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Health, Safety, and ACC

10.2 ACC levies

10.2
ACC levies
10.2.1
Work account levy
The levies paid by employers and self-employed people are under a single account, called the work account levy.
The work account funds the costs of entitlements paid by ACC to employees and self-employed people as a result of work-related injuries that occur in the levy year. The levy aims to cover the lifetime costs of the injury.
Employers must pay the work account levy in advance directly to ACC. The amount paid is based on:
• 
the employer’s payroll;
• 
the amount and cost of injury claims for the employer’s industry group during the previous year; and
• 
the amount and cost of injury claims that ACC anticipates the employer’s industry group will have during the next year.
The levy rates vary according to the risk of work injuries occurring in the activities carried on. A low risk activity, such as accounting services, will have a low rate of levy. A high-risk activity, such as forestry, will have a significantly higher levy rate. This is because there are many more serious and costly ACC forestry claims than there are ACC claims made by employees in accountancy firms.
The levy rate for different employers varies based on the relevant classification unit for the employer’s activity. The classification units are listed in Schedules of the Accident Compensation (Work Account Levies) Regulations 2017.
These regulations came into force on 1 April 2017 and apply to Work Account levies payable from 1 April 2017 to 31 March 2018, the tax year 1 April 2018 to 31 March 2019 and subsequent tax years unless the regulations are replaced. They apply to both employers and self-employed people and they replace the Accident Compensation (Work Account Levies) Regulations 2016.
The regulations also set the maximum amount of earnings (of an individual employee) on which the levy is payable. The maximum amount of employee earnings in 2017/18 is $124,053 and $126,286 in the 2018/2019 tax year. The maximum amount of self-employed earnings in the 2016/17 tax year is $122,063 and $124,053 in the 2018/2019 tax year.
The Work Account levy rates payable by employers and private domestic workers is calculated using the formula set out in reg 8 of the regulations.
The Work Account levy rates payable by self-employed people is calculated using the formula set out in reg 9 of the regulations.
Self-employed people and shareholder-employees who have entered into an agreement with ACC to purchase weekly compensation pay a Work Account levy calculated by ACC.
Levies are payable in advance directly to ACC. The provisional payment is based on the previous year’s payroll as an estimate, adjusted by the labour cost index. Employers may provide the ACC with an amount that is considered to be a more accurate estimate of the current year’s earnings for provisional payment purposes. The levy is recalculated in the following year when the actual payroll details are available. A levy adjustment is then issued to the employer.
The residual portion of the work levy has not been collected since 1 April 2016.
(1)
Reduction of levy
The 2017 regulations do not contain provisions for reductions of the Work Account levy, unlike work account regulations for previous years.
(2)
Increase of levy
The Accident Compensation Act 2001 allows ACC to increase an employer’s levy if they have a consistently poor workplace safety record. ACC monitors injury records and may require employers to undergo an audit under the Workplace Safety Evaluation Programme (see [10.2.3.]). The regulations cover how the levy must be increased.
The regulations state that ACC must increase an employer’s levy by 50 per cent if the audit shows that the workplace does not meet the standards required. The levy increase must be based on an audit of the employer’s safety management practices carried out:
• 
at worksites chosen by ACC;
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on reasonable day(s) chosen by ACC;
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by an auditor chosen by ACC; and
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in accordance with the upward audit tool.
Once an employer has had their levy increased, ACC must arrange further audits of the employer’s safety management practices. These must be carried out no more than once a year, and must continue until the employer passes an audit.
(3)
Invoicing
The regulations stipulate that the work account levy is payable in advance and can be invoiced by ACC at any time after the income year begins. If an employer has overpaid their levy, the regulations set an interest rate on the refund of 6 per cent per year. The regulations also state that the work account levy is exclusive of GST.
(4)
Classifications
For the purposes of setting levies payable by employers and self-employed people, ACC must classify them in an industry or risk class that most accurately describes their activity.
If the employer or self-employed person is engaged in two or more activities, they will be classified in the industry classification unit that attracts the highest levy under the regulations. However, if an employer meets specified thresholds, ACC may use separate classification units to classify the employees.
10.2.2
Earners’ levy
Employees and self-employed people pay an earners’ levy to fund the costs of entitlements paid by ACC to people in the workforce as a result of non-work injuries (except those covered by the motor vehicle account). Employees pay the earners’ levy to the ACC through the PAYE system of income tax.
The earners’ levy is set by the Accident Compensation (Earners’ Levy) Regulations 2017. The regulations replace and revoke the Accident Compensation (Earners’ Levy) Regulations 2016. The earners’ levy rate for all earners except self-employed people for 2017/18 is $1.21 per $100 of earnings (excluding GST). Rates for self-employed persons are set out in regulations 4, 6 and 7.
In the 2017/18 levy year the maximum level of earnings liable for the earners’ levy is $124,053 per annum for employees and $122,063 per annum for self-employed people. The maximum level of earnings liable for the earners’ levy in the 2018/2019 tax year and subsequent tax years is $126,286.
Self-employed people are invoiced by ACC for the earners’ levy, together with the levy that they pay for the work account.
10.2.3
Audit and adjustment of employer levies
ACC may adjust the employer’s levies after carrying out an audit of the employer’s safety management practices. This is to encourage employers to provide a safe working environment to assist with injury prevention.
If ACC is satisfied that the number and severity of work-related injuries suffered by employees of a particular employer are significantly greater than those of a comparable employer, ACC may look at whether to carry out an audit of the employer’s safety management practices.
If ACC decides to carry out an audit, it must do so using the approved audit tool to measure the employer’s safety management practices. Based on the outcome of the audit, ACC must adjust the levy.
ACC has set up the Workplace Safety Evaluation Programme to help employers whose record of workplace injuries is much higher than the industry average to improve their workplace safety. The emphasis is on helping employers to improve their safety record and making upward adjustment of levies the last resort.
ACC identifies employers to audit by looking at their workplace injury records. Examples given by ACC of employers who will be selected are those with injury rates that are five times higher than the industry average, or where 25 per cent of the employees have suffered injuries in one year.
Employers selected for the programme will be sent a notice and a meeting between ACC and the employer will be arranged. At this point, the employer can provide ACC with information on why the claims information does not accurately reflect the actual situation.
If ACC decide to proceed, ACC will provide the employer with free advice on what can be done to improve workplace safety. The employer will generally be given up to six months to take corrective action. A report will be drawn up after the employer has been given a chance to take action, and the ACC will decide what to do next based on this report.
If ACC feels that the employer is not making a genuine and concerted effort to improve, an ACC-funded workplace safety audit will be carried out. If the employer fails this audit, their ACC levies will be increased by up to 50 per cent. Audits will be carried out no more than once a year and the increased levies will continue until the employer passes an audit.
10.2.4
Workplace Safety Management Practices programme
The ACC Workplace Safety Management Practices programme was discontinued from 1 April 2017 as, according to the Accident Compensation Corporation, it did not align with the Health and Safety at Work Act 2015 and was not fit for purpose. Discounts ended on 30 June 2017.
10.2.5
Experience rating
In 2011, a scheme was introduced to give employers more incentive to improve their safety performance. Under the scheme, employer levies could be reviewed and adjusted (or not adjusted) annually according to an employer’s claims history.
The Accident Compensation (Experience Rating) Regulations 2017 provides for ACC reviews and adjustments to an employer’s (or self-employed person’s) work account levy. These regulations changed the scheme from annual review and adjustment to biennial reviews, adjustments and classification of industries or risks.
There are two programmes for experience rating, depending on the amount of levies paid by the employer or self-employed person.
The first type is a basic “no claims discount” scheme for those who pay less than $10,000 per year for their work account levy (class 1 levy payers). The maximum discount or loading is 10 per cent, based on the claims history. ACC looks at the individual employer or self-employed person’s claims history over the previous three years and calculates the number of “weekly compensation days”. If there have been no weekly compensation days and no fatal injury claims, a 10 per cent discount will be applied. If there have been one to 70 weekly compensation days and no fatal injury claims, no adjustment will be made. If there have been 71 or more weekly compensation days or any fatal injury claims, a loading of 10 per cent will be applied.
The second type is a more complex “experience rating programme”, based on individual performance compared to industry peers. It applies where annual levies paid exceed $10,000 per year. ACC scores an individual employer or self-employed person’s claims history over the previous three years, based on the number of “weekly compensation days”, claims that have incurred more than $500 in medical costs, and any fatal injury claims. The resulting “score” is then compared to the claims history of the industry group as a whole (as classified under the Accident Compensation (Work Account Levies) Regulations 2017 and the applicable discount (of up to 50 per cent), or loading (of up to 50 per cent), or non-adjustment, is calculated.
“Weekly compensation day” means a day for which a claimant received weekly compensation for a work-related injury. First week compensation paid by the employer is not included in the calculation of weekly compensation days. Compensation for mental injury caused by a criminal act, and a gradual process injury or disease either caused by exposure to asbestos or resulting in hearing loss are also not counted as weekly compensation days.
10.2.6
Workplace Safety Discount Scheme
The ACC Workplace Safety Management Practices programme has now been discontinued. The Accident Compensation Corporation, is changing its focus and giving rewards to businesses for reducing workplace injuries and claims, rather than giving discounts for health and safety compliance.
Members of the programme will continue to receive their discount until the end of their contract, as long as they are still meeting the health and safety practice requirements.

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