Labour-hire firms warn WorkCover hike risks compounding staffing crisis

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Victorian labour-hire firms warn the state could lose more teachers and nurses after WorkCover fees more than doubled on July 1, exacerbating cost pressures in some industries with possible knock on effects for household budgets.

Australia’s peak body for the labour-hire industry sounded the alarm on Tuesday and called on the Andrews government to justify the increase, which it said would “take away employment opportunities for Victorians”.

Consumer Affairs Minister Danny Pearson has been asked to investigate why WorkCover fees for the labour-hire industry have more than doubled year-on-year. Credit: Luis Enrique Ascui

In a letter to WorkSafe Minister Danny Pearson, seen by The Age, Recruitment, Consulting and Staffing Association (RSCA) chief executive Charles Cameron said the sector suspected workers’ compensation claims were being incorrectly attributed to labour-hire services, instead of the industries in which the accidents or injuries occurred.

As a result, Cameron said, the industry rate for labour-hire firms – the figure used to calculate WorkCover premiums – had grown from 3.1 per cent of a company’s payroll to 7.5 per cent year-on-year.

“In the middle of a crisis around staffing, it seems crazy that we’re going to increase premium costs for those who are actually trying to solve the talent shortage,” he said.

“We want the government to come clean as to how it can be that a worker who works in an office can be rated as twice the risk of someone who works on a building site.”

Cameron said the extra fees were particularly devastating because, in his view, the 3.1 per cent figure was already inflated.

“The equivalent premium percentage in NSW is approximately 1 per cent. Everyone’s scratching their head.”

Cameron said that unless the state government intervened, the WorkCover rate for office staff at labour-hire firms would exceed the construction industry, at almost 4 per cent, and meat processing at 5.7 per cent.

“We’re supplying teachers into schools where there’s a massive teacher shortage, we’re supplying an aged care sector that’s on its knees, we’re supplying hospitality. Right across the board, these costs will be passed on to the consumer.”

In response to questions from The Age, a Victorian government spokesman described the old WorkCover model as “fundamentally broken”.

“We’re working side by side with unions and businesses to deliver fundamental reforms to make WorkCover sustainable,” the spokesman said.

The spokesman added that, due to rate capping provisions, an individual employer’s premium cannot increase more than 75 per cent from the previous year.

Bayside Group and Acclaimed Workforce director Robert Blanche said the hiked charges would set his two labour hire companies back a combined $200,000, given he had about 60 employees.

“We haven’t had a claim in the last three years,” he said.

“It doesn’t make it easy working in Victoria, that’s for sure. I’ve spoken to two [other] recruitment agencies, and they’re now having to think about where they go.”

In his letter, Cameron demanded to know how the new industry rate was calculated and what data was used to justify the decision.

“Additionally, we would like to know that WorkSafe are taking appropriate steps to ensure that their agents are checking that claims involving labour-hire workers are properly classified,” the letter reads.

In May, business groups and unions united to oppose changes to Victoria’s workplace compensation scheme after the state government announced premiums paid by businesses would rise from 1.27 per cent to 1.8 per cent.

The overhaul came after WorkCover recorded an insurance operations deficit of $1.6 billion in the 2021-22 financial year, with payouts exceeding premium revenue by $1.1 billion.

Opposition finance spokeswoman Jess Wilson said the WorkCover hikes were another barrier to investment and jobs in Victoria.

“When you add WorkCover premium increases to the new hike in payroll tax for medium and large businesses in Victoria, you have to ask whether Victoria is actually open for business?” Wilson said.

“At a time of widespread skills and labour shortages, Victoria should be exploring options to attract workers and investment to our state, not imposing significant further costs on local businesses.”

The WorkCover premium is 1.23 per cent in Queensland and 1.48 per cent in NSW, but above 2 per cent in Tasmania and the ACT.

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