Submission to the Accident Compensation Corporation

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1 New Zealand Secretariat PO Box Glen Eden, Auckland Ph: Fax: RECRUITMENT AND CONSULTING SERVICES ASSOCIATION LTD Submission to the Accident Compensation Corporation Regarding 2007/08 Levy Rates for Employers Date: Via Contact: Andrew McComish Ph: or Julie Mills Chief Executive Officer Recruitment and Consulting Services Association PO Box Collins Street East MELBOURNE VIC 8003 Ph:

2 Contents Introduction...3 The Recruitment And Consulting Services Association Ltd...4 The Flexible Workforce...5 Injury and Risk...6 Proposals...7 1: CU Descriptions: General...7 2: CU Descriptions On-Hired Office / Non-Office Ratios...8 3: CU Descriptions On-Hired Office / Non-Office Activities...9 4: CU Descriptions On-Hired Office / Non-Office Injury Classification : Incorrect Industry Data Held By ACC : Nursing Bureau Definition : Levies for 2007/08 Pricing Model : Pre 1999 claims : Partnership Programme : Safety Discounts : Injury Prevention...14 Conclusion

3 Introduction The Recruitment and Consulting Services Association (RCSA) welcomes the opportunity to present its concerns and recommendations to the Accident Compensation Corporation regarding the 2007/08 levy rates for employers. According to ACC data the Employment Services industry, as a whole, has an average Entitlement Claim Frequency of (compared with 0.83 last year), a little higher than ACC s average of (0.58 last year). However the average Claim Cost of $9,494 ($8,923 last year) is significantly lower than ACC s model average of $13,703 ($12,717 last year). The industry will contribute approximately 1.29 % (1.3% last year) of ACC s required Employer Account levy income. It appears that ACC is budgeting on the industry Earnings contracting a little after a number of years growth. The industry s average levy rate to fund cost of claims is $0.78 against ACC s average of $0.74 however our final average premium proposed by ACC is $1.16 against ACC s employer average of $0.86. ACC is proposing the following changes: Proposed Fully Funded Levy Current Fully Funded Levy Proposed Residual Claims Levy (Pre 1999 injuries) Current Residual Claims Levy (Pre 1999 injuries) 78610: Employment services $0.16 $0.21 $0.54 $0.35 (candidate or contractor placement - no on-hired employees) Employment services $0.16 $0.21 $0.26 $0.19 (on-hired employees - only office work assignments) Employment services $2.10 $2.79 $1.04 $0.62 (on-hired employees - non-office work assignments, including up to 30% office work 78622: Employment services $0.92 $1.22 $0.54 $0.35 (on-hired employees - mixed classification assignments, minimum 30% office work) Nursing Bureau $1.02 $1.36 $0.22 $0.17 3

4 The Recruitment And Consulting Services Association Ltd The RCSA is the peak body for the employment services industry throughout Australia and New Zealand. It is a not-for-profit association that is managed by a Board of Directors. The central focus of the RCSA is to represent and serve the interests of members for the increased profile and professionalism of the industry. The RCSA has more than 3,200 members in Australia and New Zealand comprising multi-national companies, single consultancies, and individual practitioners operating within a recruitment consultancy. This includes the majority of recognised Agency names within the industry in New Zealand. The association is instrumental in setting the professional standards, educating and developing member skills, monitoring industry participant performance and working with legislators to formulate the future. Members are kept up-to-date on information regarding best practice techniques, resources and technological innovation, along with legislative changes impacting on employment. The RCSA also acts as a lobbying voice, representing its members on issues that impact upon the industry. It has a strong relationship with the public and private sector. Members offer the following capabilities: On-hired employee services On-hired contractor services Recruitment services Employment consulting services As an industry that provides employment to every other industry in New Zealand from manufacturing to agriculture, we have an insight into the impact of changes to accident compensation levies and welcome the opportunity to respond to proposed Levy changes. RCSA New Zealand Corporate members directly employ over 2,000 staff within their own businesses and represent the following numbers of workers: Temporary/on-hire employees working on any single day: 15,000 Candidates registered seeking temporary/on-hire employment: 40,000 Contractors working on a contract on any single day: 2,000 Candidates registered as seeking contract work: 8,500 4

5 It is important to note that member companies of this Association have combined a combined payroll, based on ACC figures, in excess of $730 million and their self employed independent contractors will earn in excess of $50 million. The RCSA mission is to be recognised as the professional representative body and recognised authority for recruitment, on-hire and associated consulting services in New Zealand and Australia by: ensuring members provide high value, high quality and responsive recruitment and consulting services to clients ensuring members deal with candidates in a professional and honest manner being the recognised voice of the profession on recruitment issues advancing the professional development of the Members so that the profession of recruitment is advanced and continues to deliver services to the community of the highest standard. RCSA members are required to meet stringent professional standards as established in the Constitution, Membership Rules and Code for Professional Practice. There is access to a formal complaints process for clients and candidates if there is any dispute regarding the provision of services. This established framework ensures RCSA members are socially responsible and we recognise the need for employees to access ACC entitlements and to entitlements which cover periods of sickness, bereavement and holidays at a standard that society as a whole considers acceptable. The Flexible Workforce To guarantee New Zealand s economic growth it is essential that ACC levies properly reflect the risk individual industries pose. To encourage economic growth, business compliance costs need to be minimised and employers need assurances they are getting value from the payment of any ACC levies. A flexible workforce is now an economic and social reality. People are choosing diversity in work patterns that suit their individual circumstances. This includes: employment that is permanent, employment that provides for time off in school holidays, employment that allows late starts and early finishes, employment that is a stop-gap between opportunities, employment that is seasonal and able to be carried out by visitors on short term work-permits. 5

6 employment that provides for greater and diverse work experiences employment of a fixed short-term nature, and employment with one employer in one week and employment with other multiple employers the following week/s at a greater or lesser rate of pay. This may include returning to the original employer within a 12- month period. Clients and jobseekers work in partnership with RCSA members to access any combination of the employment patterns indicated but the three primary services can be summarized as: the provision of temporary or on-hire staff for short term employment where the employee remains on the payroll of the member but works in the client s workplace. In this situation the employee is managed by the Agency but the day-to-day supervision is carried out by the client at the client s workplace. the provision of contract staff for fixed term employment where the person is a self employed contractor but works in the client s workplace the identification of candidates who best suit the client s vacant permanent positions and will therefore be on the payroll of the client and work in the client s workplace. Injury and Risk The RCSA notes that each of the employment patterns mentioned above creates its own injury risk profile and we endeavour to provide our Members with the tools to assist them with managing the risks associated with each pattern. For example later in 2006 we will be introducing to our Members a web based learning tool which will be available to all employees, at no cost to the employee, covering material such as Safety Induction, Safety in Hospitality, Retail and Nursing, Forklift refresher and EEO. The RCSA membership represents the many varied employment relationships that reflect current diverse patterns, and associated injury risk, in a flexible workforce. Our members have employees working in virtually every type of industry in New Zealand and we have known some of our NZ members to place employees into short term work opportunities in Australia We also recognise the injury risk to people working in each industry and the associated social and economic costs of short-to-long term claims for such injuries. 6

7 We are committed to a risk management strategy which focuses on injury prevention and this is evidenced by our continued commitment to the On- Hire Industry Injury Prevention Forum. This, along with many other initiatives places the industry in a unique position to comment on ACC levies that impact on the industry. We would like to take this opportunity to commend ACC for its support of the On-hire Industry Safer Industry initiatives and regret to see its recent exit from this excellent injury prevention forum. We see this forum and activities as a significant investment which will pay dividends to not only the employees in this industry but also the wider employer community as a whole and NZ society in general. The RCSA has reviewed the proposed ACC levies and the following represents our views on those proposals Proposals 1: CU Descriptions: General We note that ACC is proposing to alter the CU descriptions for the 78610, 78620, 78621, and CU s. We concur with ACC s proposed change of the CU to Employment Placement and Recruitment Services (no on-hired staff). We do however have some difficulty with the proposed changes to the other four CU s. The RCSA considers that changing the description to Labour Supply Services does not accurately describe the business activity of these CU s and indeed undervalues the services provided by our Members. The term labour supply infers that employment agencies simply supply labour. This is not the case. Our Members conduct vigorous employment services including a screening process which covers interviews, assessment and reference checking along with induction training and provision of Personal Protective Equipment prior to an employee going on a Client Site. Supplying labour is but one part of the overall employment services provided by our Members in the 78620, 78621, and CU s. 7

8 We therefore recommend that the changes be described as: Employment Services (On-hired staff office workers only) Employment Services (On-Hired staff - non-office work including up to 30% office work) Employment Services (On-hired Staff - both office and non office work minimum 30% office work) - though please see our comments on this CU further on Employment Services (on-hired staff, nursing, medical, dental and other health) - though please see our comments on this CU further on. 2: CU Descriptions On-Hired Office / Non-Office Ratios. The RCSA understands that ACC considers Office Work to include typing, clerical, reception, administration, data entry, sales, information technology and administration work, that is undertaken in an office workplace. Non-Office Work is considered to be anything that is not office work. Furthermore ACC considers that any time in excess of 5% which is not attributable to office work in an office should be considered as Non-office. For example: a sales role requires the person to be out of office for more than 5% of the work time - classify as non-office-work. a IT role requires a person to be in the office 95% or greater classified as office work. The RCSA considers these definitions to be too limiting from both a practical and levy setting purpose. At a practical level 5% is too small a percentage to allow a person to be out of the office. At one extreme, for example, an Office Junior employed for 40 hours a week could spend 30 minutes a day partaking/preparing morning / afternoon tea in a staff tea room with other office workers. This 2 ½ hours of work on-pay a week would see the Office Junior spending 6.25% of the time outside the office and would therefore be considered to be a Non-Office employee when in reality the risks that this person is exposed to are no greater than any other office person. Indeed many office workers do not spend as much as 95% of their time in the office. 8

9 Furthermore when it comes to choosing an appropriate levy, an employer is required to look at their business activities. If the business has several activities the employer should look at the ACC levies for each of these activities and then select the ACC levy which is the greatest amount and apply this levy to all earnings. If we expect ACC s 5% rule to be applied consistently across all New Zealand office based business activities this rule would see the like of Accountants, Architects, Insurance and other office activities move to an activity that better reflected the non-office aspect of their activities which we would expect to be at a higher levy rate than the standard business levy rate. For example a Residential Home Architect would go to a residential construction CU; a Farm Accountant would be required to move to an agriculture related CU, an insurance company specialising in construction where its Sales reps and Assessors spend time out of the office would be required to go to a Construction CU. We recommend that the threshold be increased to 20% to enable a more practical assessment of office activities. 3: CU Descriptions On-Hired Office / Non-Office Activities. Of additional concern is the way the Office / Non-Office time constraints would impact on the Employment Services industry. Using the above example the Office workers exceeding the 5% threshold would have to go from either the CU to the CU or from the CU to the CU. While the risks don t change the levies payable have a significant impact on the business. For example: proposed composite levies are $0.42, the levies are $1.46 while the levies are $3.14. Potentially a 1% shift in time outside an office could see a trebling of the levy payable. We recommend that rather than having a % and Office vs Non Office descriptors ACC consider looking at amending the definitions to better reflect the risks of the different activities undertaken by the Employment Agencies. Definitions might be: 78620: Are On-hired employees engaged solely in office and low risk business related activities which attract an ACC composite levy rate of equal to or less than the rate payable by : Are On-hired employees engaged in office and non-office activities which attract an ACC composite levy rate up to but not including the composite rates: Minimum 30% office work 9

10 78621: Are On-hired employees engaged in non office activities which attract an ACC composite levy rate equal to or in excess of the rate payable by : Are On-hired employees engaged in health sector activities 4: CU Descriptions On-Hired Office / Non-Office Injury Classification. Furthermore the Industry has struggled over recent years obtaining accurate injury statistics. It is the RCSA s view that by restricting the business activities to narrowly defined criteria Employment Service agencies will be required to pay a higher levy than their business activity warrants thus causing distortions in the injury data. We recommend that ACC create CU descriptions that enable injury data to be better attributed to the business activities and associated risks associated with the injury. 5: Incorrect Industry Data Held By ACC Through the On-hire Injury Prevention Forum, the RCSA is aware that an analysis of all recruitment industry claims data for claims from (entitlement plus other claims) shows claims for the industry have potentially been overstated and potentially attributed to incorrect CUs. It is understood that if ACC accepts all the recommendations of a taxonomy report: overall claim numbers will reduce by 1,353: from 7,959 to 6,546 costs will reduce from $7.782m to $6.393m (Entitlement costs going down from $7.177 m to $5.923m) CU claims will reduce from 1,177 to 21 ($1.14m down to $39k) claims will go up from 257 to 359 ($324k to $529K) claims will go up from 402 to 758 ($605k to $693K) claims will go up from 4,702 to 5,068 ($3.78m to $4.56m) claims down from 1,421 to 340 ($1.6m to $564k) Furthermore the 2006 Injury Causation report identified that out of 8,632 claims from 2002 to ,841 claims should be removed from the CU in which the claim was classified. For example 91 Labourers & Related Elementary Service Workers, 83 Drivers & Mobile Machinery Operators, 81 Industrial Plant Operators or people who were clearly not Permanent Recruitment Consultants or people within an agency involved in this type of business activity were included in the CU claims. 10

11 An assessment of the 2007/08 pricing models for the industry s CU s suggests that no provision has been made for adjusting CU claims details resulting in incorrect CU classification or incorrect attribution of claims data identified by the above analysis. Of primary concern is the claims related to the CU. Both sets of analysis suggest this CU is being grossly over represented with claims attributable to permanent recruiters. In the Taxonomy Report it was recommended that claim numbers reduce from 1,177 to 21 while the Injury Causation report removed 834 claims for the purposes of identifying injuries with the sector. It is also clear from this analysis that the CU is experiencing significantly less claims than the CU however ACC s pricing model does not seem to reflect this. ACC anticipates both CU s having approximately the same numbers of injuries when this is clearly not the case. The RCSA remains of the view that past claims data needs to be cleansed and the industry be credited with the estimated $1,400,000 in over paid levies. The correction of claims data is critical given that past premiums have been set on the basis of data available at that time. It has been the RCSA s view that industry levies have been too high relative to the risks posed by our sector. 6: Nursing Bureau Definition. We note the existing definition of includes nursing bureau and hospice and porter services. The RCSA supports ACC s proposal to change the definition and our views on a preferred definition are included in (3) above. We are concerned to see no CU which clearly shows where Hospice/Porter activities should fall. We recommend that ACC identify another CU, perhaps such as 86130, and include Hospice/Porter activities under this CU. Furthermore we note that ACC s Pricing Model has a payroll and claim numbers following trends set in earlier years. The RCSA anticipates that the removal of Hospice activities will see some drop in Earnings and a considerable drop in Claim numbers and associated Claim Costs. 11

12 The 2005 Taxonomy suggested that claims should go from 1,421, down 1,082 to 339 clams attributable to the employment services sector. This also saw a reduction of claim costs from $1.6m to $0.5m. We therefore recommend that ACC adjust its pricing for the new definition to reflect the loss of Hospice earnings and claims. 7: Levies for 2007/08 Pricing Model Using the Pricing Model in the ACC Consultation Document and the projected claim details provided by ACC we are able to estimate the Employer Work Levy Rate as shown below * 78620* * A. Expected Sector Payroll $162,178,960 $48,351,000 $51,050,880 $287,804,943 $73,402,179 B. Entitlement Claim Frequency per $1m C. Number of claims D. Average Claim Costs $7,944 $8,624 $9,401 $8,215 $17,106 E. Estimated cost of claims (=c x D)Total cost of claims $281,797 $319,087 $733,309 $2,481,071 $1,077,680 F. RCSA Proposed Employer Levy per $100 payroll to fund cost of claims (=E / A) $0.174 $0.660 $1.436 $0.862 $1.468 ACC Proposed Levy Difference -$0.01 -$0.50 $0.66 $0.06 -$0.45 Cost to Employment Services Industry -$22,311 -$241,726 $338,760 $166,735 -$328,978 Figures do not reflect recommendations made above. Based on figures provided by ACC which are inconsistent with the RCSA s understanding of the earnings and injury rates. The earnings figures appear to be grossly understated. We note that the industry paid higher levies than those proposed by the RCSA last year, and indeed in previous years. This year we recommend, as a preferred alternative to the ACC proposed levies the levies as shown in the above Pricing Model with these levies to be adjusted once claim numbers have been appropriately adjusted. 12

13 8: Pre 1999 claims The employment services industry, particularly the services provided by the 78620, 78621, and CU s tend to be of a short term nature. I.e. the employees working for an agency will work on a client site, in a different industry for a period of time less than their permanent staff equivalents. The average term of on-hired assignments is between 2 weeks and 6 weeks with some assignments being as short as three hours and others extending over several years. Furthermore the work carried out by the employees is work carried out in different industry sectors. For example a furniture removal company may engage the services of a Employment Services Agency to provide a Removal person for a 3 week assignment moving furniture. The short term nature of the employment suggests that a person will not be in employment long enough to be exposed to risk of a gradual process injury. If there is indeed such a risk then we would expect that risk to manifest itself in an ACC claim shortly after the exposure. Where a claim is received sometime after events that would lead to a Gradual Process claim we would expect that other employers or indeed another industry would be more responsible for the causation and hence the claim. It is the RCSA s view that 2005 changes to the IPRC Act will have no affect on the employment services industry simply because any claims on events that occurred prior to 1999 will be better settled by the industry in which the person worked on a long term basis. This applies to existing claims and for future claims. Indeed according to ACC statistics there were no reported incidents of gradual process claims in the industry for the years For this reason we recommend that the 78620, 78621, and CU s not be exposed to the proposed $0.07 increase. With regard to the CU the employees in this category are typically Recruitment Consultants, Managers and administrative support staff. Their primary risk situation is Occupational Overuse as this relates to computers and telephone usage. Such gradual process injuries are known to have occurred within the industry however the symptoms typically manifest themselves while the person is in employment or shortly thereafter. 13

14 With regard to the CU we are unaware of any existing gradual process claims (which will be related to computer/phone related OOS) that relate back to pre For this reason we recommend that the CU not be exposed to the proposed $0.07 increase. The RCSA is unaware of any existing gradual process injuries which can be attributed to the industry which relate back to pre For this reason we recommend that the CU not be exposed to the proposed $0.12 increase. Indeed if such a claim was to arise it is our belief that the claim should be attributed to the industry in which the person was more recently working. The RCSA is not aware of any injuries to befall self employed contractors engaged by agencies to carry out work for clients. This extends to any gradual process injuries. We are unable to see why any pre-1999 self employed gradual process injuries should be attributed to the employment services industry. 9: Partnership Programme Where our Members are part of the Partnership Programme we prefer that their views be considered on any proposed changes to this scheme. 10: Safety Discounts Last year ACC introduced workplace safety discounts for employers with fewer than 20 staff. We note no mention is made of increasing access to this scheme however we would recommend that access be made available to employers in the employment services sector who meet ACC s entry criteria. 11: Injury Prevention The RCSA is concerned to see a drop in the ACC budget for Injury Prevention activities. We are firmly of the view that injury prevention should remain a firm emphasis of ACC and we would prefer to see an increase in budget which will be offset by a subsequent reduction in claims. This is particularly so when we see that collection costs are $11m for a purely administrative function and Injury Prevention is at $22m which is a function which should be able to add substantial value to ACC levy payers. We recommend that ACC provide greater resources to the injury prevention function if not through its own staff then through initiatives industry sectors are involved in. 14

15 Conclusion The RCSA is the leading industry body for recruitment and on-hired employee services - that is we represent the experts in flexible employment solutions. We would like to thank the Accident Compensation Corporation for the opportunity to present our views on the issues. Given the proposed changes to levies to five CUs for our industry, we believe we have a critical role to play in ensuring that this consultation remains balanced and its outcomes are sustainable for all parties. The RCSA has access to a wide variety of statistics and information relating to employment service provision, and would be willing to share this information to aid a more detailed consideration of the implications arising from the proposed levy changes. We are keen to work with the Government, and discuss our views further to develop a workable solution that gives both employers and employees choices and 15

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