The Hospitality Industry is faced with a variety of issues which affect us in one way, shape or form. To familiarise yourself with some of these issues please click on the titles below for Hospitality New Zealand submissions, media releases and correspondence relating to that issue.

Injury Prevention, Rehabilitation, and Compensation Amendment Bill

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Hospitality Association of New Zealand

Level 2, Radio Network House, Corner Abel Smith and Taranaki Streets

PO Box 503, Wellington

Phone: 04 385 1369

Fax: 04 384 8044

www.hanz.org.nz

Injury Prevention, Rehabilitation, and Compensation Amendment Bill

Members of the Committee

The Hospitality Association is a statutory body created by the Hotel Association of New Zealand Act 1969. The Association has been restructured from the Hotel Association to reflect the breadth of diverse operations in the sector including restaurants, cafï¿© bars, hotels, taverns, off-licenses, casinos and a wide array of short and long term accommodation providers. We believe the name 'Hospitality Association' reflects this diversity.



The Association is voluntary and is primarily funded by membership subscriptions. Our membership of approximately 2400 plus members employ approximately 11,610 full-time and 19,674 part time employees for a total of around 30,000 people. Approximately 83% of the Association's members are small businesses and owner operated. Through membership servicing of its own 2,350 members throughout New Zealand the Association is able to gauge the views and experiences of a wide variety of New Zealand hospitality businesses.



The Association provides compliance advice to its members through a team of 8 Regional Managers based at local branches around New Zealand supported by a service team in Wellington. Service is delivered through personal visits and telephone contact to members and includes advice to hospitality businesses on a wide variety of industry and compliance issues including liquor licensing and employment.



There is also a perception that the Association speaks for and represents the interests of the hospitality industry as a whole.



The Association has considered the bill and makes appropriate comment on selected aspects of the bill.



The Association would like an opportunity to be heard before the Committee on its submission.



Bruce H Robertson

Chief Executive

Hospitality Association of New Zealand



Executive Summary and Summary of Recommendations



The Association recommends that:



    * The Bill proceed.



    * All pre-1999 residual claims i.e. the residual claims account, residual claims within the Earners' Account and residual claims within the Motor Vehicle Account, should be funded out of general taxation as the least distortionary mechanism for funding what are, in economic terms, sunk costs.



    * If the above recommendation is not acceptable, then consideration should be given to extending the timeframe by which residual claims across accounts must be funded beyond 2019 in view of the sunk cost nature of the claims. Given the nature of these claims, the Association would not be averse to considering funding residual claims on a pay-as-you-go (PAYG) basis if this would spread the cost more efficiently. Alternatively, a low flat tax spreads across employers, earners and motorists could be a viable alternative option.



    * Reinstate experience rating and risk sharing within the Work Account in conjunction with the Workplace Safety Management Practices (WSMP) scheme as proposed and that consideration be given to introducing experience rating in the Earners' and Motor Vehicle Accounts as well.



    * ACC or the Department of Labour's Policy Unit undertake further research to get a better understanding of the risk factors that determine motor vehicle accident claims and costs in order to understand better where responsibility for costs should lie.



    * Repeal changes made in 2008 to test for causation for workplace gradual process, disease or infection.



    * Replace vocational independence threshold of capacity to work for 35 hours with capacity to work for 30 hours per week.



    * Make it optional for occupational assessors to consider pre incapacity earnings when undertaking initial and vocational independence assessments.



The Association supports the following measures in the Bill without further comment:



    * Reinstate former calculations for long term (after 4 weeks) weekly compensation for non-permanent employees.



    * Return increasing weekly compensation to the minimum weekly earnings rate after the fifth week of incapacity, instead of from the second week.



    * Return to the provision that claimants leave entitlements after their employment ends are considered as part of weekly earnings when calculating weekly compensation.



    * Reduce loss of potential earnings compensation for young people back to 80% of minimum weekly earnings.



    * Strengthen disentitlement provisions for claimants for whom it would be repugnant to justice to provide entitlements.



    * Remove the requirement for ministerial advisory panels on Work Related Gradual Process, Disease, or Infection and Injury Surveillance.



    * Enable ongoing information sharing between IRD and ACC.



    * Enable ACC to provide non ACC related government services or entitlements to ACC claimants.



    * Require ACC to table financial reports in Parliament annually.



INTRODUCTION



1. The Association supports the objects of the Bill and recommends that the Bill proceed. In addition, the Association supports the submission and comments of Business New Zealand on the Bill and provides further comment on selected aspects of the Bill as it relates to the hospitality industry.



2. The primary focus of an accident insurance scheme should be on providing an appropriate framework and incentives to reduce the number and severity of accidents. A secondary purpose is to provide appropriate and effective treatment, rehabilitation and compensation to those who get hurt through no fault.



3. Reducing the overall costs associated with an accident insurance scheme requires that stakeholders including funders, claimants, health professionals and insurers all face strong incentives to minimise the number of accidents and associated costs.



4. The Association believes that the measures in the Bill have the potential to enhance these objectives, and together with effective levy setting and funding, are a step toward significant improvements to the ACC scheme.



5. Notwithstanding our general support for the Bill, there are a number of recommendations that we believe could improve the Bill.



COMMENTS ON SELECTED ASPECTS OF THE BILL



Full funding of residual claims liabilities



6. The Association considers transparency paramount in the sense that premium payers are aware of the real costs and are charged appropriate premiums. In other words, full funding encourages efficiency and reduces cross-subsidisation.



7. A fully-funded model also assists implementation of experience rating as the full premium can be experience rated, unlike a pay as you go (PAYG) model. The PAYG model often means that experience rated premiums are at the expense of PAYG where the ongoing costs of past claims can continue for many years.



8. Finally, a fully-funded model is a pre-prerequisite if any of the ACC Accounts are to be opened up to competition from private sector providers as only a state sanctioned monopoly provider such as ACC can effectively tax future premium payers for the underfunding of accounts.



9. Notwithstanding the above arguments in support for full-funding of future claims, the same does not apply in respect to funding residual claims (i.e. pre-1999 claims) which up until 1999 were based more or less on a PAYG model.



10. At a conceptual level, the costs associated with pre-1999 accidents (work and non work) and pre-1999 residual claims in the Motor Vehicle Account are, in economic terms, sunk costs. In other words, charging for previous claims cannot affect the outcome of those claims because those costs have already been bourne. In this respect, the funding of those costs should arguably be borne by general taxpayers as the least distortionary funding method.



11. While the Association's recommendation is that residual claims should be funded out of general taxation, if this is not economically practical, then the costs of residual claims should be spread amongst as many people as possible and over as long a period as possible to ensure that the costs are as least distortionary as possible.



12. The Bill also proposes to extend the time frame for the full funding of pre-1999 claims out to 2019 (currently 2014). However, given the extent and ongoing cost associated with unfunded residual claims, the time frame to achieve full funding could be extended out further than 2019 and that other options to fund residual claims to minimise the impact on current and future levy payers be considered, such as for example reverting back to a PAYG system of funding pre-1999 claims thus lessening the impact on current and future premium payers.



Enable experience rating and risk sharing in Work Account



13. The Association supports the reintroduction of experience rating and risk sharing within the work account. The Association considers that the current Workplace Safety Management Programme (WSMP) on its own is an ineffective injury prevention tool because there is no link to actual injury incidence, only to the implementation of systems which may or may not be effective.



14. Currently, there is little ability for small and medium-sized enterprises to reduce their premium levels irrespective of their claims record. Neither can the vast majority of small and medium sized businesses access the self-insurance (accredited employers) scheme because they are far less likely to have the resources to self manage injury in the manner required by the scheme. However, without some form of recognition of their efforts in improving workplace safety, these employers are left with no option but to pay whatever costs are dictated.



15. The Association considers that this is inherently unfair when, even now, options for self-insurance are available to larger employers. For these reasons we support reintroduction of experience ratings, either as a stand-alone system or in conjunction with a modified WSMP scheme. Such an initiative ought to encourage incentives for employers of all sizes to strive to improve their workplace safety practices and minimise risks.



16. While the Association supports WSMP, the scheme is systems-based rather than output based, meaning there is an assumption that if employers have received a satisfactory audit from ACC, the risk of accidents in the workplace is lower.



17. The Association considers that experience rating is essential in ensuring strong incentives are placed on employers so that those with consistently lower than average accident rates within their risk class are rewarded. On the other hand, those with poorer than average accident rates will experience a negative impact.



18. Within similar industry and risk classes there are often substantial and consistently different accident rates attributable to a range of factors. Often similar businesses within the same industry have significant ongoing differences in accident claims and associated claims costs, reinforcing the need to focus on individual enterprise risk. Experience rating is therefore crucial to ensuring employers benefit from better than average outcomes within their risk category.



Enable risk rating in Motor Vehicle Account for both vehicles and vehicle owners



19. The Association supports proposals in the Bill to allow for regulations to be made for risk rating in relation to Motor Vehicle Account levies to align more closely the costs associated with the scheme to claimants and to provide for risk-rating premiums for the Motor Vehicle Account as well as the Earners' and Work Accounts.



20. However, while supportive of the concept of risk-rating the Motor Vehicle Account, further research is probably needed in order to understand better all of the risk factors that determine accident claims and costs and thus where responsibility should lie.



Cover



Repeal changes made in 2008 in respect of causation for workplace gradual process, disease or infection



21. The Association supports the reintroduction of the 3-part test for workplace causation. This is a robust approach. That said, the Association is concerned that returning to the 3-part test without addressing the recent expansion of schedule 2 to include conditions such as asthma and contact dermatitis will not have the desired impact.



22. Asthma and contact dermatitis occur frequently in the general community. By far the majority have causes outside the workplace and with little or no discomfort in normal circumstances.



23. We retain fears that while diagnosis may be conclusive the cause may not and that including these conditions in Schedule 2 creates provides an outage for general medical practitioners to sign off the cause as workplace, simply because of the presence of and exposure to irritant agents. While the three-step test provides checks and balances against incorrect attribution, the inclusion of asthma and contact dermatitis (as indeed with all conditions) in schedule 2 alters this balance. Reinstatement of the 3 part test without removing such conditions from schedule 2 may not alter the burden of proof issues currently faced by many employers.



Vocational Independence and Rehabilitation



Replace vocational independence threshold of capacity to work for 35 hours with capacity to work for 30 hours per week



24. The Association supports this move Returning people to work does not require a return to complete former capacity. The lower threshold enhances prospects of an earlier return to meaningful work that should be a priority of the scheme.



Make it optional for occupational assessors to consider pre incapacity earnings when undertaking initial and vocational independence assessments



25. The Association also supports this move that should give broader scope to assessors to develop appropriate responses to the particular circumstances of a client rather than applying a rigid set of criteria, not all which may assist a meaningful assessment.



Disentitlement



Wilfully self inflicted self injury and suicide



26. The Association supports the disentitlement to cover for wilfully inflicted self-harm. However it needs to be recognised that 'self-harm' is more than suicide and self mutilation. Arguably it also includes less immediate sources of harm, including possibly encapsulating the effects of obesity, smoking and drinking. The harmful consequences of these conditions are largely avoidable by better personal lifestyle decisions and are not therefore appropriately covered by the ACC scheme.