Howden highlights impact of ACC levy hikes on New Zealand businesses

Howden has outlined the significant challenges that New Zealand businesses will face following the Accident Compensation Corporation’s (ACC) decision to raise employer levies.

The ACC’s 2023/24 annual report highlighted growing financial pressures, including a $7.2 billion deficit caused by an $8.7 billion increase in its outstanding claims liability (OCL). The OCL now stands at $60.2 billion. Despite these challenges, ACC’s $51.6 billion investment fund achieved a 7.6% return during the year, which helps offset long-term claims costs.

Howden noted that over the next three years, average levies will increase by nearly 15%, with some employers experiencing rises of up to 60%. This adjustment comes after a six-year period where ACC levies remained unchanged, despite escalating costs and a growing backlog of long-term claims.

Business impacts of the levy increase

Howden said that the levy hikes are expected to create several challenges for employers, including: 

• increased penalties: Companies with high claim rates or prolonged injury recoveries may face experience rating penalties of up to 100% of their base levy
• limited oversight: Employers have little ability to influence ACC’s operational performance, leaving them vulnerable to inefficiencies
• workforce disruptions: Extended claim durations, especially in a tight labour market, could exacerbate productivity issues

The Accredited Employers Programme 

The ACC’s Accredited Employers Programme (AEP) provides a potential pathway for larger businesses to mitigate rising costs.

The program allows participating organisations to self-manage workplace injury claims, offering more control over injury management and rehabilitation processes. Employers in the AEP can reduce exposure to levy increases, improve return-to-work times, and minimise operational disruptions.

However, the program requires businesses to meet stringent administrative and operational standards, which can pose challenges for those lacking specialised expertise.

Adapting to levy changes

Howden emphasises that businesses should see the levy increases as an opportunity to reassess their injury management practices. For companies with the capacity to participate in the AEP, the program offers a way to manage costs more effectively while improving employee outcomes.

By leveraging injury management expertise, employers can take a proactive approach to rising levies, minimising financial strain while supporting workforce health and productivity.

ACC levy increases accompanied by operational review 

The levy changes come as the New Zealand government launches an independent review of ACC’s operations.

Announced in December 2024, the review will evaluate ACC’s claims management systems and explore ways to improve rehabilitation rates. It will assess whether ACC’s practices align with its goals of supporting injured workers and managing claims effectively.