‘Broken’ Vic workers’ compo scheme set for an overhaul

Callum Godde and Melissa Meehan | March 7, 2023

An overhaul of Victoria’s workers’ compensation scheme is on the cards after the government, business groups and unions conceded it has become unsustainable.

WorkCover premiums for Victorian businesses are lower than all states and territories except Queensland, with the gap between the annual cost of claims and collected premiums leaving a $1.1 billion shortfall.

The Andrews government on Tuesday confirmed it is working with businesses and workers to reform what it described as a “fundamentally broken” scheme that is no longer fit for purpose.

WorkSafe Minister Danny Pearson said WorkCover costs have increased three-fold since 2010, while average premiums have fallen.

“There’s no silver bullet here,” he told reporters.

“Raising premiums alone will not be enough, but we need to work in a very constructive and collaborative way to make sure we get the balance right.”

Victoria’s workers’ compensation scheme was set up in 1986 to primarily deal with physical injuries, but mental health now accounts for about 19 per cent of claims.

Those claims are expected to represent 50 per cent of WorkCover costs within the next 12 months, Mr Pearson said.

More Victorians are also spending longer on the scheme.

The number of people claiming benefits for more than 130 weeks has grown from about 4500 in 2016 to nearly 8500. 

Before the November election the Andrews government was forecasting a return to surplus of just under $900 million in 2025/26, and Mr Pearson said Labor remains committed to delivering it.

Taxpayers have topped up the scheme with an extra $1.2 billion in funding to offset rising costs over the past three COVID-disrupted financial years, keeping premiums for businesses at 1.272 per cent of their payroll.

While refusing to entertain what changes could look like, including the possibility of restricting eligibility criteria, Premier Daniel Andrews said the government would no longer prop up the scheme.

“I’m not taking money from hospitals and schools to prop up a WorkCover scheme that’s not sustainable,” Mr Andrews said.

“We have to find a better way.”

Victorian Chamber of Commerce and Industry chief executive Paul Guerra said the peak body recognises the current system is not sustainable, and adjustments are needed to ensure its viability.

“The government has been consulting with us in good faith to ensure the business position is taken into account,” he said in a statement.

“While we’d like to see additional costs to business minimised, we recognise that the ongoing viability of the system is paramount.”

A Victorian Trades Hall Council spokeswoman said the union is open to “new thinking”, but premium increases would be required.

“The most important consideration should be supporting injured workers,” she said.