Can Australia afford to lose $57.5 billion a year through work-related illness and injury?

Robert Hughes

What role do compensation authorities play in helping people back to work?

Illness and injuries at work costs Australia and Australians $57.5 billion a year, a staggering 5.9% of GDP (Australian Safety and Compensation Council - Cost of work-related injury and illness 2005-06). Up from $34.3 billion in 2000/01.

The cost to employers is 18% of the total (direct and indirect costs).

Even more frightening is that the injured and ill workers who the workers' comp systems are there to protect actually pay 49% of the total cost.

We do not argue against paying the cost of work-related injury or illness. 

We do believe that what this country spends in this context today is largely the result of poorly framed and administered legislation.

Change would not only improve health outcomes, but also reduce costs.

The Australian workers' compensation systems and enabling legislation have laudable aspirations i.e. to protect employees who have become ill, or are injured, as a result of work.  However, the application of the different state and Commonwealth systems are fraught with problems, some of which are common.

OH&S issues aside, every responsible Australian employer these days treats all illness and injury to their employees in the same way.  Whether an arm is broken at work or tripping over a supermarket trolley, the injury presents the employer with exactly the same problem and the same duty of care policies are invoked i.e. how to best support the employee back to good health and facilitate their return to work.

Regardless of where injury occurs, it costs an employer the same amount to replace the person in the interim, to make any ergonomic changes required, and to support a graduated return to work.  However, if the injury occurs at work, the cost of facilitating and then managing a workers compensation claim - even just in terms of time alone - are significantly greater. 

Let's look for a moment at the nature of insurance.  By definition a premium is paid to protect against risk.  In the instance of workers' compensation, the premium is paid by the employer but the benefit goes to the employee.  We do not question the need to protect Australian workers from the health consequences of work.  however, the notion of insurance paid for by the employer which, if called on, then costs a business even more money (replacement labour, ergonomics, return to work program and management, possible premium hike) borders on the absurd.

If the claimants / employees were fully compensated it might make some sense, but the Australian Safety and Compensation report shows that rather than benefit workers, they actually incur 49% of the direct and indirect costs of work related illness or injury.

Work-related injury or illness costs everyone involved a great deal of money.  And worse, the compensation schemes do not work as intended.  Research evidence from repeated studies in Australia and elsewhere shows that when people suffer like injuries, those who fall within the compensation systems take longer to recover and have worse health outcomes than people who are outside of the system.

In our view it would be preferable if, instead of a workers' compensation premium, business were to pay its share of the cost of a national health system as a direct tax. With this money, a scheme that treated all illness and injury in the same way, whatever the origin, (as in New Zealand) could be created. This overarching scheme would focus on enabling anyone with a health problem to be compensated if necessary, and returned to work as quickly as possible. It makes much more sense.  Such a scheme would enable a far more efficient and concentrated focus on the worker and their return to positive health and activity, via a partnership between all stakeholders.

Unfortunately, as the workers' compensation matrix exists in Australian at present, a claim automatically creates a canvas for conflicts of interest between the stakeholders.  Worker against employer and insurer, employer against insurer and so on. Worse, the present system infuriates patient focussed health professionals who simply do not have the time to deal with what are essentially process driven systems. And let's not mention the lawyers. 

Australia needs a policy and legislative framework that brings together stakeholders in positive partnerships designed to focus precisely on the ill or injured person and assist them through a difficult time in their life. 

What we actually have are 'authorities' charged with administering various bits of well intentioned legislation through schemes whose very nature fosters conflict of interest between stakeholders.

Workers' Compensation as it exists in Australia today is not something that works as its legislation intends. That's something we can't afford, morally or financially.  

Published 16 April, 2009