Capping: How it affects your premium

How capping works

WorkCover premium capping is a safeguard for your business that limits how much your premium rate can increase in a single year (the premium rate is different to the annual premium you pay). Capping softens the impact of a rise in your premium rate resulting from a new or costly claim, or because of an increase in the rate for your industry.

Generally, your workplace is eligible for premium capping if –

• it continues from last year with the same industry classification, or
• it is an imputed workplace and you continue from last year to provide labour hire.

The standard cap is 30 per cent, meaning that if capping is applied your premium rate would not increase by more than 30 per cent from one year to the next.

The cap applies to your premium rate (a percentage) and not the total dollar amount of premium you pay. This means that if your business grows and your total wages (rateable remuneration) increase, your total premium can still increase by more than 30 per cent.

Premium capping applies during the annual renewal and recalculation process, which begins each year on 1 July. Capping is automatically applied by WorkSafe.

Impact of capping - example

ABC Plumbing Pty Ltd (Employer)

WorkSafe uses a premium rate to calculate the Employer’s annual premium based on its total remuneration.

• Last year: The Employer’s premium rate was 1 per cent and their rateable remuneration was $250,000. The Employer’s annual premium is $2,500 ($250,000 x 1 per cent).
• This year: The Employer’s remuneration increases to $500,000. After a significant workplace claim and an industry rate increase, the Employer’s new premium rate is 2 per cent.
• Premium payable without capping: The Employer’s annual premium would be $10,000 ($500,000 x 2 per cent) this year.

Premium payable with capping: The Employer’s premium rate is still calculated at 2 per cent. However, a 30 per cent premium rate cap is applied. This means that the Employer’s maximum allowable premium rate increase is 0.3 per cent (1 per cent (last year’s premium rate) x 30 per cent).

The Employer’s premium rate this year will be 1.3 per cent (1 per cent + 0.3 per cent).

The Employer’s annual premium will be $6,500 ($500,000 x 1.3 per cent) this year.