Information about the indicative 2016/17 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
Contents Introduction... 3 The levy setting process... 3 About this document... 3 Levy components... 4 Employers... 4 Self-employed people... 4 Why do levy rates change?... 5 Work levy rates... 6 What are the indicative 2016/17 Work levy rates?... 6 Removing the residual levy portion... 7 Capping the changes to Work levy rates... 7 How can I work out my ACC levies for 2016/17?... 7 What is experience rating?... 8 Levy risk groups... 9 What is the claims trend in this levy risk group?... 9 What is the earnings trend in this levy risk group?... 10 How does ACC set levy rates?... 10 What does this mean for setting the levy rate?... 11 Workplace injury prevention... 12 What can I do to reduce rates?... 12 ACC workplace safety incentive programmes and injury management resources... 12 More information... 13 Where do I get more information?... 13 2
Introduction The levy setting process The annual levy setting process is divided into three parts: Consultation: The proposed rates in the consultation documents are made public and also feature in the New Zealand Gazette (the official newspaper of the New Zealand Government), the major metropolitan newspapers, and under Consultation Documents on www.acc.co.nz as they become available. All interested parties have a period of 28 days to make a written submission on ACC s proposals. The ACC Board will then consider all feedback and finalise ACC s recommendations on the levy rates. Indicative: Once the levy rates are approved by the Minister for ACC they become indicative. At this time the rates are a true indication of what they will be for the following year. Final: On each 1 April the levy regulations will come into force and the rates that have been approved by the Minister for ACC are effective 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 indicative Work levy rates for 2016/17 and the number of injuries and cost of claims (which is a key driver of your rates) for your industry. 3
Levy components Employers As an employer, you 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 2016/17 year, subject to the maximum liable earnings limit for any one employee. In the 2015/16 levy year this limit is $120,070 and it will be indexed for the 2016/17 year. 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, unless you re 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 2015/16 tax year, subject to the maximum liable earnings of $120,070 and is also based on the type of work you do (your CU). Your self-employed levies have two parts: 1. The Work levy 2. Earners levy for 2016/17 non-work claims For 2016/17 the Earners levy is indicated to be $1.21 (excluding GST) per $100 of earnings from self-employment. 4
Why do levy rates change? The 2016/17 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 (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 before 1 April 2016. The overall aim is to ensure the ACC 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. 5
Work levy rates What are the indicative 2016/17 Work levy rates? The table below shows the indicative 2016/17 Work levy rates for employers and selfemployed 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. Number 61231 78610 78620 78630 78691 78692 84700 Work levy rates Classification unit (CU) Rate for 2016/17 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 Residual rate plus current rate for 2015/16 Change due to previous year s capping Average rate change impact Impact of change in relativity Base rate for 2016/17 Capping impact 1 Rate for 2016/17 $0.41 $0.00 -$0.23 -$0.01 $0.17 $0.11 $0.28 $0.45 $0.00 -$0.27 -$0.01 $0.17 $0.13 $0.30 $0.27 $0.00 -$0.09 -$0.01 $0.17 $0.01 $0.18 $0.27 $0.00 -$0.09 -$0.01 $0.17 $0.01 $0.18 $0.41 $0.00 -$0.23 -$0.01 $0.17 $0.11 $0.28 $0.41 $0.00 -$0.23 -$0.01 $0.17 $0.11 $0.28 $0.27 $0.00 -$0.09 -$0.01 $0.17 $0.01 $0.18 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. 6
Removing the residual levy portion In September 2015 the Accident Compensation (Financial Responsibility and Transparency) Amendment Bill was passed into legislation. This allowed the Minister for ACC, Hon. Nikki Kaye, to remove the residual portion of levies which she has announced will occur from 1 April 2016 for the Work and Earners Accounts and from 1 July 2016 in the Motor Vehicle Account. Prior to this Act passing, legislation stated that we would stop collecting the residual portion for the Work Account on 1 April 2019. This date was chosen in 2009, when the cost of the remaining residual portion in the Work Account was estimated to be $3.4 billion. Capping the changes to Work levy rates To smooth the financial impacts of annual levy changes, we cap the Work levy for each individual CU. In the 2015/16 year the cap prevented levies changing by more than 25% in addition to any decrease in the average work levy. Because the residual levy is being removed from 1 April 2016, the increase from the average 2015/16 current component ($0.59) to the 2016/17 indicative average levy ($0.80) is significant. We have therefore applied the capping rules to the change from the total 2015/16 levy (current and residual portions) to the 2016/17 levy. There are no changes to the current capping rules for 2016/17 from those used for the 2015/16 year. Currently: increases are capped at +25% or $0.04, whichever is greater decreases are capped at -25% in addition to the change in the average rate. However, we still have to ensure that the ACC Scheme continues to fund the overall expected costs, so any net shortfall caused by the cap is funded by all other Work Account levy payers. How can I work out my ACC levies for 2016/17? If you want to work out how much your ACC levies for 2016/17 are likely to be, go to www.acc.co.nz/calculator and use our online levy calculators. 7
What is experience rating? Experience rating is a system for modifying a business s Work levy based on its claims history. Experience rating means businesses that have better-than-average injury and return-to-work rates will receive a discount on their Work levy, while those with worsethan-average claims experience will receive a loading on their Work levy. Some businesses 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 as a result of their claims history. The No-Claims Discount Programme applies to businesses and self-employed people (including non-paye shareholder employees) that pay an annual Work levy 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. For more information on experience rating, how it works, and how it might apply to you please visit: www.acc.co.nz/er. 8
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 2016/17 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 Employers Programme (AEP). 2011/2012 2012/2013 2013/2014 2014/2015 Self-Employed and Standard Employers (ie not in the AEP) Number of entitlement claims 33 17 24 29 Number of entitlement claims per $ million earnings 0.05 0.03 0.03 0.04 Total cost of all claims $0.73 m $0.39 m $1.18 m $0.81 m Number of entitlement claims 1 6 1 5 Employers in the AEP Number of entitlement claims per $ million earnings 0.05 0.36 N/A 0.30 Total cost of all claims $0.01 m $0.04 m $0.00 m $0.17 m Note: The Accredited Employers 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 2016/17 we will be reducing the number of levy risk groups from 143 to 142. 9
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 2016/17 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 2011/2012 2012/2013 2013/2014 2014/2015 4,946 5,432 5,518 4,805 Earnings $652.89 m $649.20 m $697.70 m $684.45 m Employers in the AEP Number of Employers 3 3 3 3 Earnings $19.05 m $16.76 m $16.07 m $16.41 m How does ACC set levy rates? The 2016/17 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 2016/17 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 2016/17. 10
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 2016/17 levy rate. Claims Costs per $100 of earnings for Employers and Self-Employed $0.18 $0.16 $0.14 $0.12 $0.10 $0.08 $0.06 $0.04 $0.02 $0.00 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 Actual 2016/2017 forecast We then add allowances for operating and injury prevention expenses plus adjustments for the over or under funding of past claims in the period up to 31 March 2016. 11
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. ACC workplace safety incentive programmes and injury management resources ACC offers incentive programmes that can 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 www.acc.co.nz/for-business/small-medium-and-large-business/how-to-pay-less Find out more about injury prevention by going online to: www.acc.co.nz/preventinginjuries www.acc.co.nz/for-business/small-medium-and-large-business/managing-employeeinjuries Self-employed www.acc.co.nz/for-business/self-employed/how-to-pay-less 12
More information Where do 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 0800 222 776 Self-employed 0508 426 837 Tax agents 0800 222 991 13