We're improving Experience Rating for businesses
Each year, New Zealand businesses receive their ACC Work levy invoice. The levy helps protect and insure your most valuable asset – your people.
We want all workplaces in New Zealand to be as safe as possible. Healthy, safe workplaces are likely to have fewer claims and staff days off. The changes we’re introducing aim to encourage Experience Rated businesses to ensure the health and safety of your people is even more of a priority.
How to know if a business is part of Experience Rating
Your business is part of Experience Rating if you, or your business group, has paid a Work Account levy of $10,000 or more a year, for three years in a row.
For example, to be part of Experience Rating in the 2021 levy year, a business would have paid an ACC Work Account levy of $10,000 or more during the 2017, 2018 and 2019 levy years.
If you're part of a business group
When businesses share common ownership, we group them together. We determine if you're in a business group by looking at the shareholdings. Each business in the group will pay an ACC Work levy based on their individual liable earnings.
The information below refers to businesses and business groups. We outline any differences where applicable.
Experience Rating is part of the ACC Work levy
There are a few steps to calculate your ACC Work levy and, for some businesses, the Experience Rating is one of them. The ACC Calculations section on the back of your latest ACC Work levy invoice explains how it works.
First, you’ll see a Work Account levy amount
This is a base calculation that considers the industry you operate in and the total liable earnings of all your employees.
We add a Working Safer levy
We collect this on behalf of the Ministry of Business Innovation and Employment to support the activities of WorkSafe, which is New Zealand’s workplace health and safety regulator.
For some businesses, we apply an Experience Rating adjustment
This adjustment determines the ACC Work levy total. Your business is part of Experience Rating if:
- your business has paid a Work Account levy of $10,000 or more a year for three years in a row
- your business group has paid a combined Work Account levy of $10,000 or more a year for three years in a row.
Immediately after those three years, there will be one 'gap year' before your business becomes part of Experience Rating, as ACC finalises claims data and other information.
Business group members will receive the same Experience Rating adjustment. This will reflect the group’s overall performance. Where a group has members involved in multiple levy risk groups, the final adjustment reflects the group’s size and performance in those levy risk groups.
How we’re improving Experience Rating
We spoke with Kiwi businesses over the last two years to see if we could make Experience Rating better. As a result, we’re making some improvements.
1. Older claims, lesser influence
We calculate Experience Rating based on your claims for any work-related injuries over a three-year period.
In the past, your claims for each of the three years had equal weighting.
Now, each year will have its own weighting, so your business’ older claims will have less bearing on your Experience Rating adjustment:
- 100% weighting will be given to your claims made during the most recent completed year – Year 1
- 70% weighting will be given to your claims made during the previous year – Year 2
- 40% weighting will be given to your claims made during the year before – Year 3.
2. Goodbye to the industry modifier
The Industry Modifier made up a part of your final Experience Rating adjustment, which ranged from a 15% discount to a 15% loading. It was applied equally to everyone in your industry peer group.
Businesses told us it’s important that the Experience Rating adjustment more accurately reflects your performance. Because you had little influence over the Industry Modifier, we’re dropping it from your Experience Rating.
3. Easier access to discounts
As part of calculating your Experience Rating adjustment, we also look at the size of your business. We determine this using your liable earnings. We use this information to identify your credibility threshold.
Currently, the credibility threshold can restrict some businesses, especially smaller businesses, from receiving more significant discounts. That’s all changing.
After listening to feedback, we’re relaxing the credibility thresholds to make it easier for more businesses to access larger discounts.
But remember, relaxed credibility thresholds will also increase the possibility of exposure to a greater loading if health and safety performance isn’t up to standard. It’s another good reason to prioritise improving health and safety.
We’ll be providing more detail about the changes to the credibility threshold and how it works at a later date.
4. Discounts and loadings, in increments
These first three changes mean your Experience Rating adjustment will more accurately reflect your business’ health and safety performance.
However, it also means that your business may see greater variations in your year-on-year Experience Rating adjustment, and this will affect the levy you pay.
To reduce this variability, we'll be applying discounts and loadings in increments of 10%, and one of 15%. This will make it clearer where you sit and how your future performance might impact your discount or loading.
We place you in a band, based on your Experience Rating calculation, shown in the table below. Your position within a band will give you an insight into how you could act to influence future discounts and loadings.
If your calculation sits:
- in the middle of a band - you can be confident that if you continue with your current level of health and safety performance, your discount or loading will not change
- near the top of a discount band - you’ll see that a further improvement in your health and safety performance may lead to a higher level of discount
- near the top end of a loading band - if you don’t improve your health and safety performance, it may lead to a greater loading.
This table shows the Experience Rating bands and how they affect your final discount or levy.
|Experience Rating bands||Final discount/loading|
|Discount||< = -45||-50%|
|< -45 to -35||-40%|
|< -35 to -25||-30%|
|< -25 to -15||-20%|
|< -15 to -5||-10%|
|Neutral||> -5 to 5||0%|
|Loading||> 5 to 15||+10%|
|> 15 to 25||+20%|
|> 25 to 35||+30%|
|> 35 to 45||+40%|
|> 45 to 55||+50%|
|> 55 to 65||+60%|
How we calculate and apply Experience Rating
There are three main steps to calculating and applying your Experience Rating.
We take three pieces of information from claims which occurred in your workplace:
- the number of weekly compensation days for your employees
- the number of claims for your employees with medical costs $500+
- accidental death claims.
We'll now compare claims and return to work performance with businesses in your levy risk group using two rates. If you’re in a business group, we'll compare these against the group's levy risk groups.
Risk management rate
This is the number of claims with medical costs greater than $500 (or fatal claims) per $1 million liable earnings in your levy risk group. Two rates are calculated reflecting:
- your business’ or businesses group's claims record
- the number of claims in your levy risk group.
- The number of weekly compensation days (for qualifying claims) per $1 million liable earnings in your levy risk group.
- Again, we calculate two rates, one for your business, or business group, and one for your levy risk group.
At this step of the calculation...
A greater weighting is given to your most recent completed year’s performance, and less to earlier claims.
The Industry Modifier has been removed from the calculation.
Credibility thresholds have been relaxed, making it easier for businesses to access larger discounts and loadings.
Your experience rating calculation
Your performance against the Risk Management and Rehabilitation rates determines your Experience Rating calculation and whether you’re likely to receive a discount or loading.
For business groups, if there are multiple business activities this calculation is done for each of its levy risk groups. To calculate the group’s final Experience Rating adjustment, we weight these rates based on the group’s size in the levy risk group, which is determined by the liable earnings filed. We bring them together to calculate the group’s final adjustment.
To work out the amount of your final discount or loading we place your Experience Rating calculation into an Experience Rating band, using the table above.
When your new Experience Rating comes into effect
These changes will come into effect with government approval of the new Experience Rating regulations in early 2020. The changes will affect our calculation of your 2020/21 levy year Experience Rating adjustment. Remember, the 2020/21 levy year goes from 1 April 2020 to 31 March 2021.
Any changes a business makes to its health and safety which result in a discount will show up in future levies. So, for instance, improvements made now may have an impact on your ACC Work levy in 2021/22. For businesses in a business group, the group will need to lift performance to influence the levy.
A few more things for you to know about
What your ACC Work levy covers
The levy helps protect and insure your most valuable asset. Your people. If you or a staff member has an accident, we help pay for and support their recovery. We also fund injury prevention in the workplace and community.
Have you registered for MyACC for Business yet?
You can get more detail about how we calculate your levy, see how you’re tracking with your claims record, view your invoice, find out if you owe anything, set up payment plans and more. Over time, we’ll be adding yet more helpful information for you to access.
If you have any questions about Experience Rating, and the changes, contact our business team.
Phone 0800 222 776
Or email us and one of our Solution Partners will be in touch.