Reading the Heads of Workers’ Compensation Authorities 1997 report “Promoting Excellence: National Consistency in Australian Workers’ Compensation” isn’t so much a trip down memory lane as a disconcerting “back to the future” experience. The drive towards workers’ comp harmonisation in Australia is longstanding but for an issue that has been on the agenda for in excess of fifteen years surprisingly little progress has been made.

In 2010 that looks set to change, with Canberra making workers’ comp harmonisation a priority. This means that now is an opportune moment to consider, from a RTW perspective, the pros and cons of harmonisation.

But first a little background briefing...

Currently, we have a national workers’ comp framework with ten principle schemes, each with its own compliance requirements for employers and injured workers. Most employers and employees operate within one jurisdiction only and have to comply with just one set of requirements. For them, jurisdictional differences are not an issue. For multi-state employers, however, the picture is more complex.

Multi-state employers employ over ¼ of the Australian workforce and for these employers the less variation between workers’ compensation schemes the better. Some large companies stand to save millions of dollars annually if harmonisation goes ahead. Easing compliance and reducing costs for these organisations is the main goal of harmonisation, with flow on benefits expected for the national economy.

Unions, business groups and government have all spoken in support of harmonisation. However, precisely what workers’ comp harmonisation will involve is, as yet, unclear. The Strategic Issues Group on Workers’ Compensation, recently established by SAFE Work Australia and charged with identifying and assessing the issues most in need of reform, is yet to meet. There is also a National Workers’ Compensation Forum of invited stakeholders and experts to be held in March. In a sense, it is early days.

It is clear that the aim of harmonisation of workers comp is not, as it is with OHS harmonisation, to develop uniform national laws, but rather to streamline employer compliance requirements and to provide consistent processes and regulations around such key aspects as making a claim and paying a premium.

These are laudable aims but at what cost? Given how slowly the debate has moved to date, how much time, resources and energy will be required to make even this limited version of harmonisation a reality? What unforeseen consequences might there be? And will the benefits really outweigh the costs?

We’re not yet ready to come down definitively on either side. As noted above, it is still early days in the renewed push for harmonisation. You might notice, however, that the ‘cons’ we’ve listed below outweigh the ‘pros’. It’s certainly food for thought.

Pros

• Multi-jurisdiction employers can expect to see:
  • Reduced compliance burdens, costs and inefficiencies;
  • Staff freed up to concentrate on injury management rather than bureaucratic paperwork; and
  • Workers may experience fewer processing delays and errors in benefit payments.
• Governments might receive more accurate workers’ comp data due to a decreased likelihood of employer error when filing.
• More clarity for multi-jurisdiction workers.
• Harmonisation offers the chance to reduce inefficiencies in current systems and change injury management procedures for the better.

Cons

• According to the productivity commission, changes to a scheme can have ‘far reaching and unexpected impacts on scheme outcomes’. In fact, ‘actuaries suggest that it can take up to five years for the outcomes of scheme changes to become fully apparent’. This means that the impacts of harmonisation may be unpredictable and difficult to monitor and assess.
• Schemes have developed over time to reflect the particular circumstances within each jurisdiction. What is good for the goose may not be good for the gander.
• Although we advocate a partnership approach, workers’ compensation is often seen as a field in which competing interests clash. Stakeholders may be very resistant to giving up hard-won concessions in the name of national consistency. According to the Institute of Actuaries of Australia finding ‘the common ground between states on each of the variations...may involve, in some instances, protracted consultation with stakeholders, lawmakers and actuaries’. Got another fifteen years to spare, anyone?
• When requirements change a short term period—say, one to two years—of increased error can be expected.
• Despite the vast resources required to make harmonisation happen, health improvements aren’t likely to be significant.
• Harmonisation may remove some of the competition between systems that currently provides an impetus for improvement.

The major concern we have with the push towards harmonisation is that the focus stays on process, not people.  With the outcomes of health problems significantly worse for compensable injuries, shouldn’t improvements in health and return to work be front and centre of any reform? 

The information in this article is drawn from two sources: a report from the Institute of Actuaries of Australia and the 2004 Productivity Commission report into harmonisation.