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Seacare scheme – Reforms to Work Health and
Safety and Workers’ Compensation
Consultation Paper
December 2015
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Table of Contents
1. List of Abbreviations and Defined Terms ...................................................................................... 5
2. Purpose of this paper............................................................................................................................ 7
2.1. Background of Seacare Reform .......................................................................................... 7
3. Objectives .................................................................................................................................................. 8
4. Problem Statement ................................................................................................................................ 9
4.1. What is the Seacare scheme?............................................................................................. 9
4.2. Who does the Seacare scheme cover?............................................................................... 9
4.3. Work Health and Safety Arrangements ........................................................................... 10
4.3.1. Performance comparison of other industries ...................................................................... 11
4.3.2. Performance comparison of other work health and safety jurisdictions ............... 12
4.4. Workers’ Compensation Arrangements ........................................................................... 14
4.5. Seacare scheme Governance ........................................................................................... 15
4.6. Cost recovery for the Seacare scheme ............................................................................. 15
5. Seacare scheme Reform Options .................................................................................................... 17
5.1. Option 1 – Status Quo ...................................................................................................... 17
5.2. Option 2 – Abolish the Seacare scheme ........................................................................... 17
6. Work Health and Safety ..................................................................................................................... 19
6.1. Summary of proposed changes ........................................................................................ 19
6.2. Health and Safety duties .................................................................................................. 19
6.3. Key differences ................................................................................................................. 22
6.4. Regulations and Codes of Practice ................................................................................... 27
6.5. Costs and benefits of the proposal................................................................................... 28
6.5.1. Cost impacts for business .............................................................................................................. 28
6.5.2. Overall Costs and Benefits ............................................................................................................ 30
6.5.3. Net economic impact of changes to WHS arrangements .............................................. 32
7. Workers’ Compensation .................................................................................................................... 33
7.1. Summary of proposed changes ........................................................................................ 33
7.2. Reforms to the Comcare scheme ..................................................................................... 33
7.3. Proposed Reforms to Seacare Workers’ Compensation .................................................. 33
7.3.1. Eligibility for Compensation ........................................................................................................ 33
7.3.2. Designated injuries – heart attacks and strokes................................................................ 34
7.3.3. Reasonable management action ............................................................................................... 35
3
7.3.4. Journey claims and recess breaks ............................................................................................. 35
7.3.5. Rehabilitation .................................................................................................................................... 36
7.3.6. Calculation of Compensation ...................................................................................................... 36
7.3.7. Provisional medical expense payments .................................................................................. 37
7.3.8. Medical expenses .............................................................................................................................. 38
7.3.9. Household and attendant care services ................................................................................. 38
7.3.10. Redemption.................................................................................................................................... 39
7.3.11. Absences from Australia .......................................................................................................... 39
7.3.12. Permanent Impairment ........................................................................................................... 39
7.3.13. Mutual Obligations and Sanctions Regime ..................................................................... 40
7.3.14. Claim Determination Timeframes ...................................................................................... 41
7.3.15. Legal Costs ..................................................................................................................................... 41
7.4. Costs and benefits of the proposal................................................................................... 42
7.4.1. Total cost impact (Distributional impact)............................................................................ 45
7.4.2. Training costs ..................................................................................................................................... 46
7.4.3. Summary of workers’ compensation impacts ..................................................................... 46
8. Summary of the costs and benefits of workers’ compensation and work health and
safety changes ................................................................................................................................................ 46
9. Cost Recovery Levy and Fees ........................................................................................................... 47
9.1. Summary........................................................................................................................... 47
9.2. Regulatory Context ........................................................................................................... 47
9.3. Current Costs of the Seacare Scheme .............................................................................. 47
9.4. The Cost Recovery Levy and Fees ..................................................................................... 48
9.4.1. Cost recovery charges ..................................................................................................................... 48
10. Coverage .................................................................................................................................................. 49
10.1. Proposed Reforms to Coverage ........................................................................................ 49
10.2. Costs and Benefits of Reforms to Coverage ..................................................................... 49
11. Governance ............................................................................................................................................. 50
12. Regulatory Cost ..................................................................................................................................... 51
Attachment A .................................................................................................................................................. 52
WHS Analysis Methodology ........................................................................................................ 52
Assessment of cost impacts ........................................................................................................ 53
Assessment of benefit impacts ................................................................................................... 57
Assumptions ............................................................................................................................... 58
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Limitations…………………………………………………………………………………………………………………………….59
Attachment B .................................................................................................................................................. 60
Workers’ Compensation Analysis Methodology ........................................................................ 60
Attachment C .................................................................................................................................................. 66
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1. List of Abbreviations and Defined Terms
AAT Administrative Appeals Tribunal
ABS Australian Bureau of Statistics
ACT Australian Capital Territory
AMSA Australian Maritime Safety Authority
EBA Enterprise Bargaining Agreement
EY Review Ernst & Young Actuarial Business Consultants Pty Ltd, Evaluation of the
Seacare Scheme, May 2005
FPSO Floating Production Storage and Offloading
FTE Full-Time Equivalent
HSR Health and Safety Representative
Levy Act Seafarers Rehabilitation and Compensation Levy Act 1992
Levy Collection Act Seafarers Rehabilitation and Compensation Levy Collection Act 1992
Navigation Act Navigation Act 1912
NCEP National Compliance and Enforcement Policy
NPV Net Present Value
NSW New South Wales
NT Northern Territory
OHS Occupational Health and Safety
OHS Act Occupational Health and Safety Act 1991 (Cwlth)
OHS(MI) Act Occupational Health and Safety (Maritime Industry) Act 1993
OHS(MI)(NS)
Regulations
Occupational Health and Safety (Maritime Industry) (National Standards)
Regulations 2003
OHS(MI) Regulations Occupational Health and Safety (Maritime Industry) Regulations 1995
PCBU Person Conducting a Business or Undertaking
PIN Provisional Improvement Notice
6
PwC PricewaterhouseCoopers
QLD Queensland
RIS Regulation Impact Statement
RSC Review Review of the Seacare Scheme, Mr Robin Stewart-Crompton, March 2013
RTW Return to Work
SA South Australia
SWA Safe Work Australia
Seacare Authority Seafarers Safety, Rehabilitation and Compensation Authority
Seacare Code Seacare Authority Code of Practice
Seafarers Act Seafarers Rehabilitation and Compensation Act 1992
Seafarers
Amendment Act
Seafarers Rehabilitation and Compensation and Other Legislation
Amendment Act 2015
SRC Act Safety, Rehabilitation and Compensation Act 1988
SRCC Safety, Rehabilitation and Compensation Commission
TAS Tasmania
The Fund Safety Net Fund
WA Western Australia
WHS Work Health and Safety
WHS Act Work Health and Safety Act 2011
WHS Regulations Work Health and Safety Regulations 2011
WPI Wage Price Index
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2. Purpose of this paper
2.1. Background of Seacare Reform
This consultation Regulation Impact Statement (RIS) outlines the Australian Government’s proposed
reforms to the Seacare scheme, including the costs and benefits of the reforms. It is being publicly
released to provide interested stakeholders and members of the public with an opportunity to
review and comment on the proposed reforms.
In December 2014, the Government made a decision to transfer the regulatory functions of the
Seafarers Safety, Rehabilitation and Compensation Authority (Seacare Authority) to the Safety,
Rehabilitation and Compensation Commission (SRCC).
In December 2015, the Government made further decisions on the new work health and safety
(WHS) and workers’ compensation arrangements that will apply to the scheme and the introduction
of a levy to fund the scheme’s regulatory activities.
Following the passage of the Seafarers Rehabilitation and Compensation and Other Legislation
Amendment Act 2015 (Seafarers Amendment Act), the Department of Employment commenced
consultations with stakeholders represented on the Seacare Authority on the proposed reforms to
the scheme.
The Department engaged PricewaterhouseCoopers (PwC) to conduct a cost benefit analysis of
possible changes to the WHS and workers’ compensation arrangements. PwC consulted with scheme
employer representatives and employers and used scheme workers’ compensation data held by
Comcare to conduct its analysis. The analysis conducted by PwC has assisted the Department to
develop this consultation RIS.
Interested parties are encouraged to provide feedback on the proposed reforms to the Department
at: [email protected].
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3. Objectives
The Government’s objectives for reform to the scheme are to:
ensure its WHS arrangements are effective in improving safety performance, and protect workers and other persons against death and serious injury and are aligned with contemporary WHS laws,
ensure its workers’ compensation arrangements provide a sustainable framework for compensating employees for injuries incurred during work, provide a focus on early intervention and return to work (RTW), and place effective rehabilitation obligations on employees,
ensure that the coverage of the scheme is clear so that employers and employees can easily determine if the scheme applies, minimising claim disputation rates, and
provide efficient and effective governance arrangements, with adequately resourced regulators to monitor workers’ compensation arrangements and enforce compliance with WHS laws.
9
4. Problem Statement
4.1. What is the Seacare scheme?
The scheme is a national WHS and workers’ compensation scheme for a very small proportion of the
maritime sector. The scheme is currently co-regulated by the Seacare Authority and the Australian
Maritime Safety Authority (AMSA).
The Seafarers Rehabilitation and Compensation Act 1992 (Seafarers Act) establishes a privately
underwritten workers’ compensation scheme, with employers covered by the Act required to
maintain an insurance policy with an approved insurer to cover workers’ compensation claims made
under the Act. The Seafarers Act also establishes the Seacare Authority, which currently oversees the
scheme. The Safety, Rehabilitation and Compensation Act 1988 (SRC Act) requires Comcare to
provide the Seacare Authority with secretarial and administrative support.
The Occupational Health and Safety (Maritime Industry) Act 1993 (OHS(MI) Act) provides WHS
regulation for a similar part of the maritime industry. The OHS(MI) Act confers broad oversight
functions on the Seacare Authority and prescribes AMSA as the work health and safety inspectorate
for the scheme.
The scheme is supported by the Seafarers Safety Net Fund (the Fund) which operates as a safety net
‘employer’ to provide workers’ compensation payments to employees where there is no employer
against whom a claim can be made (for example, because an employer becomes bankrupt or
insolvent or is wound up or ceases to exist). The Fund is maintained by a levy on employers under
the Seafarers Rehabilitation and Compensation Levy Act 1992 (the Levy Act). All employers covered
by the scheme are required to pay the levy each quarter under the Seafarers Rehabilitation and
Compensation Levy Collection Act 1992 (Levy Collection Act).
Two independent reviews of the scheme (the “Ernst & Young Actuarial Business Consultants Pty Ltd
Evaluation of the Seacare Scheme” (EY Review) and the “Review of the Seacare Scheme by
Mr Robin Stewart-Crompton” (RSC Review)) have highlighted that it needs widespread reform. Its
workers’ compensation arrangements do not provide adequate incentives or support for injured
seafarers to return to work. Its WHS arrangements are outdated and require alignment with
contemporary WHS law and practice. In addition, the scheme is not sufficiently funded to be
adequately regulated, coverage of the scheme is unclear, and its governance arrangements are
inefficient.
4.2. Who does the Seacare scheme cover?
The scheme is relatively confined in scope, only applying to employers and seafarers in a defined
part of the broader maritime industry. The scheme generally covers employers and seafarers on
vessels which are engaged in interstate or international trade or commerce.
The Seacare Authority’s 2014-15 Annual Report noted there were 6,863 seafarers and 33 employers
covered by the scheme. There were 336 vessels covered, consisting of 207 vessels from the offshore
sector, 88 vessels from the blue-water sector, 30 vessels from the dredging sector, and 11 vessels
from other sectors (passenger or tourism for example).
There are longstanding issues regarding the coverage of the scheme that have created problems for
governments, regulators, employers and seafarers.
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Both the Seafarers Act and the OHS(MI) Act rely on the repealed Navigation Act 1912
(Navigation Act) to define the term ‘prescribed ship’, which sets out a broad range of vessels that
could potentially be covered by the scheme. This reliance is the major source of uncertainty
regarding the exact coverage of the scheme.
The lack of certainty and clarity has resulted in a large number of disputed claims. The claim
disputation rate is much higher under the scheme than under other workers’ compensation schemes
across Australia. Disputed claims often lead to costly and time consuming appeals to the
Administrative Appeals Tribunal (AAT) and the courts.
Table 1: Seacare scheme claim disputation rate
Performance indicator Seacare scheme 2012-13
performance
Seacare scheme 2013-14
performance
Australia 2013-14 performance
Claim disputation rate (number of AAT applications as a % of claims lodged)
26.7% 28.4% 5.4%
Source: Seacare Annual Report 2013-14, Comparative Performance Monitoring Report 17th
Edition, Safe Work
Australia
In December 2014, the Full Court of the Federal Court handed down its decision in Samson Maritime
Pty Ltd v Aucote [2014] FCAFC 182. The Full Court held that the Seafarers Act covered seafarers
employed by a trading, financial or foreign corporation on a ‘prescribed ship’, including vessels
engaged in intrastate trade. This interpretation was at odds with the commonly understood view of
coverage and meant that up to 11,000 Australian registered vessels could potentially be covered by
the scheme.
The Seafarers Amendment Act received Royal Assent on 26 May 2015 which restores the
jurisdictional boundary between the scheme and state schemes, as it was broadly understood to be
prior to the Aucote decision but only up to the date the Seafarers Amendment Act received
Royal Assent.
Further administrative and legislative action was taken to clarify that the scheme does not extend to
vessels only engaged in intrastate trade. The Seacare Authority granted exemptions from coverage
by the Seafarers Act for vessels affected by the decision. The former Minister for Employment also
made declarations to limit coverage. However, the Seacare Authority exemptions are due to expire
one year after they were made (March and April 2016) and the Minister’s declarations will sunset
two years after they were registered (June 2017).
4.3. Work Health and Safety Arrangements
The OHS(MI) Act, which came into effect in 1994, was based on the Occupational Health and
Safety Act 1991 (Cth) (OHS Act) and at that time was broadly similar to health and safety laws across
all states and territories.
In 2012, the OHS Act was replaced by the Work Health and Safety Act 2011 (WHS Act). The WHS Act
reflects the Commonwealth’s implementation of the model WHS laws, developed by Safe Work
Australia (SWA) and adopted in most Australian jurisdictions.
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The OHS(MI) Act has not been substantially amended since its enactment and as a consequence has
become considerably out-of-date, contributing to the poor safety performance of the scheme. It has
not proven effective in securing the health and safety of seafarers.
4.3.1. Performance comparison of other industries
According to data compiled by SWA, in 2012-13 (the last full year for which data is available), the
incidence rate of serious injury claims for the Seacare scheme (19.4 claims per 1000 employees) is
significantly higher than the Australian average (11.0 claims per 1000 employees).
Table 2: Comparison of the Seacare Scheme and Australia key performance indicators
Performance indicator 2009-10 2010-11 2011-12 2012-13
Seacare Scheme
Deaths 0 0 0 1
Serious personal injuries (per 1,000 workers)
30.3 30.9 25.2 19.4
Australia
Deaths 250 236 228 195
Serious personal injuries (per 1,000 workers)
12.4 12.2 12.1 11.0
Source: Comparative Performance Monitoring Report 17th Edition, Safe Work Australia
While it is expected that the maritime industry would have a higher incidence rate of serious injury
claims than the Australian average, given the high risk nature of seafaring work, the incidence rate of
serious injury claims for the Seacare scheme is generally higher than that of other high risk industries
such as construction, mining and agriculture. While the serious injury incidence rate for the scheme
trended downwards from 2010-11 to 2012-13, the serious injury incidence rate for the scheme can
be quite volatile due to its relatively small size.
Comparison of serious injury claims per 1000 employees between the Seacare scheme
and other industries
Source: Safe Work Australia 17th
Comparative Performance Monitoring Report, Seacare Annual Report 17th
Edition
0
5
10
15
20
25
30
35
2009-10 2010-11 2011-12 2012-13
Seacare
Agriculture
Mining
Construction
12
4.3.2. Performance comparison of other work health and safety jurisdictions
The most recent analysis conducted by SWA shows that while there has been a reduction in injury
rates across all jurisdictions (including the Seacare scheme) there has generally been a greater
reduction in serious injury rates in jurisdictions that have adopted the model WHS laws.
The graph below shows the incidence rate of all accepted workers’ compensation claims (claims per
1,000 employees) by jurisdiction. Jurisdictions are grouped into those which enacted model WHS
legislation on 1 January 2012 (New South Wales (NSW), Queensland (QLD), Northern Territory (NT), the
Australian Capital Territory (ACT) and Commonwealth jurisdictions); 1 January 2013 (South Australia
(SA) and Tasmania (Tas); and Western Australia (WA) (which has not enacted the model laws). Victoria
(which has also not enacted legislation) was excluded from the analysis.
All jurisdictions showed a decline in the rate of claims between the 2002-03 and 2013-14 financial
years.
To determine if enactment of the model WHS laws may have had a significant impact on the rate of
claims, incidence rates were modelled to assess if a series or trend break had occurred following
enactment (allowing for a two quarter lag following enactment).
0
5
10
15
20
25
30
35
40
45
50
2002-0
3Q1
2002-0
3Q3
2003-0
4Q1
2003-0
4Q3
2004-05Q
1
2004-05Q
3
2005-0
6Q1
2005-0
6Q3
2006-07Q
1
2006-07Q
3
2007-0
8Q1
2007-0
8Q3
2008-09Q1
2008-09Q3
2009-10
Q1
2009-10
Q3
2010-11Q
1
2010-11Q
3
2011-12Q
1
2011-12Q
3
2012-13Q
1
2012-13Q
3
2013-14
Q1
2013-14
Q3
Cla
ims
pe
r 10
00
em
plo
yee
s
NSW/QLD/NT/ACT/CMWTH TAS/SA WA
13
Analysis of injury rates for NSW/QLD/ACT/NT/Commonwealth
The analysis shows that a statistically significant change in the trend decrease of the injury incidence
rate occurred following the date of enactment of the model WHS laws in jurisdictions that enacted
the model laws on 1 January 2012. Injury incidence rates have trended downward more quickly
since the introduction of the model WHS laws.
For comparison, the chart below shows the injury rate for the Seacare scheme, which is not
modelled in the charts above, over a similar period of time.
Analysis of injury rates for the Seacare scheme
The Seacare scheme showed a higher injury incidence rate compared to other jurisdictions in the
period from 2004-05 to 2014-15. While there has been some decrease in injury incidence rates in
recent years, injury incidence is still well above that of jurisdictions that have adopted the model
WHS laws. The Seacare injury incidence rate can be highly volatile due to the small size of the
scheme.
0
5
10
15
20
25
30
35
40
45
50
55
60
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Cla
ims
per
10
00
em
plo
yees
14
4.4. Workers’ Compensation Arrangements
Commonwealth workers’ compensation legislation for seafarers dates back to the
Seamen’s Compensation Act 1911.
In 1988, Professor Harold Luntz undertook a review of workers’ compensation arrangements for
Australian seafarers and recommended that a scheme for seafarers should be established,
consistent with the Comcare scheme established by the Commonwealth Employees’ Rehabilitation
and Compensation Act 1988 (as the SRC Act was then named). Consequently, in 1993 the
Seafarers Act and related levy acts were enacted.
Since the commencement of the Seafarers Act, Australia’s maritime industry, workplace
arrangements, health care and rehabilitation, technology, and community expectations have
changed significantly.
Both the EY Review and the RSC Review recommended greater alignment between the two
Commonwealth workers’ compensation schemes consistent with the rationale underpinning the
enactment of the Seafarers Act.
The RSC Review found the Seafarers Act has not kept pace with the changes made to the SRC Act.
The RSC Review noted that, while it is not necessary that all changes to the SRC Act be adopted for
the Seacare scheme, there remains an imperative to ensure the scheme is up-to-date and benefits
from national initiatives in the workers’ compensation arena.
The RSC Review also found the costs of insuring under the scheme are comparatively high. Some of
the reasons for this, according to the Review, included the poor WHS performance of the scheme
and the comparative difficulty in ensuring effective RTW. The small size and industry-specific nature
of the scheme are also likely factors contributing to high premiums.
The RTW rate in the scheme is significantly lower than the Australian average. The average durable
RTW rate across all Australian workers’ compensation schemes for 2013-14 was 77 per cent, while
for Seacare in the same period it was only 64 per cent.1 Although the durable RTW rate increased
under the scheme from 59 per cent in 2012-13 to 64 per cent in 2013-14, this is still comparatively
low when compared to the Australian average. The RTW rate remained at 64 per cent for the
2014-15 year.
There are significant barriers preventing effective RTW for seafarers under the scheme, including:
injured seafarers must be declared 100 per cent fit by a doctor before resuming seafaring
duties,
there are only a limited number of on-shore positions for those not deemed to be
100 per cent fit, particularly for the smaller employers, and
it is difficult to rehabilitate injured seafarers due to their remote places of work.
Incentives for RTW in the scheme are also comparatively weak. Weekly benefits for total incapacity
under the scheme are paid at 100 per cent for the first 45 weeks of incapacity, with this amount
1 Seacare Annual Report, 2013-14, p.14
15
reducing to 75 per cent after that time. There are high salaries available for certain seafarers in the
maritime industry, which presents little incentive to RTW.
Table 3: Seacare scheme workers’ compensation performance
Performance indicator Seacare scheme 2012-13
performance
Seacare scheme 2013-14
performance
Seacare scheme 2014-15
performance
Australia 2013-14 performance
Injury management and rehabilitation
Durable return to work rate (% of injured workers who have returned to work and still at work 8-9 months after injury)
59% 64% 64% 77%
Scheme sustainability
Premium rates (average five day deductible premium equivalent rate)
3.32% (for 2011-12)
2.93% (for 2012-13)
2.88% (for 2013-14)
1.48%
Source: Seacare Annual Report 2013-14; Seacare Annual Report 2014-15, Comparative Performance
Monitoring Report 17th
Edition, Safe Work Australia
4.5. Seacare scheme Governance
On 15 December 2014, as part of its Smaller Government Reform Agenda, the Government
announced its intention to transfer the statutory functions of the Seacare Authority to the SRCC.
The decision was made because it was considered that the Seacare Authority does not have the
capacity or processes in place to effectively monitor the WHS or RTW performance of scheme
participants or drive improvements in performance. In contrast, the SRCC has a strong track record
at regulating self-insurers under the Comcare scheme, which is one of the safest schemes in
Australia.
A direct transfer of the Seacare Authority’s responsibilities to the SRCC would result in the SRCC
performing functions in respect of the Seacare scheme that it does not perform in respect of the
Comcare scheme.
To ensure the efficient administration of the Seacare scheme, it is proposed that certain
administrative functions of the Seacare Authority (that are similar to functions performed by
Comcare in respect of the Comcare scheme) be performed by Comcare instead of the SRCC. This is
outlined further in Section 11.
4.6. Cost recovery for the Seacare scheme
The Seacare Authority does not receive any appropriation from the Government to perform its
functions for the scheme. Comcare receives an annual appropriation of around $400,000 to provide
the Seacare Authority with secretariat and administrative support but this appropriation does not
cover the full cost to Comcare of assisting the Seacare Authority. AMSA does not receive any
appropriation to undertake its OHS(MI) Act functions and there is no legislative power under the
OHS(MI) Act for AMSA to collect levies to fund its WHS enforcement activities. AMSA currently cross-
subsidises this role through levies collected for other purposes which are paid by a number of ships
that are not covered by the scheme.
It is estimated that the combined unfunded costs to Comcare and AMSA in managing the scheme
under the current arrangements are around $1.6 million. This lack of resources for the Seacare
Authority (and Comcare to assist the Authority) and AMSA limits their ability to perform their
regulatory functions for the scheme.
16
Both the EY Review and the RSC Review highlighted the limited resources of the Seacare Authority
and AMSA to carry out their functions under the Seafarers Act and OHS(MI) Act.
The RSC Review noted that the funding available for workers’ compensation and WHS regulation
under the scheme is likely to limit regulatory activities that would improve performance under the
scheme.
The EY Review recommended that the Seacare Authority’s funding and resources be increased to
allow it to regulate and manage the scheme more effectively, and to recruit additional appropriately
skilled and experienced staff. They also identified cross-subsidisation of AMSA’s inspectorate
activities as an issue.
17
5. Seacare scheme Reform Options
There are three broad options for reforms in the Seacare scheme:
1. maintain the scheme in its current form (status quo),
2. abolish the scheme (deregulatory), or
3. reform the scheme.
The first two of these options are examined in more detail below. The third option is examined in
Sections 6-11 of this paper.
5.1. Option 1 – Status Quo
This option is for no change to the current arrangements. The Seafarers Act and OHS(MI) Act would
remain as they are, retaining significant differences from relevant Commonwealth and state and
territory workers’ compensation and WHS legislation. These differences will be further exacerbated
if the Safety Rehabilitation and Compensation Amendment (Improving the Comcare Scheme)
Bill 2015 passes the Parliament.
The Seacare scheme’s WHS arrangements would remain outdated and not aligned with harmonised
WHS laws that have been adopted in seven of the nine Commonwealth, state and territory
jurisdictions. Serious injury rates would likely continue to be higher than other high risk industries.
In relation to workers’ compensation, RTW outcomes would likely continue to be lower than the
Australian average, there would be limited incentives for employees to return to work and costs of
injury under the scheme would remain high in comparison with other schemes.
The Seacare Authority would continue with its current role and functions, with support from
Comcare to perform those functions. AMSA would continue to be the WHS inspectorate. Existing
funding arrangements (or lack thereof) for the Seacare Authority and AMSA would continue.
The regulatory cost/benefit of options 2 and 3 are calculated relative to maintaining the status quo.
5.2. Option 2 – Abolish the Seacare scheme
The “Australian Government Guide to Regulation” requires a non-regulatory option to be
considered. A non-regulatory option is to abolish the scheme by repealing its underpinning
legislation and passing responsibility for the sector to the states and territories.
Employers and seafarers would be covered by state and territory workers’ compensation and WHS
schemes. State and territory governments may need to amend their laws to give effect to this
option.
This option would result in regulatory savings for scheme employers since they would no longer be
required to obtain insurance from a private sector insurance provider under the scheme. Averaged
over ten years, it is estimated that this option would result in regulatory savings of around
$26.8 million per year for employers ($812,000 per employer for the 33 current scheme employers).
However, because employers would have to pay premiums to state or territory workers’
compensation authorities or private sector insurers operating in state schemes, the actual regulatory
saving for employers would be the difference between premiums paid under the scheme and
premiums paid under state and territory workers’ compensation schemes. On average, insurance
18
premiums are lower in state and territory schemes than in Seacare, but premiums for maritime
industry employers may be higher than average given the high risk nature of the work.
Employers would also incur one-off regulatory costs from transitioning to a state or territory
workers’ compensation and WHS scheme, such as building an understanding of new legislative
requirements and processes and obtaining a workers’ compensation insurance provider. These are
estimated to be approximately $50,000 in total across the scheme.
While it is difficult to make definitive comparisons of benefits across different workers’
compensation jurisdictions, the Seacare scheme is generous compared to state and territory
workers’ compensation schemes (especially compared to states where the total amount paid in
weekly compensation payments is capped). Overall, this option would likely result in a transfer of
benefits from seafarers to employers, as a result of reduced weekly compensation payments for
seafarers. The amount of this transfer has not been quantified because of the complexities of
calculating differences in compensation amounts, including weekly compensation and permanent
impairment compensation, between the Seacare scheme and each state and territory scheme.
19
6. Work Health and Safety
6.1. Summary of proposed changes
The reform option for WHS involves repealing the OHS(MI) Act and amending the Commonwealth
WHS Act to extend its application to the Seacare scheme (other than facilities located in offshore
areas) to the exclusion of state or territory WHS laws. At present, to avoid regulatory overlap, the
WHS Act does not apply to any vessel or structure to which the OHS(MI) Act applies. As a
consequence of repealing the OHS(MI) Act and extending the WHS Act to apply to the scheme, the
regulations made under the WHS Act and the approved Codes of Practice would also apply unless
otherwise provided.
The duties and requirements in the WHS Act and Work Health and Safety Regulations 2011
(WHS Regulations) are broad based and are capable of applying to a range of sectors, industries and
businesses. Retaining industry-specific WHS legislation covering the sector of the maritime industry
covered by the scheme is no longer necessary. The sector is not significantly different from other
industries which fall under generally applying Commonwealth, state or territory WHS laws (or
occupational health and safety (OHS) laws) to justify the continuation of separate WHS
arrangements. Maritime industry employers not currently covered by the OHS(MI) Act operate
under general WHS laws that apply to all businesses within the state or territory in which they
operate.
There benefits of adopting this approach include:
improving safety outcomes by ensuring that up to date laws and practices are applied,
providing consistent concepts and terminology, enabling companies to implement national
policies and procedures applying to all workers in all premises Australia-wide,
providing workers with the same protections no matter where they work or the basis on
which they were engaged, for example, employee or contractor,
to encourage safety leadership in workplaces by placing a positive obligation on officers to
exercise due diligence,
to ensure that responsibility for health and safety is shared by requiring duty holders to
consult, cooperate and coordinate activities with each other,
facilitating and encouraging worker mobility by the mutual recognition of training and licensing,
and
enabling AMSA, as the inspectorate for the scheme, to benefit from being able to draw on the
resources, expertise and experience of other WHS regulators who apply same laws.
6.2. Health and Safety duties
The OHS (MI) Act provides a similar duty-based regime to the WHS Act which aims to minimise risks
to the health and safety of persons employed on vessels while they are at work:
the OHS(MI) Act requires an operator of a ‘prescribed ship’ or ‘unit’ to take all reasonable
steps to protect the health and safety at work of seafarers,
the WHS Act requires a ‘person conducting a business or undertaking’ (PCBU) to ensure, so
far as is reasonably practicable, the health and safety of workers. The duty to ensure health
and safety requires the person to eliminate or otherwise minimise risks to health and safety
so far as is reasonably practicable.
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Table 4 outlines how the primary and upstream duties within the WHS Act would apply to PCBUs
operating vessels.
Table 4: Primary and upstream duties of care
WHS Act How proposed to apply in the Seacare scheme
Duty to ensure the health and safety of workers
Section 19(1)
A PCBU must ensure, so far as is reasonably practicable, the health and safety of workers engaged, or caused to be engaged by the person, and workers whose activities in carrying out the work are influenced or directed by the person, while workers are at work in the business or undertaking.
Owed by PCBUs (operators) to the extent that business or undertaking is being conducted on a vessel.
State WHS law would not apply to PCBUs to the extent that the business or undertaking is being conducted on a vessel.
State WHS laws would apply to stevedoring companies that load and unload a ship, including if that requires sending workers on-board the vessel.
Duty to ensure health and safety of other persons
Section 19(2)
A PCBU must ensure, so far as is reasonably practicable, that the health and safety of other persons is not put at risk from work carried out as part of the conduct of the business or undertaking.
Owed by PCBUs conducting a business or undertaking on a vessel to the extent that work is carried out as part of the business or undertaking on the vessel.
Duty would extend to persons on and off the vessel that may be put at risk from work carried out on the vessel.
State WHS law would not apply to PCBU.
Duty of persons with management or control of a workplace
Section 20
The person with management or control of a workplace must ensure, so far as is reasonably practicable, that the workplace, the means of entering and exiting the workplace and anything arising from the workplace are without risks to the health and safety of any person.
Person with management or control of a workplace means a PCBU to the extent that the business or undertaking involves the management or control, in whole or in part, of the workplace.
Applies to PCBUs with management or control of a vessel.
State WHS law would not apply to the PCBU.
Duty of persons with management or control of fixtures, fittings or plant at a workplace
Section 21
The person with management or control of fixtures, fittings or plant at a workplace must ensure, so far as is reasonably practicable, that the fixtures, fittings and plant are without risks to the health and safety of any person.
Applies to PCBUs with management and control of fixtures, fittings or plant on a vessel.
State WHS law would not apply to the PCBU.
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Table 4: Primary and upstream duties of care
Designers, manufacturers, importers or suppliers of plant, structures or substances
Sections 22-25
A PCBU who is a designer, manufacturer, importer or supplier of a plant, structure or substance that is to be used, or could reasonably be expected to be used, at a workplace must ensure all workplace activity relating to it including its handling or construction, storage, dismantling and disposal is, so far as is reasonably practicable, to be without risks to health or safety when used for its intended purpose.
These duties apply to PCBUs that design, manufacture, import or supply plant, structures or substances used on vessels.
As PCBUs might supply the same or similar products to vessels and onshore workplaces, state and Commonwealth WHS laws will apply concurrently to PCBUs that design, manufacture, import, or supply plant, structures or substances.
Duties of people installing, constructing or commissioning plant or structures
Section 26
A PCBU who installs, constructs or commissions plant or structures must also ensure, so far as is reasonably practicable, all workplace activity relating to the plant or structure including its decommissioning or dismantling is without risks to health or safety.
These duties apply to PCBUs that install, construct or commission plant or structures on vessels.
As PCBUs might install the same or similar products to vessels and onshore workplaces, state and Commonwealth WHS laws will apply concurrently to PCBUs that install plant, structures or substances.
Table 5 below outlines how duties would apply to individuals, including officers of a PCBU, workers
and other persons at a workplace.
Table 5: Duties on Individuals
WHS Act How proposed to apply in the Seacare scheme
Duty of officers
Section 27
An officer of the person conducting the business or undertaking must exercise due diligence to ensure that the person conducting the business or undertaking complies with that duty or obligation.
Would apply to officers within the meaning of section 9 of the Corporations Act 2001.
An officer would be a person who makes, or participates in making, decisions that affect the whole or a substantial part of the business or undertaking (ie. a member of the Board), not just the part of a business or undertaking being conducted by a particular vessel (ie. the master of a ship would not be an officer).
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Table 5: Duties on Individuals
Duty of workers
Section 28
While at work, workers must take reasonable care for their own health and safety and that of others who may be affected by their actions or omissions.
They must also comply, so far as they are reasonably able, with any reasonable instruction given by the PCBU to allow the PCBU to comply with WHS laws, and cooperate with any reasonable policy or procedure of the PCBU relating to health or safety at the workplace that has been notified to workers.
Applies to all workers carrying out work on the vessel including contractors and subcontractors, employees of labour hire companies, apprentices and trainees.
Duty of other persons at the workplace
Section 29
A person at a workplace must take reasonable care of their own health and safety and that of others who may be affected by their actions or omissions. They must also comply, so far as they are reasonably able, with any reasonable instruction that is given by the PCBU to comply with WHS laws.
Applies to other persons on vessel, including passengers and workers of stevedoring companies.
6.3. Key differences
The tables below outline key differences between the Commonwealth WHS Act the OHS(MI) Act.
Table 6: Duties
WHS Act OHS(MI) Act
Duty of Officers Under the WHS Act, an officer of a PCBU must exercise due diligence to ensure the PCBU complies with its health and safety duties. This duty relates to the strategic, structural, policy and key resourcing decisions.
No similar duty in the OHS(MI) Act. While operators have primary duties in the OHS(MI) Act, officers of the operator do not have specific duties.
In the maritime industry, ‘officers’ are more akin to on-shore managers and would not normally work on-board vessels
Duty of other persons at the workplace
Any person at a workplace, including customers and visitors, must take reasonable care of their own health and safety and that of others who may be affected by their actions or omissions. They must also comply, so far as they are reasonably able, with any reasonable instruction that is given by the PCBU to comply with WHS laws.
No similar duty in the OHS(MI) Act, however a common law duty would apply.
Duty on designers
The WHS Act places a duty on designers of plant, substances and structures.
No similar duty in the OHS(MI) Act.
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Table 6: Duties
Duties of persons engaged in loading or unloading a ship/unit
There is no similar duty in the WHS Act, however the WHS Act imposes duties on PCBUs that supply, install etc to a workplace. State WHS laws would apply to stevedoring companies that load and unload a ship, including if that requires sending workers on-board the ship.
Under the OHS(MI) Act, there is a specific duty for a person engaged in the loading or unloading of a ship/unit to take all reasonable steps to ensure that the ship/unit is not loaded or unloaded in such a way that it is unsafe for others or constitutes a risk to their health.
Table 7: Offences and penalties
WHS Act OHS(MI) Act
Breaches of the Act
Breaches of duties of care are criminal offences. Breaches of right of entry provisions are subject to civil remedies, consistent with the Fair Work Act 2009.
Civil proceedings can also be brought in relation to discriminatory conduct for a prohibited reason under section 112 of the Act.
The OHS(MI) Act also has criminal offences for breaches of duties of care, but there are no civil penalties under the OHS(MI) Act.
Penalties The maximum monetary penalty is $3,000,000 for a corporation and $600,000 for an individual.
Breaches of duty of care may also incur imprisonment. The maximum period of imprisonment available for the most serious breach of the Act is five years.
The maximum monetary penalty is 1000 penalty units (currently $170,000) for operators or 50 penalty units (currently $8,500) for employees. The maximum period of imprisonment (for specified breaches) is six months, but this does not apply for a serious breach of a duty of care.
Sentencing options
In addition to fines and custodial sentences, the WHS Act provides for remedial orders, adverse publicity orders, training orders, injunctions, orders for restoration, work health and safety project orders, and the release of an offender under terms of a court-ordered WHS undertaking.
The OHS(MI) Act is limited to monetary penalties.
Infringement notices
The WHS Act contains provisions to establish an infringement notice scheme. The Commonwealth has not established such a scheme.
The OHS(MI) Act does not contain provisions establishing an infringement notice scheme.
Enforceable undertakings
The WHS Act provides that the Regulator may accept a written undertaking given by a person in connection to a contravention or alleged contravention by a person of this Act (Part 11 section 216). The Regulator may also apply to a court for an order if a person contravenes a WHS undertaking (section 220)
There is no ability for the regulator to accept enforceable undertakings under the OHS(MI) Act.
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Table 9: Duties to consult, cooperate and coordinate
WHS Act OHS(MI) Act
Duty to consult with other duty holders
The WHS Act places a duty on the PCBU to consult etc, so far as is reasonably practicable, with all other persons who have a duty in relation to the same matter.
This requires duty holders with shared responsibilities to work together to protect the health and safety of workers and other persons.
There is no statutory requirement under the OHS(MI) Act to consult with other duty holders, however consultation may be necessary in order for duty holders to discharge duties under the Act.
Duty to consult workers and their representatives
The WHS Act places a duty on a PCBU to consult, so far as is reasonably practicable, with workers. The duty is not limited to employees but extends to contractors.
The WHS Act also prescribes what is required for consultation purposes and when it is required.
This requires PCBUs to consult with workers and their representatives over work health and safety matters and give workers a reasonable opportunity to express their views, raise work health and safety matters and contribute to decisions on work health and safety matters.
The OHS(MI) Act places a duty on the operator of a prescribed ship or unit to take all reasonable steps to develop an OHS policy in consultation with involved unions.
Table 8: Incident notification
WHS Act OHS (MI) Act
Incident notification
A PCBU must ensure that the regulator is notified immediately after becoming aware that a notifiable incident (death of a person, or serious injury or illness of a person, or a dangerous incident) arising out of the conduct of the business or undertaking has occurred. The Act also outlines what is a serious injury or illness and what is a dangerous incident.
Similar provisions in the OHS(MI) Act, although there is no requirement to notify the regulator immediately. The meaning of the terms and timing and form of reports is prescribed in regulations (currently 4 hours, or as soon as reasonably practicable afterwards, for notification).
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Table 10: Representation and participation
WHS Act OHS(MI) Act
Establishment of work groups
The WHS Act provides that a work group may be determined for workers engaged in two or more businesses or undertakings.
Due to the broad definition of worker, workers other than ‘employees’ such as contractors and labour hire workers can be members of a work group.
A PCBU must if asked by a worker include the worker’s representative in negotiations about the workgroup.
Under the OHS(MI) Act, a request to an operator to enter into consultations to establish a designated work group in respect of employees of the operator on a prescribed ship or unit may be made by an employee or union (if there is one involved). An operator has the right to enter into consultations at any time if they believe that a designated work group should be varied. The designated work group is comprised only of employees.
Health and Safety Representatives (HSRs)
The WHS Act provides that a worker may ask that the PCBU facilitate the conduct of an election for one or more HSRs to represent workers.
A HSR holds office for a period of three years.
Under the OHS(MI) Act, only one HSR may be selected for each designated work group and holds office for two years.
Training of HSRs The WHS Act provides that a PCBU must, if requested, allow the HSR to attend training (currently 5 days) that is approved by the Regulator (Comcare); and is a course that the HSR is entitled to attend; and that it is chosen by the HSR in consultation with the PCBU.
The OHS(MI) Act requires a HSR to undertake a course of training accredited by the Seacare Authority but does not specify the number of days.
Power to issue provisional Improvement Notices (PINs)
The WHS Act provides HSRs with the power to issue PINs provided that the HSR has consulted the person receiving the PIN.
The HSR cannot issue a PIN unless the HSR has completed relevant training.
PINs may be issued by leaving the notice with the person with management and control of the workplace to which the notice relates, or by delivering the notice at the person’s usual place of business.
A HSR may issue a PIN to a person in command.
While a HSR must be trained, they may issue PINs before undertaking training.
Issue resolution The WHS Act provides that parties to a WHS issue must take reasonable efforts to achieve a timely, final and effective resolution of the issue in accordance with an agreed procedure, or if there is no agreed procedure, the default procedure prescribed in the Regulations.
Where an issue cannot be resolved after reasonable efforts have been taken, the issue can be transferred to the Regulator to arrange for an inspector to attend the workplace to assist in resolving the issue.
There are no specific provisions for issue resolution in the OHS(MI) Act, although there are provisions dealing with disagreements in relation to the establishment or variation of work groups and directions to stop unsafe work.
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Table 10: Representation and participation
Right of worker to cease unsafe work
The WHS Act provides that a worker may cease, or refuse to carry out, work if the worker has a reasonable concern that to carry out the work would expose the worker to a serious risk to health or safety, emanating from an immediate or imminent exposure to a hazard.
The OHS(MI) Act allows HSRs to direct that unsafe work cease in certain circumstances but does not provide individual workers with that right.
Table 11: Discriminatory, coercive and misleading conduct.
WHS Act OHS(MI) Act
Prohibition of discriminatory, coercive or misleading conduct
The WHS Act has wide ranging provisions that prohibit a person directly or indirectly engaging in discriminatory conduct for a prohibited reason.
Criminal or civil action may be taken in respect of this provision. Reverse onus of proof applies in this provision.
The OHS(MI) Act includes similar provisions prohibiting discriminatory conduct, but ‘discriminatory conduct’ and ‘prohibited reason’ are more narrowly defined.
Reverse onus of proof applies. A contravention may incur a financial penalty, but penalties are significantly lower under the OHS(MI) Act compared to the WHS Act.
Table 12: Union right of entry
WHS Act OHS(MI) Act
Workplace entry by permit holders
The WHS Act confers powers on authorised representatives of unions (WHS permit holders) to enter workplaces for OHS purposes.
A WHS entry permit holder may enter a workplace to inquire into a suspected contravention of the WHS Act (without notice), or to consult and advise relevant workers who wish to participate in the discussions on work health and safety matters (with at least 24 hours’ notice of entry).
There are no right of entry provisions in the OHS(MI) Act, although right of entry may be currently exercised through the Fair Work Act or state/territory work health and safety legislation.
Table 13: Review of decisions
WHS Act OHS (MI) Act
Internal review The WHS Act provides for a two-stage review process of certain decisions (e.g. issuing of statutory notices by an inspector), starting with internal review followed by external review by the Fair Work Commission.
The OHS(MI) Act does not provide for internal review but provides for external review by the Fair Work Commission.
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6.4. Regulations and Codes of Practice
The WHS Act, like the OHS(MI) Act, is supported by Regulations and Codes of Practice.
Regulations
The OHS(MI) Regulations sets out detailed administrative matters relating to the elections for HSRs,
forms for provisional improvement and other notices, and procedures and forms for notifying and
reporting incidents.
The Occupational Health and Safety (Maritime Industry) (National Standards) Regulations 2003
(OHS(MI)(NS) Regulations) sets out the requirements relating to hazardous substances (including
asbestos, manual handling and confined spaces). Like the repealed Commonwealth Occupational
Health and Safety (Safety Standards) Regulations 1994, many of the requirements are based on
National Standards which were development by SWA’s predecessor bodies.
The WHS Regulations specify the way in which some duties under the WHS Act must be met and
prescribe procedural or administrative requirements to support the WHS Act. They cover a wide
range of matters relating to WHS.
As a consequence of repealing the OHS(MI) Act and extending the WHS Act to apply to the Seacare
scheme, the Regulations made under the WHS Act and the approved Codes of Practice will also
apply unless otherwise provided. It is not possible to retain the OHS(MI) and/or OHS(MI)(NS)
Regulations as they are based on the provisions of the OHS(MI) Act, not the WHS Act, and many of
the terms and concepts would not align.
Like the WHS Act, the requirements and guidance in the WHS Regulations are broad based and are
capable of applying to a range of sectors, industries and businesses. Some of the WHS Regulations
will not be relevant to maritime activities and will have no effect, however a number of chapters of
the WHS Regulations will be, including:
Representation and participation (Chapter 2),
General risk and workplace management (Chapter 3),
Hazardous work (involving noise, hazardous manual tasks, confined spaces, falls, work
requiring a high risk work licence, demolition work, electrical safety and energised electrical
work and diving work) (Chapter 4),
Hazardous chemicals (Chapter 7), and
Asbestos (Chapter 8).
The requirements in the WHS Regulations that are relevant to maritime activities are very similar to
that of the OHS(MI)(NS) Regulations. It is therefore considered the burden on employers from a
regulatory perspective would be minimal as duty holders would be required to do similar things to
discharge their duties.
However, consideration will be given to whether it is necessary to modify or dis-apply certain WHS
Regulations to allow for them to be phased in.
Codes of Practice
Codes of Practice provide practical guidance on how to meet the standards set out in the WHS Act
and Regulations. Codes of Practice are admissible in court proceedings as evidence of what is
reasonably practicable in the circumstances for a duty holder to meet their obligations under the
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WHS laws. They can also be referred to by an inspector when issuing an improvement or prohibition
notice.
The Seacare Authority Code of Practice (Seacare Code) adopts in identical terms the Australian
Offshore Support Vessel Code of Safe Working Practice and the Code of Safe Working Practice for
Australian Seafarers issued by AMSA. Marine Orders which gave force to these codes have been
replaced or discontinued, so the two codes of practice which together make up the Seacare Code
remain in force only under that Code. The Seacare Authority recently established a working group to
consider the future of the Seacare Code.
The Approved Code of Practice for Manual Handling (Maritime Industry) provides practical guidance
relating to managing the risks arising from manual handling in a maritime environment.
It is proposed that the Minister be given the ability to approve codes of practice relevant to the
industry without going through the tripartite SWA process prescribed in the WHS Act. This would
allow guidance on matters specific to the maritime industry that are not covered in the WHS Codes
of Practice, including on-board emergencies, safe access and movement about the vessel, anchoring,
docking and mooring and working in particular areas of a vessel, to be developed without needing to
consult with state and territory governments that are not involved in the regulation of the scheme.
Compliance and Enforcement Policy
The National Compliance and Enforcement Policy (NCEP) sets out the approach WHS regulators take
to compliance and enforcement under the model WHS Act and Regulations.
As AMSA would be responsible for regulating compliance and enforcement under the WHS Act and
Regulations, it is proposed that AMSA would follow the NCEP to ensure AMSA’s approach to
compliance is consistent with that of other WHS regulators.
6.5. Costs and benefits of the proposal
As previously discussed, the Department engaged PwC to collect and analyse data on the benefits
and costs of aligning the OHS(MI) Act with the WHS laws through interviews with businesses and
industry associations. An analysis of the key differences between the OHS(MI) Act and the WHS Act
was undertaken. The differences were then further split into those that were deemed by PwC to
have a significant impact on costs and those that would likely have no significant impact.
Consideration of the significance of differences was informed by the findings of the
Stewart-Crompton Review and consultations with stakeholders.
6.5.1. Cost impacts for business
Implementation and training
Stakeholders indicated there would be one-off and ongoing costs incurred as a result of the
proposed changes.
The one-off costs were:
training for staff to help them understand the changes (including officers, health and safety
representatives and all other staff), and
licence costs for certain classes of high-risk work (existing staff).
29
The ongoing costs were:
additional time required for undertaking induction for visitors etc on the duty of care of
other persons at a workplace, and
licence costs for certain classes of high risk work (for new staff).
Officers
Stakeholders expected to incur one-off costs associated with training of ‘officers’ in relation to their
due diligence responsibilities under an aligned WHS scheme. It is estimated that this would consist
of around one day of training, for an average of 10 officers per organisation. Costs would include
course costs, staff time and food, as well as travel and accommodation for half of the participants.
The one-off cost to employers of additional training for officers is estimated to be around $528,000
across the scheme ($16,000 per employer).
Health and Safety Representatives
Stakeholders expected to incur one-off costs associated with training HSRs in respect of their role
and responsibilities under an aligned WHS scheme. While initial training for a HSR is usually around
five days, it was generally agreed that a bridging or refresher course to cover the updates to the
requirements would take around two days. Costs would include course costs, staff time and food, as
well as travel and accommodation for half of the participants.
The one-off cost to employers of training for HSRs is estimated to be around $3.3 million across the
scheme ($100,000 per employer). However this cost may not eventuate as transitional provisions
would recognise prior training by HSRs, and under the WHS Act HSRs are only required to be trained
to perform some of their duties. But the transitional provisions will only apply for the first year of
the new WHS Act.
All other seafarers (workers)
All stakeholders consulted expected to incur some one-off costs associated with bringing all other
seafarers up to speed with their new responsibilities under an aligned WHS scheme. It is estimated
this would consist of updating online training modules, and providing verbal communication and
written material. On average, it was estimated to take around half an hour per worker.
The one-off cost to employers of training existing seafarers on the new WHS laws is estimated to be
around $366,000 across the scheme ($11,000 per employer).
Duties of other persons at the workplace
The WHS Act imposes duties on ‘others’ at the workplace, e.g. visitors and passengers on a vessel.
This codifies the common law requirements. Stakeholders consulted held varying views on whether
this change would result in additional compliance costs for them.
The consultation process suggested that while it may vary between business to business, or vessel to
vessel, vessels in the blue-water sector might be likely to undertake a greater number of inductions
due to imposing duties on other persons at the workplace.
Estimates of the ongoing costs of complying with this change were prepared based on the costs of
time associated with an estimated three additional inductions per week per ship operating in the
blue-water sector within the scheme.
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The cost to employers of providing induction training for ‘others’ coming on-board ships is estimated
to be $258,000 per year across the scheme (approximately $8,000 per employer per year).
Authorisation
The WHS Regulations require certain work, or classes of work, to be carried out only by or on behalf
of a person who is authorised.
Most stakeholders were of the view that individuals required to perform such work would already
have completed the relevant training. As many seafarers work across jurisdictions with different
safety requirements, employers in many cases have required seafarers to be trained to satisfy the
highest possible standards that could be encountered.
An issue that was raised by employers was that despite already having undertaken the relevant
training to perform such work, some seafarers may not possess the licence associated with the
training. One business indicated that approximately 50 per cent of its seafarers would undertake
work in the applicable classes and would potentially require a licence.
The one-off cost to employers of obtaining licences for existing seafarers is estimated to be
$291,000 across the scheme (approximately $9,000 per employer). The ongoing cost of obtaining
licences for new seafarers is estimated to be $29,000 per year across the scheme (approximately
$1,000 per employer).
6.5.2. Overall Costs and Benefits
Averaged over 10 years, the total cost of the proposed changes to WHS arrangements is estimated
to be between $0.482 million-$0.740 million per year across the scheme (around $15,000-$22,000
per employer).
PwC noted that estimated benefits were more difficult to quantify due to the mixed views of scheme
employers who were consulted, the range of circumstances that often lead to safety incidents, the
range of different businesses that operate under the scheme, and the uncertainty over the likely
safety improvements that would result from the proposed changes.
Improvements in safety outcomes
The RIS for the introduction of model WHS laws across Australia suggested that the minimum
expected reduction in workplace injuries resulting from alignment with model WHS laws would be at
least 1.4 per cent.2
Given the current WHS performance of the Seacare scheme and the reduction in safety incidents
observed following the implementation of the model WHS laws, it is reasonable to expect that
expanding the WHS Act to include Seacare will have some positive impact on WHS performance for
the scheme. The estimate of 1.4 per cent is used in this analysis as the lower-bound of reduced work
safety incidents from scheme alignment.
One stakeholder suggested that the reduction in workplace injuries resulting from these changes
could be in the order of 5 per cent to 10 per cent relative to current arrangements. This estimate is
2 Decision Regulation Impact Statement for a Model Occupational Health and Safety Act, Access Economics, December 2009.
31
reasonable given other estimates of the impact of implementing aspects of the model WHS laws and
outcomes observed in those jurisdictions that have implemented the model WHS laws. The reported
reduction in safety incidents achieved in those jurisdictions that have implemented the WHS laws is
also modelled by the experience in NSW, where some of the changes adopted in the model WHS
laws were considered in updates to the NSW legislation in 2001. This was reported in 2006 to deliver
a 9 per cent reduction in safety incidents.3
The estimate of 5 per cent, based on the lower estimate provided by the stakeholder, is used in this
analysis as the upper bound of reduced work safety incidents from scheme alignment.
Indirect impacts
Safety benefits do not accrue only to businesses. They also accrue to workers and the community.
In 1995, the Industry Commission4 (now the Productivity Commission) estimated that only
25 per cent of the total cost of work-related injury and disease was due to the direct costs of
work-related incidents (for example, workers’ compensation premiums paid by employers or
payments to injured workers from compensation schemes). The remaining 75 per cent related to
indirect injury costs such as loss of productivity, loss of income and quality of life. This 1:3 direct to
indirect cost ratio was considered a conservative estimate as not all indirect costs could be
quantified. Subsequent reports by the National Occupational Health and Safety Commission and
SWA have refined the method for calculating indirect costs but have not specified a new ratio. To
address the underestimation of indirect costs, a slightly higher ratio of 1:4 is often applied, although
this does vary by sector and severity of injury from as low as 1:2 to as high as 1:50.5
The more conservative 1:4 ratio is used to estimate the indirect safety benefits from aligning the
Seacare scheme, since there is not sufficient data to directly calculate these indirect costs and so as
not to overestimate the potential safety benefits.
When adjusting for this ratio, the overall benefits from improved safety outcomes associated with
the changes are estimated to be between $1.050 million and $3.750 million per year across the
scheme.
In 2012, SWA estimated that the cost of workplace injuries borne by employers was 16 per cent of
the total cost of workplace injuries, the cost borne by the community is 10 per cent, and the cost
borne by workers is 74 per cent (using an ex-ante approach to estimating costs).6
If benefits from preventing future workplace injuries are shared in the same manner, the changes
are estimated to provide benefits of $0.168-$0.600 million per year for employers ($5,000-$18,000
per employer per year), $0.777-$2.775 million per year for workers. The remaining
$0.105-$0.375 million per year would be benefits to the broader community.
3 ACIL Tasman (2004) Occupational Health and Safety: Economic Analysis, Report for WorkCover
4 Industry Commission (2005), Work Health and Safety, An Inquiry into Occupational Health and Safety Pg 22
5 Prepared by Allen Consulting Group for WorkSafe Victoria (2007). Regulatory Impact Statement: proposed Occupational Health and
Safety Regulations 2007 and proposed Equipment (Public Safety) Regulations 2007.
6 Safe Work Australia (2012), The Cost of Work-Related Injury and Illness for Australian Employers, Workers and the Community
32
6.5.3. Net economic impact of changes to WHS arrangements
If the potential changes resulted in a 1.4 per cent reduction in safety incidents and businesses
incurred the maximum estimated costs, then it is estimated there would be net benefits of
$0.310 million per year (averaged over ten years). On the other hand, if the changes lead to a
greater decrease in safety incidents of 5 per cent, but minimal costs to business, it is estimated there
would be net benefits of $3.268 million per year (averaged over ten years).
PWC were of the view that the likely outcome is more likely to be closer to the higher bound of
safety incident reduction of 5 per cent, rather than the lower bound of 1.4 per cent, for the reasons
given in Section 6.5.2.
Given PwC’s view that the likely outcome is more likely to be closer to the higher bound to safety
incident reduction, while uncertain, a best estimate of the likely net benefits for employers would be
$0.118 million per year across the scheme (around $4,000 per employer, averaged over ten years).
A best estimate of the likely net benefits for workers would be $2.775 million per year (averaged
over ten years). A best estimate of the likely net benefits for the community would be
$0.375 million per year (averaged over ten years).
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7. Workers’ Compensation
7.1. Summary of proposed changes
The workers’ compensation reform option involves restoring consistency between the Seafarers Act
and the SRC Act (except where the particular circumstances of the maritime industry justify a
different approach), while retaining a separate workers’ compensation system for the Seacare
scheme. Similar to the OHS(MI) Act, the workers’ compensation arrangements in the current scheme
are out-dated, costly and burdensome for employers, injured seafarers and government. The
performance of the scheme is poor in comparison to larger Commonwealth, state and territory
workers’ compensation schemes.
7.2. Reforms to the Comcare scheme
The Safety Rehabilitation and Compensation Amendment (Improving the Comcare Scheme) Bill 2015
reflects the outcomes of the first major review of the SRC Act since 1988. It is proposed that
amendments to the Seafarers Act take into account these changes to the SRC Act, which are
currently before Parliament. The changes to the SRC Act will:
improve RTW outcomes for injured employees,
improve the focus on early intervention and health outcomes of injured employees, and
improve the operation of the system and bring it into line with community expectations by
excluding non work-related injuries, excluding secondary psychological injuries from some
compensation and only paying for evidence-based treatments.
7.3. Proposed Reforms to Seacare Workers’ Compensation
The proposed reforms to the Seacare workers’ compensation arrangements are outlined in detail
below. Many of these reforms will be applied to existing claims as well as new claims from the date
of commencement of the legislation. Transitional arrangements are proposed to allow for claims to
be assessed under the existing eligibility criteria for a six month period from commencement.
7.3.1. Eligibility for Compensation
Both the Seafarers Act and the SRC Act use the same test for whether a physical or mental injury, or
aggravation of an injury, is compensable; that is, an injury or aggravation ‘arising out of, or in the
course of, the employee’s employment’.
Under the Seafarers Act, an ailment (including a psychological or psychiatric ailment), or aggravation
of an ailment, is compensable as a ‘disease’ if it was ‘contributed to in a material degree by the
seafarer’s employment’.
The current SRC Act provision applies a more stringent test: a disease is compensable if it was
‘contributed to, to a significant degree, by the employee’s employment’. ‘Significant degree’ is
defined to mean a degree that is substantially more than ‘material’. The SRC Act contains a list of
matters which may be taken into account when determining the contribution of employment.
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The term ‘material degree’ was originally used in both the SRC Act and the Seafarers Act with the
intention of requiring a ‘close connection’ between the ailment and the employee’s employment.7
However, the term has been interpreted by courts and tribunals in a manner that has eroded this
‘close connection with work’. The SRC Act was amended in 2007 to require a ‘significant
contribution’ in order to re-establish an effective test of work-relatedness.
It is proposed that both the ‘significant degree’ test and the expanded list of considerations for
disease claims (including claims for aggravation) be adopted for the Seacare scheme. The matters
that are proposed to be included are:
the state of the employee’s physical and psychological health before the ailment or
aggravation,
the probability that the employee would have suffered the same condition at or about the
same time in (or at the same stage of) the employee’s life,
where there is a claim for a psychological condition based on an employee’s belief about or
interpretation of an incident or a state of affairs, whether the employee had reasonable
grounds for that belief or interpretation, and
any other matters affecting the employee’s physical or psychological health.
7.3.2. Designated injuries – heart attacks and strokes
A heart attack or a stroke was initially treated as a manifestation of a ‘disease’ (rather than an
‘injury’) and liability to pay compensation was only accepted where employment had contributed to
the disease (or its aggravation) to a material degree. Following a High Court decision in 1996
concerning equivalent provisions in NSW, the Federal Court held that a heart attack was an ‘injury’
rather than a ‘disease’ under the SRC Act (and consequently the Seafarers Act).
This has resulted in employers being liable to pay compensation for conditions were there the
culmination of an existing pre-existing ailment that occurred or were exacerbated at the workplace,
regardless of whether employment has contributed. State and territory laws have since been
amended to cover heart attacks, strokes and similar events only where employment has significantly
contributed.
It is proposed that a new category of injuries (‘designated injuries’) be established for injuries which
consist of, are caused by, result from, or are associated with a pre-existing ailment. Designated
injuries would include heart attacks, strokes and spinal disc injuries. In order for a designated injury
(or its aggravation) to meet the employment nexus test, the seafarer’s employment must be a
significant contributing factor to either the designated injury (or its aggravation) or its pre-existing
ailment where that pre-existing ailment significantly contributed to the designated injury (or its
aggravation). This is appropriate because employers should not have to insure against the cost of
heart attacks, strokes or spinal disc injuries that are a manifestation of an underlying genetic or
lifestyle-based disease process without any significant contribution from employment.
7 Commonwealth, Parliamentary Debates, House of Representatives, 27 April 1988, 2192–3 (the Hon, Brian Howe MP, Minister for
Social Services).
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7.3.3. Reasonable management action
The Seafarers Act currently aims to prevent compensation claims being used to obstruct reasonable
disciplinary action or in response to a failure to obtain a transfer, promotion or benefit by excluding
from the definition of ‘injury’ any condition that has arisen as a result of such action. In practice, this
will nearly always relate to a psychological condition.
It is proposed to replace ‘reasonable disciplinary action’ with ‘reasonable management action’, the
term used in the Fair Work Act 2009. The scope of the current exclusionary provision would be
expanded to apply to operational decisions of employers such as corporate restructures or
instructions to seafarers to perform work at a particular location, or to perform particular duties, as
well as to extend to a seafarer’s anticipation or expectation of such action being taken.
It is important to note that this will only exclude from the definition of compensable injury any injury
that results from reasonable management action, not the incident or state of affairs that follow from
management action.
7.3.4. Journey claims and recess breaks
Compensation will be payable for injuries which arise out of, or in the course of, an employee’s
employment. A journey may be considered to be in the course of an employee’s employment where
the journey is at the direction or request of the employer or is sufficiently work-related. Injuries
suffered during those journeys may therefore be compensable. Whether an injury occurred in the
course of employment during a journey will be a question of fact but to provide greater certainty the
provisions will expressly exclude and include certain journeys/recesses.
An injury suffered by a seafarer will generally be treated as having arisen out of, or in the course of,
employment where the injury suffered by the seafarer occurred when the seafarer was
undertaking travel at the direction or request of his or her employer. An exception to this is that
travel between a seafarer’s place of residence and the seafarer’s usual place of work is taken not to
be at the direction or request of the employer. This aligns with the position under the SRC Act since
2007 amendments to that Act which provided that injuries which occur while an employee is
travelling to and from work are generally not compensable.
There will also be express provision made for other circumstances that are generally deemed not to
be travel at the direction of the employer. These circumstances include where:
the seafarer delayed commencing a work-related journey for a substantial period of time,
the seafarer used a route for a work-related journey that was not reasonably direct, unless
that route was used for reasons connected with the seafarer carrying out the duties of their
employment,
there was a substantial interruption in the work-related journey, or
the seafarer sustained an injury in circumstances where he or she had ceased to carry out
the duties of his or her employment.
Off-site recess breaks (that is, shore leave during a voyage) will continue to be considered to be in
the course of employment. Similarly, seafarers’ attendance at education and training will also be
treated as being in the course of their employment.
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7.3.5. Rehabilitation
Effective rehabilitation of seafarers can be difficult due to medical requirements arising from
operational health and safety matters and the associated limited capacity for seafarers to engage in
restricted duties on board a vessel. Despite these difficulties, it is reasonable to expect that every
effort be made to rehabilitate an injured seafarer.
Extended time off work is not conducive to rehabilitation. Studies show that, if an injured worker is
off work for 20 days, then the chance of them ever getting back to work is 70 per cent. This drops to
just 35 per cent if an injured worker is off work for 70 days.8
It is proposed to place on obligation on employers from the date of injury notification to take all
reasonable steps to ensure the rehabilitation of a seafarer. The term ‘rehabilitation program’ will be
replaced with ‘workplace rehabilitation plan’. Workplace rehabilitation plans may require employers
and seafarers to carry out specified activities. An employer will be obliged to consider the need for a
workplace rehabilitation plan following injury notification or a seafarer may request a workplace
rehabilitation plan. In formulating a plan, consultation must take place between the employer and
seafarer and treating medical practitioners.
Under the Seafarers Act, if a seafarer is undertaking, or has completed, a rehabilitation program, an
employer has a duty to take all reasonable steps to provide suitable employment or to assist the
seafarer to find such employment. The term ‘suitable employment’ is defined as employment to
which the person is suited (including self-employment), having regard to a number of factors,
including the personal circumstances of the individual, the individual’s suitability for rehabilitation or
vocational retraining, whether it is reasonable to require the individual to change his or her place of
residence, and any other relevant matter. It is not proposed to change this definition.
It is also proposed that an employer will be required to take all reasonably practicable steps to
provide an injured seafarer with suitable employment or assist the seafarer to find such
employment. Where an injured seafarer is in suitable employment the employer is required to take
all reasonably practicable steps to maintain the seafarer in suitable employment.
It is further proposed that an employer may require a seafarer to undergo an assessment of the
seafarer’s capacity to undertake suitable employments. A work readiness assessment will be
undertaken by a nominated medical practitioner or other suitably qualified person (or by a panel
comprising both).
7.3.6. Calculation of Compensation
Since the Seafarers Act was enacted, the employment conditions of seafarers covered by the scheme
have changed. However, provisions for the calculation of weekly incapacity payments have not. For
seafarers whose terms and conditions do not fall within the prescribed formula, it can be difficult to
calculate normal weekly earnings in a way that fairly represents a seafarer’s lost earnings.
8 Johnson, D., Fry T. Factors Affecting Return to Work after Injury: A study for the Victorian WorkCover Authority. Melbourne: Melbourne
Institute of Applied Economic and Social Research; 2002. Referenced by the Australasian Faculty of Occupational & Environmental
Medicine Realising the Health Benefits of Work: A Position Statement. 2011: Royal Australian College of Physicians. Page 12.
37
The Seafarers Act only considers the amount payable to a seafarer in the week immediately before
his or her injury for the purposes of calculating his or her weekly incapacity payments. This may not
fairly reflect the remuneration of a seafarer who works non-standard hours during that particular
week (for example, due to overtime or seasonal requirements).
It is proposed to change the calculation of a seafarer’s weekly incapacity payments to better reflect
the profile of seafarers covered by the Seafarers Act and to align it with the SRC Act and some state
and territory workers’ compensation schemes.
The method used to calculate a seafarer’s weekly incapacity payments will better reflect earnings
before their injury. The concept of ‘normal weekly earnings’ will become ‘average weekly
remuneration’. Average weekly remuneration adopts a broader view by averaging over the relevant
period (either two weeks, or another period of time which is a fair representation of the
remuneration that was attributable to the seafarer’s employment before the injury) all income
earned. Overtime and specified allowances will be included in the calculation of a seafarer’s average
weekly remuneration for the first 104 weeks of incapacity.
Additionally, new ‘step-down’ provisions are proposed to provide structured tapering of the amount
of weekly compensation payments an injured seafarer is entitled to receive. The new compensation
entitlements will be:
for the first 13 weeks of incapacity a seafarer will be entitled to 100 per cent of their weekly
incapacity payments less any income earned through self-employment or other alternative
duties (including a seafarer’s deemed ability to earn),
after 13 weeks of incapacity, compensation will be paid at an adjusted rate of 90 per cent of
the seafarer’s average weekly remuneration less the seafarer’s applicable earnings (from 13
weeks, payments cannot be more than 150% of the average weekly earnings of full-time
adults (AWOTEFA)),
after 26 weeks of incapacity, compensation will be calculated using the formula of 90 per
cent of the employee’s average weekly remuneration less the seafarer’s applicable earnings
and paid at an adjusted rate of no more than 80 per cent of the seafarer’s average weekly
remuneration,
after 52 weeks of incapacity, compensation will be calculated using the formula of 90 per
cent of the seafarer’s average weekly remuneration less the seafarer’s applicable earnings
and paid at an adjusted rate of no more than 70 per cent of the seafarer’s average weekly
remuneration.
The cut off for incapacity payments will be linked to the pension age to ensure alignment with the
qualifying age for the pension in the Social Security Act 1991.
7.3.7. Provisional medical expense payments
It is proposed that a provisional medical expense payments scheme (capped at $5,000 and indexed
annually) be available to seafarers in respect of an alleged injury before a claim for compensation is
made. This will allow injured seafarers to obtain medical treatment in the critical early stages of an
injury.
A seafarer will be able to request a provisional medical expense payment in respect of costs incurred
in the medical treatment of an alleged injury. The employer may decline to make a payment if it has
38
reasonable grounds. However, if a claim for compensation is made and subsequently denied, any
amount of provisional medical expense payment is not recoverable (unless there is fraud).
7.3.8. Medical expenses
Under the Seafarers Act, compensable medical treatment is not clearly defined or based on
objective standards, and does not require providers to meet a level of national accreditation. There
is also a lack of clarity about the assessment or delivery of support services provided in the home.
This puts injured seafarers at risk, increases costs for employers, and delays recovery and return to
work.
For the purposes of the Seacare scheme, the intention is to ensure that injured seafarers, whilst in
Australia, receive appropriate and quality medical treatment in respect of their injury.
It is proposed that this be achieved by:
imposing additional requirements in relation to the compensability of prescription
medicines, Schedule 8 medicines and medicines which are a ‘registered good’ under the
Therapeutic Goods Act 1989,
providing compensation for ‘treatment and maintenance as a resident in a nursing home’,
and
defining the terms ‘nursing care’ and ‘registered nurse’.
It is also proposed that Comcare be empowered to determine Clinical Framework Principles for the
scheme that specify matters in relation to items of medical treatment that compensation payers
under the Seafarers Act must have regard to in determining whether medical treatment obtained in
Australia was reasonable.
7.3.9. Household and attendant care services
The period for which compensation for household and attendant care services is payable to
seafarers with a non-catastrophic injury will be limited to three years from the date of injury.
Notwithstanding the three year limit, if the injured seafarer is hospitalised as a consequence of the
non-catastrophic injury, compensation for attendant services will be payable for six months after
discharge.
There will no time limit for these services in the case of a catastrophic injury. Nor will there be any
limit on the amount of compensation payable – the compensation payer will be liable to pay such
amount of compensation as the compensation payer considers reasonable in the circumstances.
Decisions about the amount of compensation will be reviewable.
Under the Seafarers Act, there is no distinction between household and attendant care services
provided to seafarers with injuries of varying degrees of severity. It is proposed to establish a tiered
approach to the payment of compensation for these services, depending on whether the injury was
‘catastrophic’. The term ‘catastrophic injury’ will be based on the definition used in the National
Injury Insurance Scheme.
An independent assessment will be required to determine an injured seafarer’s need for household
services, attendant care services or both. The assessment must be conducted by a registered
occupational therapist or a registered physiotherapist nominated by the relevant authority.
It is proposed that attendant care services will only be able to be provided by an accredited,
registered or approved provider in order to be compensable and make provision for the
39
accreditation, registration and approval of providers. If satisfied that there are special circumstances,
an individual who is not otherwise accredited, registered or approved (for example, a family
member) could be authorised to provide attendant care services.
7.3.10. Redemption
Redemption of compensation involves the payment of a lump sum amount in lieu of a seafarer’s
ongoing weekly incapacity payments. The current low statutory minimum threshold in the
Seafarers Act means that very few seafarers qualify for redemption. It is proposed that the minimum
threshold for the scheme be increased from $110.65 to $212.46 per week.
Consistent with the Military Rehabilitation and Compensation Act 2004, it is proposed that the
Seafarers Act include a Ministerial power to provide for the making of legislative rules to detail the
circumstances where an employer would be able to redeem its liabilities to pay weekly
compensation to a seafarer beyond the threshold and other circumstances specified.
7.3.11. Absences from Australia
The Seafarers Act does not impose any limit on the payment of compensation to a person outside
Australia.
The SRC Act will be amended to suspend compensation payments when an injured employee is
absent from Australia for private purposes (that is, not for work purposes) for a period of more than
six weeks and to enhance the requirements for employees to notify of their intention to be absent
from Australia. This will be modified for the Seacare scheme. To address the situation of seafarers
who ordinarily reside outside of Australia, injured seafarers would be required to notify their
employer, or the employer’s insurer, of their intention to leave their country of residence. In
addition, employers would have the power to exempt a seafarer from the rules relating to
suspension of compensation during extended absences from Australia if the seafarer normally lives
in a foreign country.
7.3.12. Permanent Impairment
Under the Seafarers Act, compensation for permanent impairment and non-economic loss is paid as
a lump sum. Loss or damage of a non-economic kind suffered by a seafarer may include pain and
suffering, a loss of expectation of life or a loss of the amenities or enjoyment of life resulting from an
injury or impairment.
This compensation is separate from, and additional to, weekly incapacity payments payable to an
injured seafarer to replace the seafarer’s regular salary or wages.
It is proposed to:
combine the compensation payable for permanent impairment and the compensation
payable for non-economic loss into a single permanent impairment payment and increase
the maximum total benefit to $350,000 (from the current maximum of $247,466.02),
provide a new method for calculating permanent impairment compensation that permits a
more equitable distribution of compensation based on the level of permanent impairment –
less severe injuries will receive a lower permanent impairment payment, while more severe
injuries will receive a higher payment,
treat associated injuries as a single injury so that the impairment resulting from that deemed
single injury can be combined to achieve a whole person impairment value,
40
require an assessment of any pre-existing degree of permanent impairment (both
compensable and non-compensable) when determining the level of permanent impairment
resulting from an injury, and
disregard, when calculating the degree of permanent impairment, secondary psychological
or psychiatric ailments and injuries.
These changes are intended to allow the National Guide to Permanent Impairment to be applied to
the Seacare scheme and to ensure the level of compensation payable for permanent impairment
better reflects the severity of a seafarer’s injury and the impact that it has on their life.
7.3.13. Mutual Obligations and Sanctions Regime
Under the Seafarers Act there are some obligations on seafarers in relation to their rehabilitation
and compensation rights.
It is proposed that the existing sanctions regime be amended by identifying key requirements that
an injured seafarer must comply with as ‘obligations of mutuality’, flowing from an employer’s
obligation to provide rehabilitation and suitable employment for an injured seafarer. Where those
obligations have been breached, the new regime will provide for the application of sanctions in
stages, culminating in the cancellation of compensation, rehabilitation and most review rights.
It is proposed that there be two types of breaches:
obligations relating to suitable employment that cannot be remedied,
obligations relating to any other requirement that can be remedied – for example, the
failure, without reasonable excuse, to undergo a medical examination or follow to
reasonable medical treatment advice.
Seafarers who breach an obligation of mutuality in relation to the same injury or an associated injury
will be subject to a three-stage regime. After a third breach, or a continued failure to remedy a prior
breach (in the case of a breach that can be remedied), the employer (or their insurer) must
determine that the seafarer is subject to the cancellation regime.
Under the cancellation regime, a seafarer’s rights to compensation and to institute or continue any
proceedings in relation to compensation (other than proceedings in the AAT in relation to the
sanctions or cancellation regime) in respect of all current and future associated injuries are
permanently cancelled. This also has the effect of permanently cancelling a seafarer’s right to
rehabilitation.
The cancellation of a seafarer’s right to compensation and rehabilitation will not affect the right of
the seafarer’s dependant to claim compensation if the seafarer subsequently dies as a result of an
injury in respect of which compensation has been cancelled.
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7.3.14. Claim Determination Timeframes
The Seafarers Act provides timeframes for determination and reconsideration of claims in the
following manner:
12 days to determine claims for medical treatment,
12 days to determine liability for incapacity payments,
30 days to determine liability for permanent impairment,
60 days to determine liability for death claims, and
60 days from receipt by an employer of a request by the employee to reconsider a decision.
The Seafarers Act also provides for a ‘stop clock’ mechanism in relation to the determination and
reconsideration of claims. This means where further relevant information is requested, then a
further period for assessment of liability is allowed upon receipt of the relevant information.
Where an employer has not determined a claim in the time allowed, the employer is deemed to
have made a decision disallowing the claim. Similarly, where an employer has not reconsidered a
claim in the time allowed, the employer is deemed to have made a decision disallowing the claim.
The SRC Act reforms will amend the SRC Act to provide the following timeframes:
30 days to determine liability for any injury that is not a disease or a designated injury, or an
aggravation of a designated injury,
70 days to determine liability for a disease or designated injury, or an aggravation of a
designated injury,
12 days to determine liability for an accident that resulted in damage to an employee’s
medical equipment (such as medical aids or artificial limbs), and
60 days from receipt by a relevant authority of a request by the employee to reconsider a
decision.
Consistent with the SRC Act, where liability has not been determined in the time allowed, the claim
will be deemed to have been rejected (as per the current Seafarers Act). Where a decision is not
reconsidered in the time allowed, the decision is deemed to have been affirmed.
The intention is to ensure claims are resolved and benefits provided in a speedy, efficient and fair
manner, noting that any delay in payment or treatment may result in unnecessary financial hardship
for an injured employee or seafarer and adversely affect the prospect of an early RTW.
7.3.15. Legal Costs
It is proposed to control, and thereby reduce, costs associated with proceedings brought before the
AAT. This approach is consistent with other Australian workers’ compensation schemes. It is
proposed to empower Comcare to prescribe, by legislative instrument, a ‘Schedule of Legal Costs’
that provides for the maximum amount of costs that may be awarded or reimbursed to a claimant in
certain circumstances. This may include where there is a decision or settlement agreement in
relation to proceedings instituted after commencement, and which must be complied with by all
relevant authorities and the AAT.
It is also proposed to allow for costs to be payable upon favourable reconsideration of a
determination, if the claimant undertakes in writing that he or she will not seek review in the AAT.
Costs may also be payable when an application is dismissed by the AAT.
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All parties to a proceeding (including employers and third parties) will be required to disclose
evidence that they intend to adduce at least 28 days prior to the first day of hearing.
7.4. Costs and benefits of the proposal
As previously discussed, the department engaged PwC to collect and analyse data on the benefits
and costs of restoring consistency between the Seafarers Act and the SRC Act through interviews
with businesses and industry associations.
Consultation feedback in relation to the potential changes was that the changes were generally
supported by employers with the largest perceived impact to result from the changes to ‘income
replacement compensation’.
The significant impacts were expected to be in relation to:
changing the employment contribution to a disease threshold from ‘material’ to ‘significant’,
changing heart attacks, strokes and spinal disc ruptures so that they are only compensable if
employment contributed in a significant way,
changes to the exclusion for ‘reasonable management action’,
changes in relation to journey claims,
changing definition of when incapacity payments cease to align with the
Social Security Act 1991 in relation to pension age,
changes to the calculation of income replacement amounts,
changes to the assessment of degree of permanent impairment (including the account of
pre-existing impairment and removal of account of secondary psychological injuries),
changes to the maximum compensation for permanent impairment (subsuming the
non-economic loss component) to $350,000 and multiplication factors for determining the
amount of compensation for permanent impairment,
changes to the provisions for household and attendant care services, including requiring
attendant care providers to be adequately qualified,
limiting access to household and attendant care services to three years from date of injury,
and with an additional six months following hospitalisation, for non-catastrophically injured
seafarers.
Feedback was used in addition to the information from previous Seacare claims data to estimate the
potential impact on future claims.
PwC noted that stakeholders also stressed the impact of generally large deductible amounts for
businesses under Seacare compared to other schemes. That is, there is a much larger proportion of
incidents that do not result in an insurance claim being lodged with insurers.
PwC noted that the estimated impacts for workers’ compensation are included as distributional
impacts.
Distributional impacts
Any reduction in compensation to claimants would reduce cost pressure on the Seacare scheme.
From a cost-benefit analysis perspective, this impact simply represents a transfer of resources or
redistribution between two groups in society. Transfers can only be regarded as enhancing
community wellbeing if a decision is made that one group derives more value from the resources
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than the other. In this case, this assumption is not made and so the cost-benefit impact of this
transfer is therefore nil.
Analysis of cost impacts
The PwC analysis approach was to consider the individual differences in the workers’ compensation
legislation under the Seafarers Act and SRC Act, and how moving to align to provisions under the
SRC Act legislation would impact the number of claims received by Seacare and the cost of these
claims.
A summary of the material changes and their estimated impact is shown in Table 14 below.
Overall the PwC assessment of the change in compensation to be paid per annum indicates that the
average cost of claims may reduce slightly; they estimated a 0.2 per cent reduction or $0.5 million.
Table 14: Material changes and their estimated impact on the number and average cost of claims
Ref Title Impact on number
Impact on average cost
A.1 Basic Test
A.2 Diseases Decrease
A.3 Special criteria for certain diseases
A.4 Heart attacks, strokes and spinal disk ruptures Decrease
A.5 Disciplinary/Management Action Decrease
A.6 Journey Claims Decrease
A.7 Recess Breaks
A.8 Misconduct
B.1.1 How pre-injury income is calculated
Possible increase
B.1.2 Calculation of income replacement amounts
Decrease
B.1.3 Determining an employee’s ‘ability to earn’
B.1.4 Treatment of Superannuation payments
B.1.5a Other Matters - Pension Age
Increase
B.1.5b Other Matters - Redemption
B.1.5c Other Matters - Absences from Australia
B.2.1 Definition of Medical Treatment
B.2.2 When compensation for medical treatment is available
Decrease
B.2.3 How much compensation is paid
Increase
B.2.4 Provisional Claims
B.2.5 Household Services and Attendant Care
Decrease
B.2.6 Household Services
B.2.7 Attendant Care Services
B.3.1 Non-economic loss
B.3.2 Assessment of degree of permanent impairment
Increase
B.3.3 Threshold for compensation
B.3.4 Calculation of compensation Increase Source: PwC analysis
The PwC analysis of the proposed changes to the Seafarers Act which will have a cost impact for
stakeholders are described in the sections below. Given the relatively small size of the scheme and
the claims profile, some changes do not have any cost impact or have no significant cost impact that
is able to be quantified. The claims profile differs from the Comcare scheme in some areas, so
44
estimates of cost impacts for certain changes for the Seacare scheme may differ from the estimated
impact of similar changes to the Comcare scheme.
Eligibility for compensation (Items A1 to A8)
Whilst these changes generally tighten the eligibility criteria, the nature of injuries covered by the
scheme are predominantly physical injuries sustained on duty and are unlikely to be affected by
these changes.
Overall PwC identified that 2-3 per cent of claims may be removed by these provisions, with around
half the reduction from changes related to journey claims and the remainder from all the other
changes together. This corresponds to a reduction in overall claims cost of between $0.3 million and
$0.5 million for 2014-15.
Weekly compensation (Items B1.1 to B1.5c)
Weekly compensation typically represents around two-thirds of the claims cost, so these changes
are important in assessing the overall claims cost impact.
The cost impact combines an increase in cost from higher pension age and potentially higher wage
definition offset by the introduction of more step-down points at which weekly incapacity payments
will decrease, the removal of overtime and allowances from the calculation of weekly incapacity
payments after 104 weeks and the 150 per cent cap on benefits (as per the AWOTEFA) commencing
at 13 weeks rather than 45 weeks.
Overall PwC assessed the impact to be a small reduction with a 1-2 per cent reduction from the
definitional changes being partly offset by an approximately 1 per cent increase from the pension
age change. This corresponds to an estimated reduction in overall claims cost of between
$0 and $0.2 million for 2014-15.
The cost impact is highly sensitive to the wage definition (see sensitivity testing below).
Changes in the cost of this benefit type may also impact on the below deductible payments made by
employers and on the common law and redemption payments.
Medical treatment (Items B2.1 to 2.4)
PWC analysis suggests that this group of reforms will have only a minor overall cost impact, although
it provides mechanisms to control costs into the future if increases are seen for certain treatment
types.
The impact will also depend on how they are implemented and the extent to which ‘Medical
Services Tables’ are developed.
For the medical payments made prior to determination on provisional claims, whilst in theory this
could increase claims costs (perhaps by 0.5-1.0 per cent), the experience in other schemes with is
that this provision assists with earlier reporting and treatment and may save costs over the life of
the claim. It also primarily changes the timing of payments, rather than results in increases. Hence it
is considered this change would be cost neutral.
Attendant care and personal services (Items B2.5 to 2.7)
These items represent only around 0.5 per cent of past expenditure on seafarers’ claims.
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Whilst the SRC Act imposes tighter eligibility requirements to obtain these benefits, the overall cost
impact would be minor (a decrease of around $3,000).
Permanent impairment and non-economic loss (Items B3.1 to 3.4)
The historic claims data shows that these benefits are paid to only 1-2 per cent of claimants and that
the benefits paid are 3-4 per cent of total payments.
The benefit structures are such that the current Seafarers Act provides both a permanent
impairment benefit and a non-economic loss benefit. These would be replaced by a single
permanent impairment payment under the SRC Act.
The benefits are generally higher under the SRC Act structure for people with serious injuries
(30-40 per cent + Wage Price Index (WPI)) but less for those with lesser severity injuries
(10-30 per cent WPI).
Overall PWC assessed the cost impact to be a small increase (an increase of around $30,000).
7.4.1. Total cost impact (Distributional impact)
Based on the cost impact assessments above PwC considered the overall cost impact on the scheme.
The results are presented in terms of the potential cost impact for the 2014-15 financial year. This
uses a number of assumptions regarding claims experience, as follows:
Exposure: it is assumed the number of seafarers covered by the scheme is broadly equal to
the average number covered in the previous 5 years (2010-14).
Frequency of claims: it is assumed that the number of claims incurred as a percentage of the
number of full-time equivalents (FTEs) covered by the scheme is slightly lower than the
average of the previous five years (2010-14). This gives some allowance for the reduction in
claim frequency seen in recent years.
Average cost per claim: based on an analysis of the average cost of compensation payments
historically for both open and closed claims, it is assumed that the ultimate cost of
compensation paid to a single claimant for an accident occurring in the 2015 financial year
will be $60,000.
Based on these assumptions the PwC assessment of the claims cost impact for 2014-15 is a
reduction of $0.5 million. However this is a distributional impact, rather than an overall impact to
society.
Table 15: Assessment of the claims cost impact
Description Seafarers Act Amended Seafarers Act Movement % change
Exposure (FTEs) 5,000
Claim Frequency 0.05
Number of claims 250 243.0 -7.0 -2.8%
Average cost per claim 60,000 59,860.0 -140.0 -0.2%
Total compensation ($m) 15.0 14.5 -0.5 -3.0%
Source: PwC analysis.
This covers the change in cost of scheme claims only. It does not cover related expenditures such as
below deductible claims costs, general claims management expenses (other than those recorded
against individual claims) or other items that may be included in the employer’s premiums.
46
This result is highly sensitive to the assumptions made in relation to the cost impacts for weekly
claims and should be considered in conjunction with the sensitivity testing in Attachment B.
7.4.2. Training costs
The training costs in relation to the workers’ compensation changes are estimated to be around
$414,000 in once off costs. This would allow a small amount of time for impacted seafarers to
familiarise themselves with the changes.
7.4.3. Summary of workers’ compensation impacts
Table 16 summarises the impacts of the proposed workers’ compensation changes by showing that
the one-off training cost impacts to inform staff of the relevant changes are estimated to be
$414,000 and transfers from claimants to insurers in terms of reduced overall claims costs of around
$0.5 million per annum.
Table 16: Summary of impacts
Impacts Amount
One off training costs $414,000
Transfers $0.5 million reduction in claims costs
Source: PwC analysis.
The one-off training costs of $414,000 represent the full regulatory cost of the proposed changes.
There is a transfer from seafarers to employers and their insurers of around
$0.5 million per year as a result of reduced overall claims costs. This represents the full cost of the
proposed changes for seafarers.
Averaged over ten years, these impacts represent a benefit to scheme employers and their insurers
of around $0.459 million per year across the scheme (or $14,000 per employer).
8. Summary of the costs and benefits of workers’ compensation and
work health and safety changes
Overall, the proposed changes to Seacare workers’ compensation and WHS legislation are estimated
to provide benefits of $3.227 million per year (averaged over ten years). A best estimate of the likely
net benefits from the changes for employers, seafarers and the Government would be (per year,
averaged over ten years):
$0.577 million per year for employers ($17,000 per employer),
$2.275 million per year for seafarers, and
$0.375 million per year for the community.
47
9. Cost Recovery Levy and Fees
9.1. Summary
It is proposed that a cost-recovery levy and fees be introduced for the Seacare scheme, to cover the
costs of the SRCC, Comcare and AMSA undertaking their regulatory functions in relation to the
scheme’s workers’ compensation and WHS arrangements.
The cost recovery levy would recover expenditure incurred by AMSA, the SRCC and Comcare that is
attributable to the performance of their regulatory functions for the Seacare scheme and is not
covered by a specific fee.
The cost recovery levy would be separate and additional to the levy that employers pay which
contributes to maintaining the Fund. The cost recovery levy will be calculated and collected in the
same way, and at the same time, as the existing Fund levy, ie. calculated per seafarer berth on the
first day of a quarter.
Cost recovery fees would recover expenditure incurred by AMSA, the SRCC and Comcare for a
limited range of services for scheme participants on a case-by-case basis. Fees will be set at an
appropriate level for the cost of the activity. This could include administrative functions such as
processing exemptions from the scheme.
9.2. Regulatory Context
In general, governments recoup costs of WHS schemes by requiring participants to financially
contribute to the cost of the system under which they are being regulated, whether through
application fees, regulatory levies, directly paying the regulator when investigations are undertaken
or workers’ compensation premiums.
Private sector employers in the Comcare scheme are required to pay licence fees to be a self-insured
licensee. Similarly, Australian Government bodies are required to pay regulatory levies to Comcare.
These levies cover costs incurred by the SRCC and Comcare in carrying out their regulatory functions
under the SRC Act and WHS Act, including their WHS regulatory and inspectorate functions.
By contrast, the Seacare scheme does not currently require scheme participants to financially
contribute to the cost of being regulated by the Seacare scheme.
9.3. Current Costs of the Seacare Scheme
Comcare receives a small appropriation of around $400,000 to cover both the actual costs of the
Seacare Authority, such as sitting fees for the Chairperson and meeting expenses, and its own costs
of providing administrative support to the Authority.
The actual costs of the Seacare Authority (and Comcare from assisting the Seacare Authority with
the performance of its functions) in 2013-14 are outlined in Attachment C. AMSA does not receive
any appropriation to undertake its OHS(MI) Act inspectorate role and there is no legislative power
under the OHS(MI) Act for AMSA to recover its costs. AMSA currently funds this work through levies
collected for other purposes, for example the Marine Navigation Levy and the Marine Navigation
(Regulatory Functions) Levy, including from operators not necessarily in the Seacare scheme.
AMSA’s costs from performing its OHS(MI) Act inspectorate role in 2013-14 are also outlined at
Attachment C.
48
The Commonwealth cost recovery guidelines state that levies are appropriate to impose where
regulatory activities are provided for a broad group of organisations or people and it is not possible
to link an activity and its costs with a specific organisation or individual.
Some activities undertaken by Comcare, currently on behalf of the Seacare Authority, are not linked
to a specific organisation or individual. These would be most efficiently recovered through a cost
recovery levy. Some costs, such as those relating to the administration of the Fund would be more
appropriately covered through charges.
Based on the costs of current activities undertaken, when Comcare’s annual appropriation is taken
into account, there is a funding shortfall of around $675,000 that should be recoverable, consistent
with the Government’s cost recovery guidelines.
The transfer of the Seacare Authority’s statutory powers and functions to the SRCC will result in
some cost efficiencies and consideration will need to be given to whether some existing activities
should be continued, such as the Seacare Awards and the development of an annual report.
9.4. The Cost Recovery Levy and Fees
Charging and collecting a cost recovery levy in the same way as the Fund (based on the number of
berths per quarter) is efficient since the level of the scheme’s regulatory activity is related to the
number of employees and amount of shipping activity of each scheme participant. Employers are
required to submit a report to the Seacare Authority at the end of every quarter on the number of
berths in that quarter, along with the corresponding levy payment based on that number of berths.
Employers will submit the same quarterly report and it is expected that, in practice, employers will
pay a single amount comprising the Fund levy and the cost recovery levy, therefore the introduction
of a cost recovery levy is not expected to impose any additional administrative costs on scheme
employers.
During initial consultations maritime employers expressed some concern over the affordability of
the levy, however it was acknowledged some of these concerns could be addressed by a phasing-in
of the levy over time. It is proposed that the levy be reviewed each year to ensure transparency of
the costs being recovered. The combined unfunded costs of Comcare and ASMA which could be
recovered through a cost recovery levy are around $1.6 million. However, these costs are based on
the current costs of administering the scheme, with its existing coverage, governance arrangements
and workers’ compensation and WHS legislation. Changes to the coverage and governance of the
Seacare scheme and the workers’ compensation and WHS legislation will result in changes to the
costs of administering the scheme.
9.4.1. Cost recovery charges
There are some scheme regulatory activities that are undertaken by Comcare on behalf of the
Seacare Authority where the cost of those activities can be linked to a specific organisation or
individual.
Certain activities undertaken by Comcare, on behalf of the Seacare Authority, could be more
efficiently recovered through a cost recovery charge, rather than a cost recovery fee, for example,
an application fee could be prescribed for applications for exemptions from the Seacare scheme. The
fee would be set at a level that is proportional to Comcare’s costs of advising the SRCC on the
application and administering the exemption.
49
10. Coverage
10.1. Proposed Reforms to Coverage
To address the scheme’s longstanding coverage issues, it is proposed there be new coverage rules
that broadly have similar scope to the current Seafarers Act but provide certainty and clarity.
The proposal is that the scheme covers all Australian registered vessels and all foreign vessels with a
majority Australian crew, except for those ships which are wholly or substantially engaged in
voyages and other tasks within the coastal waters of a single state or territory.
It is also proposed there would be exclusions for recreational vessels, inland waterways vessels,
fishing vessels, floating production storage and offloading (FPSOs) (from workers’ compensation
coverage only) and government vessels (so long as they are crewed by Government employees).
The coastal waters of a particular state or the Northern Territory will be defined as the three nautical
mile boundary. Vessels operating outside this boundary that are not excluded from coverage will be
covered by the Seacare scheme.
Unlike the current coverage of the scheme, it is proposed the new coverage provision will treat
vessels operating in the NT in the same way as vessels operating in any state. While the current
definition of coverage provides that all ‘prescribed ships’ operating in the NT are covered by the
scheme, in practice vessels operating solely within the NT are able to seek an exemption from
coverage by the scheme.
To provide flexibility, it is proposed that there be an ability to make legislative rules to declare that a
vessel is, or is not, a ‘prescribed ship’ and a mechanism to allow maritime industry employers to ‘opt
in’ to the coverage of the new Seacare workers’ compensation Act and WHS Act through an
application to the SRCC.
While the opt-in arrangement could result in additional employers being covered by the scheme,
this proposal is not considered to have a regulatory impact on these employers since they are
choosing to be covered by the scheme rather than being covered by a decision of the Government.
10.2. Costs and Benefits of Reforms to Coverage
Clarifying coverage as proposed would have limited impact on employers given it represents no
change in coverage from existing arrangements. There are some benefits from clarifying coverage
since it would be simpler for employers and regulators to determine coverage of a vessel, which will
reduce the time it takes to determine whether an injured employee was covered by the Seacare
scheme or a state workers’ compensation scheme at the time of their injury.
Averaged over a ten year period, it is estimated this option would result in regulatory savings for
scheme employers of approximately $5,000 per year across the scheme (or around $150 per
employer).
50
11. Governance
On 15 December 2014, as part of its Smaller Government Reform Agenda, the Government
announced its intention to transfer the statutory functions of the Seacare Authority to the SRCC.
A direct transfer of the Seacare Authority’s functions to the SRCC would result in the SRCC
performing functions in respect of the Seacare scheme that it does not perform in respect of the
Comcare scheme. It is therefore proposed to confer on Comcare some functions relating to workers’
compensation directly.
The functions are:
approving a guide to assess the degree of permanent impairment,
approving forms for the purposes of compensation claims,
providing assistance with reconsidering determinations, and
acting as the default employer of injured seafarers in the event of a default event.
51
12. Regulatory Cost
The overall regulatory cost of the proposal considers the regulatory costs to employers, individuals
and community organisations from changes to Government legislation or policy. The overall
regulatory cost of reform of the scheme includes the costs to scheme employers arising from the
proposed changes to workers’ compensation and WHS legislation, including:
the one-off cost of training for Officers,
the one-off cost of training for existing HSRs,
the one-off cost of training for existing workers (seafarers),
the ongoing cost of training for ‘other persons in the workplace’, including visitors and
passengers,
the one-off and ongoing costs of applying for high risk work licences, and
the one-off cost of training on new workers’ compensation arrangements.
The overall regulatory cost also includes the small benefit for employers from clarifying the coverage
of the scheme. However, it does not include expected benefits for employers from improved safety
outcomes as a result of changes to WHS legislation, or reduced compensation payments from
changes to workers’ compensation legislation. The regulatory cost also does not include expected
costs and benefits to seafarers or the Government from the proposed changes to workers’
compensation and WHS legislation. The levy payment is also not considered to be a regulatory cost.
Reform of the scheme has an estimated regulatory cost of $0.776 million per year for scheme
employers ($24,000 per employer, averaged over ten years). There is no regulatory cost for
community organisations or individuals.
Table 17: Regulatory Burden and Cost Offset Estimate Table
Average annual regulatory costs (from business as usual)
Change in costs ($ million)
Business Community organisations
Individuals Total change in costs
Total, by sector $0.776 N/A N/A $0.776
Cost offset ($ million)
Business Community organisations
Individuals Total, by source
Agency $0.776 N/A N/A $0.776
Are all new costs offset? Yes, costs are offset No, costs are not offset Deregulatory—no offsets required Offsets are sourced from the Workplace Gender Equality Agency – Changes to Workplace Gender Reporting (OBPR ID 16469)
Total (Change in costs – Cost offset) ($ million) = $0.0
52
Attachment A
WHS Analysis Methodology
The table below provides a summary of the assumptions used by PwC in calculating the work health
and safety impacts.
The following sections describe the respective approaches applied in estimating the impacts
associated with each key change expected to occur through alignment of the OHS(MI) Act and
associated Regulations with the Commonwealth WHS Act and Regulations.
Assumptions used in estimating workplace health and safety impacts
Assumption Unit Value Source
Average hourly wage – all workers
$ per hour 83.69
Based on a sample of Enterprise Bargaining Agreements (EBAs) across offshore, bluewater and dredging. A weighted average was calculated using seafarers per sub-sector and assuming that the mix between senior and junior crew was a mix of around 50:50. Salaries were converted into an hourly rate using the following assumptions: - 27 weeks worked per year - 70 hours worked per week (10 hours
per day for 7 days a week).
Hours worked per day Hours 10 Consultation and EBAs suggested that the average hours worked varied between 8 and 12, and a mid-point of 10 has been used.
Number of employers under the Seacare scheme
Employers 33 Seacare Annual Report 2013-14
Number of ships covered under the Seacare scheme
Ships 283 Seacare Annual Report 2013-14
Number of employees covered under the Seacare scheme
Employees 7,516 Seacare Annual Report 2013-14
Accommodation costs per-individual for attending training
$ per night 275 Industry consultation
Airfare costs per-individual for attending training
$ per return flight
500 Industry consultation
Meal costs per-individual while attending training
$ per day 60 Industry consultation
Taxi costs for trips to/from airports to attend training
$ per trip 40 Industry consultation
Training course costs – five-day course
$ per attendee
2,400 Industry consultation
53
Assumption Unit Value Source
Growth in the consumer price index
% annual growth
2.4 Based on historical growth using Australian Bureau of Statistics (ABS) data: 6401.0 Consumer Price Index, Australia
Growth in industry employment
% annual growth
4.2 Based on historical industry employment growth, Seacare 2013-14 Compendium.
Growth in wage prices % annual growth
3.3 Based on historical growth data: ABS 6345.0 Wage Price Index, Australia
Seacare claims amount per annum
$millions annually
15 PwC analysis of Seacare data
Ratio of direct to indirect costs of claims
Ratio 1:4
Regulatory Impact Statement - Technical appendix to the RIS (Proposed Occupational Health and Safety Regulations 2007 and Proposed Equipment (Public Safety) Regulations 2007)
Discount rate used in Net Present Value (NPV) calculations
% 7.0
Australian Government, Cost benefit analysis guidance note viewed on 11 May 2015 at https://www.dpmc.gov.au/sites/default/files/publications/006_Cost-benefit_analysis.pdf.
On-costs % 16.0% Assumption.
Overheads n/a n/a
Given the nature and size of the changes, we do not anticipate that additional costs for overheads (eg HR, IT, finance etc) would likely increase. Therefore no amount for overheads has been included in the estimates.
Assessment of cost impacts
Licensing for certain classes of high risk work
The WHS Act and Regulations require certain work, or classes of work, to be carried out only by or
on behalf of a person who is authorised.
It is estimated around 50 per cent of workers in the offshore sector would require a licence, and only
half of this (25 per cent) in other sectors.
Desktop research and business comments suggested that licence costs per affected employee could
range between $67 and $84.
The additional licensing requirements will impose costs on those currently working in the industry
(one-off costs), as well as new entrants to the industry (ongoing costs).
The approach used to estimate the cost for issuing the licences is provided in Figure 1 and the
approach to estimating the cost for applying for the licence in Figure 2 below.
54
Figure 1: Approach to estimation of costs associated with changes to authorisation (one-off costs to issue the licence and charge back to applicant by way of fees)
Figure 2: Approach to estimation of costs associated with changes to authorisation (Business one-off costs to apply for licence)
Figure 3: Approach to estimation of costs associated with changes to authorisation (Government ongoing costs to provide licence and charged back to applicant by way of fees)
55
Figure 4: Approach to estimation of costs associated with changes to authorisation (Business ongoing costs to apply for licence)
While it is possible businesses could incur delay costs in relation to applying for licences, this was not
identified as a concern as part of the consultation process and it is likely that transitional
arrangements and forward planning will reduce any potential delay cost to a minimal level.
Specific assumptions and modelling inputs
Assumption Value Units Source and comments
Licence costs for authorisation of high-risk work practices
78 $ per licence
Costs associated with new high-risk work licences in NSW, Qld and WA, available from http://www.workcover.nsw.gov.au/media/publications/health-and-safety/workcover-nsw-fees-schedule-september-2013 and http://www.commerce.wa.gov.au/worksafe/high-risk-work-licence-application-forms and https://ablis.business.gov.au/qld/pages/cd6ca7fe-6013-4995-8421-b1190dd97116.aspx
Proportion of the workforce requiring high-risk work licences (offshore)
50 % of workers
Industry consultation
Proportion of the workforce requiring high-risk work licences (other sectors)
25 % of workers
Industry consultation
Time to apply for licence 1 hour Assumption
Duties of other persons in the workplace
The WHS Act imposes duties on persons at the workplace who are not workers.
An estimate of the ongoing costs based on the costs of time associated with an estimated three
additional inductions per week per ship operating in the bluewater sector within the Seacare
scheme has been made.
Due to the uncertainty, it is also assumed that the lower end cost estimate is nil.
The approach used to estimate the upper bound cost is provided in Figure 5.
56
Figure 5: Approach to estimation of costs associated with duty of care of other persons at the workplace on blue-water vessels
Specific assumptions and modelling inputs
Assumption Value Units Source and comments
Additional inductions per year (per vessel)
156 (52 weeks * 3 per week)
Times Industry consultation
Induction time 0.25 Hours Industry consultation
Training of ‘officers’
The WHS Act imposes a duty on ‘officers’ to exercise due diligence to ensure that the PCBU complies
with their WHS duties. It is assumed this would be one day of training.
Figure 6: Approach to estimate costs of additional training of officers
Specific assumptions and modelling inputs
Assumption Value Units Source and comments
Average number of officers per organisation
10 persons Average figure of information provided during consultation
Course fees 480 $ Proportion of 5 day course fee.
Time taken 15 hours Assumption informed by consultation and online information.
Cost of training HSRs
The WHS Act and Regulations requires HSRs to be trained to exercise certain powers. As the
OHS(MI) Act requires HSRs to be trained, it is estimated that a bridging course would be sufficient in
providing them information on the changes and how their obligations would change. During
consultations it was estimated this would take two days.
57
Figure 7: Approach to estimate costs of additional training of HSRs
Specific assumptions and modelling inputs
Assumption Value Units Source and comments
HSRs per ship 4 persons Average figure of information provided during consultation
Course fees 960 $ Proportion of 5 day course fee.
Time taken 15 hours Assumption informed by consultation and online information.
Cost of training other employees
It was also estimated that all other employees would also need to be updated on the changes,
however this would be undertaken as either online training, a verbal information presentation or
provided as written material. It is estimated on average that this would take around 30 minutes of
time for each employee.
Figure 8: Approach to estimate costs of additional training of other employees
Specific assumptions and modelling inputs
Assumption Value Units Source and comments
Time taken 0.5 Hours Average figure of information provided during consultation
Ninety per cent of the training costs have been assumed to relate to the WHS provision changes, and
the remaining 10 per cent assumed to relate to the workers compensation provision changes.
Assessment of benefit impacts
Increased safety benefits
The estimated safety benefits are more difficult to quantify due to the mixed views of consultation
participants, range of circumstances that often lead to safety incidents, and range of different
businesses that operate under the scheme.
58
Most participants believed that there would be at least some safety benefits as a result of the
alignment, due to increased breadth of compliance tools and/or an increase in personal
responsibility due to specific duties imposed on them.
There was a view that range of enforcement mechanisms under the WHS Act would result in
behavioural change. It was expected that this behavioural change would result in further improved
safety outcomes under alignment.
The expected reduction in workplace injuries resulting from alignment with model WHS laws would
be at least 1.4 per cent.9
This estimate is used in this analysis as the lower-bound estimate of reduced workplace safety
incidents from Seacare scheme alignment. The upper bound used is 5.0 per cent, based on the lower
estimate provided by the stakeholder comments above.
Figure 9: Approach used to estimate benefit impacts
Were this impact to occur it would result in significant ongoing benefits in the form of improved
safety outcomes for scheme participants.
Assumptions
Coverage
The cost of aligning the workers' compensation and the work health and safety legislation is based
on a scheme of approximately 33 employers and around 8,000 workers.
Governance arrangements
The Seacare scheme workers’ compensation will remain a separate, privately underwritten scheme.
The SRCC will replace the Seacare Authority from 2016-17 as per the Government’s December 2014
announcement. There will be no significant changes to AMSA’s role.
There are no changes to the Fund and levy.
Timing
The reforms are expected to commence 1 July 2016, with benefits estimated over 10 years from
2016 to 2025 inclusive, measured in 2015 prices.
All changes to workers’ compensation will be implemented from 1 July 2016.
The impact of each key reform has been estimated on an annual basis and then modelled over a
10 year time period.
9 Decision Regulation Impact Statement for a Model Occupational Health and Safety Act, Access Economics, December 2009.
Annual claims costs % reduction in annual claims
Escalation factor to account for indirect
insurance claims costs
Estimated benefits from decrease in
claims
59
Discounting
The annual estimates have been discounted back to today’s dollars using a real discount rate of
7.0 per cent and then reported as an overall 10 year net present value.
Cost impacts
Costs and benefits are being assessed on the basis that the Government will near fully align the
Seacare workers’ compensation and work health and safety legislation with the Comcare workers’
compensation scheme (including the amendments to the SRC Act currently before Parliament) and
the Commonwealth WHS Act.
Where impacts occur over time, the value of costs and benefits is ‘discounted’ to ensure they are
assessed in constant dollar terms as a net present value.
Limitations
Consultations
As the consultations were generally drawn from industries most likely to be impacted by the
identified changes, certain treatments have been applied to ensure that the cost data obtained does
not overstate the general impact.
Data
There is no obligation on an injured seafarer to lodge a Seacare Claim for Workers’ Compensation
form, so not every injury results in a claim. Also, it is possible employers do not advise all employee
claims to the Seacare Authority or the employer’s insurer. This is likely due to the high deductible
amount that many businesses have arranged to ensure that insurance premiums are kept at an
affordable level.
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Attachment B
Workers’ Compensation Analysis Methodology
The PwC analysis for workers’ compensation is based on the following:
information contained in the 2013-14 Seacare Compendium Report,
individual claim data for claims over the period from 1 January 2000 to 31 March 2015 which
includes detailed information on the benefits paid to claimants in the past and the
composition of benefits by category of damage,
information provided through the consultation process and by the Department of
Employment in response to questions relating to the data, and
the understanding of the impact that similar changes in legislation have had on a number of
other workers’ compensation schemes.
Historically the Seacare scheme has had 200-300 claims per annum and the compensation paid to
date in respect of the claims over these accident years and in today’s values has varied from just
below $10 million to nearly $20 million.
In years for which data was available, there were a number of open claims (generally 5-10% for the
older years), reflecting the long-tail nature of the benefits. The open claims are longer term and
higher cost than the closed ones, thus the average costs per claim for each accident year are likely to
increase in the future.
The actual premiums paid are considerably lower than the average 5 day deductible premium
income (at approximately 60%). This indicates that the average deductible is considerably more than
five days and that some shorter term claims will not be reflected in the data. This is also reflected in
the individual claim data where the number of claims with 0-4 weeks of weekly compensation is low
relative to that observed in other workers compensation schemes.
The table below provides a summary of the Seacare claims data under the current legislation.
61
Summary of Seacare claims data
Financial year of accident
(year ending 30 June)
Exposure
(FTEs)
Premium
collected
($m)
Average 5
day
deductible
premium
income
($m)
Number
of
claims
reported
Claim
frequency
# / FTEs
Historic
compensation
paid
($m)
Compensation
paid
($m) - 2014
terms
Average
paid cost
per claim
- 2014
terms
($)
2000 219 5.1 8.9 40,000
2001 198 5.5 9.2 47,000
2002 156 5.3 8.6 55,000
2003 3,173 181 5.7% 4.2 6.5 36,000
2004 3,241 212 6.5% 6.0 8.9 42,000
2005 3,459 170 4.9% 6.2 8.8 52,000
2006 3,670 185 5.0% 7.2 9.9 53,000
2007 3,544 183 5.2% 4.7 6.2 34,000
2008 4,185 213 5.1% 11.1 14.1 66,000
2009 4,682 15.47 24.55 266 5.7% 13.9 16.9 63,000
2010 4,477 18.19 27.6 251 5.6% 14.6 17.1 68,000
2011 4,838 19.68 32.43 288 6.0% 14.8 16.6 58,000
2012 5,416 20.34 34.28 272 5.0% 17.7 19.2 70,000
2013 5,273 20.43 33.86 227 4.3% 10.2 10.6 47,000
2014 4,721 184 3.9% 6.7 6.7 37,000
2015 99 1.6 1.6 16,000
5 year avg (to 2014) 4,945
244 5.3% 12.8 14.0 57,426
Selected 2015 ultimate 5,000
250 5.0%
15.0 60,000
Source: PwC analysis of Seacare data.
62
The table below shows a summary of the payments made by benefit type. This illustrates that the
majority of payments are for weekly compensation (67%) and medical treatment (13%).
Summary of compensation paid by benefit type
Benefit type % of
payments
Weekly benefits 67.2%
Medical benefits 13.4%
Impairment / Non-
economic loss 3.4%
Personal / household care 0.1%
Death / funeral expenses 0.3%
Legal (incl. Common Law) 9.1%
Other 4.2%
Expenses 2.4%
Source: PwC analysis of Seacare data
Sensitivity Analysis
The change in weekly benefits includes both a change in how the pre-injury earnings are calculated
and in the calculation of income replacement amounts. These two items interact as the calculation
reflects defined percentages of pre-injury earnings at each duration post injury.
Summary of differences in calculating pre-injury earnings
Seafarers Act SRC Act
Normal weekly earnings – the amount payable by way of salary under the contract of employment that applied immediately before the injury occurred.
The amounts generally include overtime and other penalties but that is determined on a case-by-case basis.
Total remuneration – average weekly total remuneration over the 2 week period before the injury occurred (or alternative period if results in fairer assessment). Total remuneration includes:
Salary and wages
Overtime pay**
‘Eligible allowances’**
Piece rates
Commissions
Fringe benefits
Superannuation contributions
** Items included for first 104 weeks of incapacity only.
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For the first 104 weeks of incapacity the SRC Act includes a greater range of items within the
definition of pre-injury earnings. Thus, in isolation from calculation changes, this may lead to benefit
increases over this timeframe.
For any period of incapacity beyond 104 weeks the removal of consideration of remuneration for
overtime and allowances under the SRC Act may, in isolation from calculation changes, lead to
benefit reductions.
The differences between the two definitions may vary depending on the individual’s employment
circumstances, whether they are paid according to the terms of the Seagoing Award or have
alternative Enterprise or individual arrangements.
Pre-injury earning data
Exposure data:
this information suggested that the average yearly hours worked per employee over the
scheme history was in the range 2,700-3,500. This is considerably higher than the Award
information above. The average hours per FTE was even higher, and
this is consistent with workers working shifts and relatively high numbers of hours per week
when working. It suggests that workers may be working significantly more than 27 weeks
per year.
Claims data:
this included information on ‘Normal weekly hours at injury’ and ‘Normal wage amount at
injury’,
the majority (61%) of claimants had normal weekly hours of 84, with the other common
figures being 56 (21%) or 38-40 (10%). This is broadly consistent with the typical hours
detailed in the Award when on-duty, and
based on guidance from the Department of Employment, Comcare and internal consistency
reviews of the data, PwC interpreted the ‘normal wage amount at injury’ as representing the
full amount of wages, overtime and shift or higher duties allowances for undertaking the
normal hours of work.
Hence, PwC assumed that the earnings in respect of any overtime are in effect included within both
pre-injury earning definitions.
Further, for the period up to 104 weeks, the SRC Act pre-injury earnings may be higher than that
shown in the Seafarers data as a result of some additional allowances and fringe benefits.
Beyond 104 weeks, the SRC Act pre-injury earnings may be reduced as a result of the removal of
overtime and allowances, and we have allowed for a small reduction in assessing the cost impacts.
However, the nature of seafarers wage structures is such that it may, in practice, be difficult to
identify and remove overtime and allowances to align with the SRC Act definition.
Sensitivity testing
To illustrate the impact of these wage definitions and assumptions as to the average contributions of
the different wage elements to employee’s remuneration PwC provided detail about how their
assessment of the cost impact varies under a number of alternative assumptions.
64
The shaded rows show:
the adopted assumptions (in bold), and
the assumptions that would apply if there was no difference in wage definition (in italics).
Under all scenarios the cost is shown to decrease. This reflects the key assumption that the wage
information provided includes overtime and allowances and that these would be included in pre-
injury earnings under the current Seafarers definition.
The reductions occur because of lower rates of replacement of wages at most durations post injury
and the application of lower caps under the SRC Act. These factors more than offset the inclusion of
a broader range of allowances.
Assumptions: Results:
Allowances % Commissions, fringe benefits and super
contributions %
Overtime % (normally
worked)
% Change in weekly
compensation
% change in Total
Compensation
2% 0% 0% -6% -4%
2% 5% 0% -2% -1%
2% 0% 5% -6% -4%
2% 0% 10% -7% -4%
2% 5% 5% -2% -2%
2% 5% 10% -3% -2%
2% 5% 15% -3% -2%
0% 0% 0% -7% -5%
0% 5% 0% -3% -2%
0% 0% 5% -8% -5%
0% 0% 10% -8% -5%
0% 5% 5% -4% -3%
0% 5% 10% -4% -3%
0% 5% 15% -5% -3%
65
Uncertainty
There are a number of factors which may lead to uncertainties in this costing and should be
considered when interpreting the results:
Volume of data: the relatively low volume of claims data (around 200 claims a year) means
that claims experience, both in terms in number and cost of claims, can be quite volatile
from year to year.
Completeness of data: the use of high deductibles means that the data is unlikely to include
all potential seafarers’ workers’ compensation claims.
Data quality: the costing relies on the accuracy of the claims data provided. During the
analysis PwC noted several discrepancies in the data:
some of the payments for impairment/non-economic loss are greater than the
maximum award payable under the Seafarers Act – this may be due to inaccurate
coding of payments,
in some cases, a claim has a status of ‘Full recovery / Return to work’ and no return to
work date,
for some claimants weekly benefits have been paid with no corresponding start or end
dates for the payment of weekly compensation.
Whether the data is representative: some of the changes being considered will impact only a
small proportion of claims and these may not be appropriately represented in the historic
claims data.
Changes in benefit design may lead to changes in behaviour from scheme participants. While
allowance has been made for this, the actual experience may be different.
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Attachment C
Seacare Authority and Comcare costs 2013-14
Activity Direct Costs Indirect Costs Total
Seacare Authority Secretariat $112,593 $108,253 $220,846
Authority meeting costs $46,391 $0 $46,391
Seacare Authority administration $14,363 $16,402 $30,765
Development of Seacare Annual Report
$59,773 $53,354 $113,127
Financial Management of the Seafarers Safety Net Fund*
$5,745 $6,561 $12,306
Scheme communication and assistance
$34,053 $36,952 $71,005
Seacare Awards and Conference / Seacare Forum
$178,096 $67,778 $245,874
HSR training course accreditation activities*
$5,745 $6,561 $12,306
Administering exemptions under s. 20A of the Seafarers Act*
$11,490 $13,122 $24,612
Administering extensions of time under the Seafarers Act*
$2,873 $3,280 $6,153
Administering declarations of coverage*
$5,745 $6,561 $12,306
Management of claims against the Fund*
$10,726 $9,841 $20,568
Determination of default events* $8,618 $9,841 $18,459
Seacare Authority Governance $53,932 $49,206 $103,138
Audit of Seacare activities $45,739 $16,402 $62,141
Input into National Reporting $14,363 $16,402 $30,765
Seafarers Safety Net Fund levy collection*
$29,500 $28,257 $57,757
Management of workers’ compensation database
$29,500 $28,257 $57,757
Management of claim update and progress reporting
$23,600 $22,605 $46,205
Management of employee and ship details reporting
23,600 $22,605 $46,205
Monitoring compliance with employer insurance arrangements
$11,800 $11,303 $23,103
Provision of reconsideration assistance*
$8,588 $3,827 $12,416
$783,221 $537,370 $1,320,592
The items marked with a * would not typically be recovered through the Cost Recovery Levy
67
AMSA Costs 2013-14
Activity Direct Costs Indirect Costs Total
OHS(MI) Inspector training $180,360 $74,520 $254,880
OHS(MI) Inspectorate oversight $221,831 $196,014 $417,845
Research and education $82,250 $40,500 $122,750
OHS(MI) Inspections and
Investigations
$82,864 $60,688 $143,552
Stakeholder meetings,
presentations and engagement
$33,152 $18,144 $51,296
$600,457 $389,866 $990,323
