One of the golden nuggets of information hidden away in the Comparative Performance Monitoring Report (CPMR), released by the Workplace Relations Ministers’ Council in August 2008, is that in 06/07 Australian workers compensation schemes spent $6051 million. That’s more than six billion bucks on compensation in twelve months! As a society, we make a substantial investment in workers’ comp, so it seems only fair to pose a couple of pointed questions. Firstly, where is this money going? And secondly, what kind of return can we (as employees, employers, governments and the general public) expect on our investment?

Because we like to keep you on your toes, we’re going to start by answering question number two. Regardless of the severity of the injury involved, research shows that non-compensable workplace injuries have better health and return to work outcomes than compensable ones. Which means – somewhat counter-intuitively – that workers who receive the extra treatments available through workers compensation and wage compensation have a harder time recovering than those who don’t.

This isn’t to suggest that there is no place for compensation. If a worker is injured or becomes ill because of their work, financial support is important.  However compensation systems need to be structured so that treatment approaches and wage replacement payments assist with recovery and return to work.  While compensation is undoubtedly important, spending lots of money on it doesn’t guarantee a good outcomes for employees or employers.   

With this in mind, let’s turn back to our first question: where are our compensation dollars actually spent? The CPMR breaks down compensation claims by industry and injury mechanism. In 06/07 the manufacturing industry saw the most claims (27.6 per 1000 employees), followed by transport and storage (25.7), agriculture, forestry and fishing (25.3) and construction (22.1).  In terms of the kinds of workplace mechanisms involved in injury and disease, the most common cause of claims was body stressing, which accounted for a whopping 42% of claims.  Falls, trips and slips, being hit by moving objects and hitting objects with a part of the body were also responsible for many claims.

Once a claim has been made, the majority of the costs associated with it are appropriately worker-related. In fact, 53% of the $6 billion spent in 06/07 went straight to the worker and 22% was spent on services for the worker (things like medical treatment, rehab, legal costs, transportation, interpreter costs, RTW assistance etc.), while 15.8% was for claims management costs, and other admin costs accounted for 9.4%. However, it is interesting to note that both claims management and administration costs have risen since the last CPM Report in 2002-03, while payments and services to workers have fallen. Unfortunately the report does not provide comparative data on administration and management costs with other jurisdictions or with the self insurance sector.

Good news is, according to the CPMR, that Australia’s rate of long term claims (i.e. claims involving twelve or more weeks of compensation) looks like it will continue to decrease in 06/07, following on from an 18% decrease in 05/06. Some of this reduction may be due to the tightening of particular state based compensation schemes, but it is good to know that we are trending in the right direction. It is also worth noting that Australia's low, and falling rate of fatality as a result of work (2 in 100,000) is among the best in the developed world.

In terms of the duration of time off work following a claim, the latest data available was for the 04/05 period and there was significant variation across jurisdictions. This highlights the impact that compensation schemes can have on RTW outcomes. In South Australia, for example, 12% of claims continued past one year of compensation, while in Queensland only 3% did. These kinds of variations are something that we want to follow up in future, so keep a browser window trained on RTW Matters!

As anyone who works in the industry will know, workers compensation is a complex and challenging field. One thing we can tell you is that returning to work quickly is good for recovery, while having a compensable condition is not.

Without question, some employees need direct compensation and may go on needing it for an extended period of time – but in most instances, everyone involved is better off when good workplace relationships, flexible employment practices and an effective injury management system preclude the need for workers’ comp. For more information, check out our Workplace Systems handbook. You might just save Australia a couple of million bucks!

The CPM Report is online here.