Value-based compensation?

Blog - Value-based compensation?

Robert Aurbach | Published: September 02, 2014

I have had the privilege of working for over 19 years with the largest indigenous population in the US on their workers’ compensation laws.

Through a series of historical precedents, the indigenous populations of the US have sweeping powers to make many of their own laws for self-governance, and a few tribes have exercised that right with great sophistication. 

The Navajo Nation workers’ compensation scheme is approximately half as expensive as most Australian schemes, pays adequate benefits and has virtually no litigation. In that scheme, people get the best treatment that can be obtained, regardless of the source or cost, and they get back to work faster and more durably than other systems.

The system runs at a perennial premium surplus, and periodically is able to raise benefits to offset the success of the claims management system.

What is the secret of their success?

They have built the law around the fundamental values of the Navajo people – including a sense of community that leads everyone to regard the welfare of others as highly as they regard their own welfare. And, a sense of justice that requires the employer to have a degree of personal involvement in the worker’s rehabilitation from the injury, regardless of fault.

The various state and Commonwealth schemes in Australia are different in many ways. They are often larger programs, with greater diversity in the served population. The values of the Australian people reflect that diversity and are not codified into law in the same way as the Navajo Nation has written its “fundamental laws” into its jurisprudence. There are vast distances between, say, Sydney and Broome, that reflect more than just geography.

Still, as an observer of Australian culture, I reckon that there are a few things that are “fundamental values” for Australians across the country. The country is basically law-abiding. People may not respect politicians or the political process, but they don’t steal, cheat and murder as much as many other populations and don’t have a lot of tolerance for those that do.

The community helps those that can’t help themselves. Australians are quite generous to those who are doing it tough, especially if they have come to it through no fault of their own. Appeals, even for relief of disasters elsewhere, are well supported.

A closely related value is compassion. Australians are a compassionate people. They essentially volunteer to pay higher taxes, by supporting governmental programs designed to help vulnerable people have a chance for a good life. Australian journalists are quite attentive to the human side of a story and quick to call out the heartless or the self-seeking.

And Australians believe in a “fair go”. That simple phrase covers a wide range of meanings and circumstances, but at a minimum includes concepts of basic fairness between people, lack of discrimination concerning access to goods and services, an assumption that people will respect the rights and responsibilities of others and the concept that each person has a right to pursue their dreams.

Do the workers’ compensation schemes that we have in place embody those values?

I think a fair assessment of them is that they do not.

Workers’ compensation started out as “no fault” but has become a system characterised by attempts to get the maximum possible in benefits. The natural response is to treat all claims with distrust, forcing the system into an unnecessarily adversarial stance.

The needs of the worker tend to get lost in the need to “win”. Fairness has given way to skill in working within the artificial system. The cost of premiums has become more of a policy driver than the cost of recovery. The law has become a tool to manipulate in an attempt to get the desired result.

I’m not pointing fingers. Virtually every party in the environment has played a part in getting to where we are today. But it does raise a question. What would our workers’ compensation laws look like if we could start over with a blank slate and write a law that really incorporated Australian values?