 What is experience rating?... 8 Levy risk groups What is the claims trend in this levy risk group? How are levy risk groups structured? What is the earnings trend in this levy risk group? How does ACC set levy rates? What does this mean for setting the levy rate? Workplace injury prevention What can I do to reduce rates?

3 Workplace safety incentive programmes and injury management resources More information Where can I get more information? Glossary of ACC terms Accredited Employer Programme (AEP) Business industry description code (BIC) Classification unit (CU) Current levy portion Experience rating Levy Levy consultation Levy risk groups (LRGs) No-Claims Discount Programme Residual portion of the Work account levy

4 Introduction The levy setting process The annual levy setting process is divided into three parts: Consultation: The proposed rates are made public and feature in the New Zealand Gazette (the official newspaper of the New Zealand Government), the major metropolitan newspapers, and under Consultation Documents on All interested parties have a period of 28 days to make a written submission on the proposals. The ACC Board will then consider all feedback and finalise their recommendations on the levy rates and submit these to the Minister for ACC. Indicative: Once the levy rates are approved by the Cabinet they become indicative. The drafting of the levy regulations takes place in preparation for the regulations coming into force on 1 April of the following year. During this time the rates are a true indication of what they will be for the following year and this is why they are considered indicative only. Final: On 1 April the levy regulations will come into force and the rates that have been approved by the Cabinet are effective. These rates are now final and will be used for levy calculations for that levy year. About this document This document provides information specifically for the Levy Risk Group 724 (Business support services), including the Work levy rates for 2015/16 and the number of injuries and cost of claims (which is a key driver of your rates) for your industry. 4

5 Levy components Employers Employers pay a Work levy to cover work-related personal injuries affecting your employees. The amount of the Work levy is based on how much you pay in wages (your payroll) and what type of industry your business is in (your classification unit or CU). The levy rate is charged on your payroll for the 2015/16 year, subject to the maximum liable earnings limit of $120,070 for any one employee. The employer Work levy is made up of two parts: 1. Levy for 2015/16 work claims current portion Funds the lifetime cost of work-related injuries that occur between 1 April 2015 and 31 March 2016 plus any adjustment for over or under-funding of claims in the period from 1 July 1999 to 31 March Levy for pre-1999 claims residual portion Funds the ongoing costs of work-related injury claims that occurred prior to 1 July 1999, when the Scheme changed to a full funding model (this levy will cease after 2019). Self-employed people You pay a Work levy to cover your own work-related personal injuries. You also pay a non-work levy to cover your non-work personal injuries, except where you are paid income that is subject to PAYE. The levy rate is charged on your earnings from self-employment (excluding earnings from income such as investments) for the 2014/15 tax year, subject to the maximum liable earnings of $118,191, and is also based on the type of work you do (your CU). Your self-employed levies have three parts: 1 & 2. The employer Work levy This is made up of two parts as outlined above. 3. Earners levy for 2015/16 non-work claims This is also made up of two parts as detailed below: a. The residual levy portion, which covers ongoing costs for non-work-related injuries to earners between 1 July 1992 and 30 June b. The current levy portion that funds the costs of non-work injuries that are expected to occur during the 2015/16 year and any adjustments to funding requirements for claims that occurred in prior years. For 2015/16 the Earners rate is $1.26 (excluding GST) per $100 of earnings from selfemployment. 5

6 Why do levy rates change? The 2015/16 levy assessment is not done in isolation. To work out what we need to collect, we look back at the claims we ve received in the past from each levy risk group. Using this information we predict how many claims we ll get in the next year and what they ll cost (not just in the next year but until each claim is closed). We can also include a funding adjustment to allow for any surplus or shortfall in our previous estimates of the ongoing costs of claims for injuries that happened after The overall aim is to ensure the Scheme continues to be funded adequately and to manage levy stability and smoothing over time. ACC also takes into account changes in: the number of employers and self-employed people in each levy risk group (including any CUs moving into and out of the group) the wages paid by employers and earnings of self-employed people in each levy risk group (referred to as simply earnings below) the expected number of claims the expected cost of claims. 6

7 Work levy rates What are the 2015/16 Work levy rates? The table below shows the 2015/16 Work levy rates (current portion) for employers and self-employed people compared to last year s rates. The levy rates shown are the dollar amounts you would pay for each $100 of wages or earnings from self-employment. All rates shown exclude GST. Work levy rates (current portion) Classification unit (CU) Rate for 2015/16 Number Description Taxi and other vehicle scheduling operations Employment placement and recruitment services (no on-hired staff) Labour supply services (on-hired staff office workers only) Document preparation services Credit reporting and debt collection services Call centre operation Educational support services Rate for 2014/15 Change due to previous year s capping Average rate change impact Impact of change in relativity Base rate for 2015/16 Capping impact 1 Rate for 2015/16 $0.14 $0.00 -$0.01 $0.00 $0.13 $0.00 $0.13 $0.14 $0.00 -$0.01 $0.00 $0.13 $0.00 $0.13 $0.14 $0.00 -$0.01 $0.00 $0.13 $0.00 $0.13 $0.14 $0.00 -$0.01 $0.00 $0.13 $0.00 $0.13 $0.14 $0.00 -$0.01 $0.00 $0.13 $0.00 $0.13 $0.14 $0.00 -$0.01 $0.00 $0.13 $0.00 $0.13 $0.14 $0.00 -$0.01 $0.00 $0.13 $0.00 $0.13 Capping the changes to Work levy rates current portion To smooth the financial impacts of annual levy changes, we cap the current portion of the Work levy for each individual CU. In the 2014/15 year the cap prevented levies from changing by more than 25% in addition to any decrease in the average work levy. For the 2015/16 levy year the capping rules will be maintained as follows: increases will be capped at +25% or 4 cents (whichever is the greater) 1 Where classification rate changes have not been limited by capping, the impact on the rate will be to cover the net funding shortfall or surplus caused by capping levy rate changes. 7

8 decreases will be capped at -25% in addition to the change in the average rate. However, we still have to ensure that the Scheme can fund the overall expected costs, so any net shortfall caused by the cap is funded by all other Work Account levy payers. Levy for pre-1999 claims residual levy portion The Accident Compensation Amendment Act 2010 changed the way the residual portion of the Work Account levy was calculated: 31 March 2019 was set as the final date for paying off the estimated unfunded outstanding liability associated with residual claims the final amount to be funded by the residual levy portion as at 30 June 2009 was calculated and has been locked in (it is not recalculated each year as was done previously). The average residual levy for 2015/16 will remain at $0.31 per $100 of liable earnings, as this is the rate required to collect the remaining residual amount by The table below shows the levy rates for pre-1999 claims to be charged in 2015/16 compared to this year s rate. The levy rates shown are the dollar amounts employers and self-employed people pay for each $100 of wages or earnings. All rates shown exclude GST. Classification unit (CU) number and description Rate for 2014/15 Rate for 2015/ Taxi and other vehicle scheduling operations $0.28 $ Employment placement and recruitment services (no on-hired staff) Labour supply services (on-hired staff office workers only) $0.32 $0.32 $0.14 $ Document preparation services $0.14 $ Credit reporting and debt collection services $0.28 $ Call centre operation $0.28 $ Educational support services $0.14 $0.14 How can I work out my ACC levies for 2015/16? If you would like to work out how much your ACC levies for 2015/16 are likely to be, go to and use our online levy calculators. What is experience rating? Experience rating is a system for modifying the current portion of a business s Work levy based on its claims history. Experience rating means employers that have better-than- 8

9 average injury and return-to-work rates will receive a discount on the current portion of their Work levy, while those with worse-than-average claims experience will receive a loading on the current portion of their Work levy. For more information on experience rating, how it works, and how it might apply to you please visit: Some businesses and self-employed people are exempt and their levies will continue to be calculated as usual. The Experience Rating Programme applies to businesses and business groups whose current portion of the work levy is greater than or equal to $10,000. A discount of up to 50% and a loading of up to 75% may be applied to their Work levy (current portion) as a result of their claims history. The No-Claims Discount Programme applies to businesses and self-employed people (including non-paye shareholder employees and self-employed people) that pay an annual Work levy of less than $10,000 (current portion). Under this programme a discount or loading of 10% may be applied to their Work levy as a result of their claims history. 9

10 Levy risk groups What is the claims trend in this levy risk group? The table below shows how claim numbers and costs have changed for Levy Risk Group 724 (Business support services) over the past four years. Note that: The number of claims includes entitlement claims (claims that had entitlements paid such as weekly compensation or social rehabilitation costs) and includes an allowance for unallocated claims (claims reported but not assigned to a valid CU). The total cost of claims includes all entitlement and non-entitlement costs, as well as an allowance for incurred (but not reported) claims and reopened claims. Claim costs for all years have been inflated to values consistent with projected costs for claims occurring during the 2015/16 accident year. This means that changes seen from year to year are not impacted by normal cost inflation and are reflective of real changes in experience for the industry/levy risk group. For levy setting purposes, where standard employers and self-employed people represent a small proportion of the total workforce in a levy risk group, we include the earnings and claim cost data from employers who are participants in the Accredited Employer Programme (AEP). 2010/ / / /2014 Self-Employed and Standard Employers (ie not in the AEP) Number of entitlement claims Number of entitlement claims per $ million earnings Total cost of all claims $0.72 m $0.73 m $0.56 m $0.92 m Number of entitlement claims * Employers in the AEP Number of entitlement claims per $ million earnings * N/A Total cost of all claims * $0.00 m $0.02 m $0.36 m Note: * indicates that the figures cannot be provided for confidentiality reasons as there are fewer than three levy payers in one of Note: The Accredited Employer Programme (AEP) is a self-management option for organisations with their own injury management and rehabilitation capability and sufficient financial resources to handle work injuries to their own employees. (For more information about the Accredited Employer Programme (AEP) see the Glossary of ACC terms at the end of this document.) 10

11 How are levy risk groups structured? Levy risk groups for the current portion of the work levy combine the nature of businesses or trades into larger groups to accurately estimate the cost and frequency of future injury claims. There are 41 levy risk groups for the pre-1999 claims (the residual portion of the work levy). The relativities for the residual levies were frozen to ensure that those industries that created this previous liability will fund the liability out to For 2015/16 we will be: maintaining the number of levy risk groups for the current portion at 143 maintaining the number of levy risk groups for the residual portion at 41. What is the earnings trend in this levy risk group? The table below shows how the total earnings for Levy Risk Group 724 (Business support services) have changed over the past four years. Earnings have been inflated to values consistent with expected earnings paid for the 2015/16 year, which is more reflective of real changes in the industry. Self-Employed and Standard Employers (ie not in the AEP) Number of Self-Employed and Employers 2010/ / / /2014 4,890 5,258 5,078 4,389 Earnings $ m $ m $ m $ m Employers in the AEP Number of Employers Earnings * $18.84 m $16.57 m $16.69 m Note: * indicates that the figures cannot be provided for confidentiality reasons as there are fewer than three levy payers in on How does ACC set levy rates? The 2015/16 levy rates in this document are based on a forecast of what will happen in the future. We look at trends from past years and make a judgement about whether those trends are likely to continue in the future for claims in the Work Account. To allocate the average 2015/16 Work levy rate between levy risk groups, a weighted average of the past seven years of claim costs and earnings is used. These weighted average claim costs and earnings are then converted to a cost per $100 of earnings for your levy risk group (called the claims to earnings ratio). These are credibility-adjusted if there is insufficient information in your levy risk group. This translates into a levy rate that will be needed to cover the expected cost of claims in 2015/16. 11

12 What does this mean for setting the levy rate? The graph below shows the trend in the ratio of claims to earnings for employers and selfemployed people in this levy risk group, and the weighted average used to set the 2015/16 levy rate. Claims Costs per $100 of earnings for Employers and Self-Employed $0.14 $0.12 $0.10 $0.08 $0.06 $0.04 $0.02 $ / / / / / / /2016 Actual 2015/2016 forecast We then add allowances for operating and injury prevention expenses plus adjustments for the over or under funding of claims in the period from 1 July 1999 to 31 March

13 Workplace injury prevention What can I do to reduce rates? Everyone can contribute to lowering levy rates. Lower injury rates are the key to reducing your levy rate. ACC can reward you for safe workplace practices by discounting your levies. Programmes have been designed to meet the needs of differing business types. So if you want to pay a lower rate, you can help reduce it by: keeping yourself safe keeping your workers safe assisting injured people back to work more quickly learning from others in your levy risk group to find ways to reduce levies in the group overall establishing and maintaining effective workplace health and safety systems and practices as appropriate to the scale of your business activity and the level of risk evident maintaining proactive and regular contact with ACC. Workplace safety incentive programmes and injury management resources ACC offers incentive programmes that reduce the levies you pay if your business can demonstrate acceptable workplace safety practices. We also have resources to assist employers to help get injured staff back to work sooner. For more information about these programmes and resources go to: Employers Find out more about injury prevention by going online to: Self-employed 13

14 More information Where can I get more information? If you have any questions about the information in this document, you can talk to your ACC Relationship Manager (if you have one) or contact us at: business@acc.co.nz Employers Self-employed Tax agents

15 Glossary of ACC terms Accredited Employer Programme (AEP) A programme that allows an employer to act on behalf of ACC, managing workplace injuries for their employees and providing entitlements (e.g. weekly compensation) under the Accident Compensation (AC) Act These organisations pay medical treatment and rehabilitation costs as well as entitlements. For more information go to: Business industry description code (BIC) Description of the nature of business or trade. You must provide the business industry description when registering for GST and when completing the IR3, IR4 or IR7. The Inland Revenue Department will provide the business industry description to ACC and we will convert the BIC to a CU. Classification unit (CU) Business activities are classified, or grouped, so that the cost of work injuries is distributed fairly amongst those businesses with similar characteristics. The CU is the business activity classification. Current levy portion Funds the lifetime cost of work-related injuries that occur between 1 April 2015 and 31 March 2016, plus any adjustment for over or under-funding of claims in the period from 1 July 1999 to 31 March Experience rating Experience rating is the method of modifying levy rates for large employers based on an individual employer s claim experience. The large employer s levy is adjusted depending on whether their experience rating is better or worse than the average of the other employers in their industry group. Levy Term used to describe amounts charged to cover past, current and future costs of claims for work-related, non-work-related and motor vehicle injuries. Previously referred to as premiums. 15

16 Levy consultation The period of public consultation when businesses, communities and individuals throughout New Zealand are invited to provide a submission, i.e. feedback and ideas on our levy recommendations and other plans for the coming year. Levy risk groups (LRGs) ACC combines business industry CUs into larger levy risk groups to accurately estimate the cost and frequency of future injury claims. No-Claims Discount Programme Applies to customers (including non-paye shareholder employees and self-employed people) that pay an annual work levy (current portion) of less than $10,000. Under this programme a discount or loading of 10% may be applied to their Work levy as a result of their claims history. Residual portion of the Work account levy Funds the long-term claims of the Scheme and covers the cost of treating and rehabilitating workers who were injured in the workplace before 1 July 1999 or suffered non-work-related injuries prior to 1 July