New South Wales saw a noticeable decline in return to work rates in the 2008-09 financial year, as the global economic slowdown hit the bottom line of the state’s retail, services and manufacturing industries. While not falling to the depths experienced by neighbouring Victoria, the GFC still hit hard enough to make a dent in RTW rates from which the state is only now starting to recover.

The 2010-11 Australia New Zealand Return to Work Monitor shows that the RTW rate in NSW has lifted to 86%, slightly above pre-GFC figures. In the same year, the durable RTW rate has risen to 78%, returning to 2006-07 levels. Both figures are broadly in line with the national rate, and both have followed the national average over the last six years.

The future of RTW

In 2010, the Keneally Government launched a major policy initiative, Working Together, which was aimed at improving OH&S and injury management in the NSW public sector. Part of the initiative involved improving processes around injury claims, to make sure they were addressed earlier by immediate supervisors. It was hoped that these improvements would reduce average claims costs and duration by five percent over two years.

Since the state election, the Working Together initiative appears to have fallen by the wayside. The project’s website has not been updated in the last year and its current status is unknown.

The new state government has put forward its own RTW initiatives, taking effect from July of this year. Unlike Working Together, the changes are not confined to the public sector. For injured workers, initiatives include:

• Transition to work payments, giving an allowance of up to $5,000 for workers who cannot resume employment at their old workplace for expenses such as relocation, travel and childcare;
• Equipment funding for injured workers in trades, such as commercial kitchen knives or tools; and
• Extension of the legally mandated trial period of 12 weeks for workers in new employment, if such an extension is likely to secure ongoing employment.

Initiatives for employers include:

• Increasing the wage subsidy for employers hiring workers’ comp claimants to $27,400 over the first year of employment;
• Increasing to two years the time that an injured worker’s wages are exempt from WorkCover’s premium calculation; and
• Increasing the protection period against any further costs associated with an existing injury to two years.

Over the last six years, the number of Monitor respondents whose main source of income at the time of interview has been trending downwards, while the number whose income mainly comprised workers’ comp payments has been trending upwards. The O’Farrell Government will be hoping that in the coming years, giving businesses the incentive to take on more injured workers will shift claimants off the workers’ compensation system sooner.

Arresting costs and addressing insurer hindrance

Over the last five years, a lack of public finances in New South Wales has prevented investment in badly needed infrastructure improvements, particularly in suburban Sydney. The O’Farrell Government, elected in May of this year, has pledged to take an axe to the state’s public sector in order to improve the budget’s bottom line. So far, the NSW Government has not moved decisively, instead concentrating its efforts on taking a hard line on wage negotiations with public servants.

As a unitary body administering both OH&S policy and workers’ compensation, WorkCover NSW has spent much of the year preoccupied with the planned harmonisation of occupational health and safety laws across Australia. The state’s OH&S laws are in many ways radically different from the rest of the country. For example, before the current Government’s changes to the Occupational Health and Safety Act, unions were allowed to prosecute employers in industrial courts. Modifying this system has required a greater legislative effort and more WorkCover resources than similar preparations for harmonisation in other states. On top of this, the NSW Government has been playing a political game with its federal counterparts, sending mixed signals about whether it will fully commit to the Gillard Government’s harmonisation plans.

Once the difficult business of harmonisation is out of the way, the Government may next turn its sights onto driving down costs in the workers’ compensation system. Claims costs have been trending upwards steadily over the last six years, notwithstanding a slight fall over the last monitor survey. Average claims costs currently sit at just under $15,000 per claimant, slightly above the national average.

Rehabilitation costs are a significant financial burden on claims. Despite only about 30% of claimants participating in rehabilitation, the average cost of rehab provision is $2,500 per participating claimant, roughly $700 more than the national average.

Despite the improvement in return to work rates, New South Wales claimants are expressing unprecedented levels of dissatisfaction with their insurers.

The 2010-11 Monitor survey reported a sharp increase in the number of respondents who said their insurer made it harder to return to work, as well as a 10% decrease in the number of people who said their insurer helped with return to work. Respondents also recorded a lower level of satisfaction on insurer performance than their interstate counterparts on most criteria.

If the O’Farrell Government is committed to cutting costs across the NSW public sector, a regulatory review of rehabilitation provision and insurer KPIs in the workers’ compensation system would be a promising start.