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21 Jul 2016
As luck would have it, ACC challenges have been more evident to me in the last few months, than is normal. These have fallen into two categories: first the levels of cover taken out by self employed workers, and second the extraordinary challenges faced by businesses which have more than one type of activity.
The problem of the self employed and business people securing adequate loss of income cover in the event of an accident, crops up all the time. The normal ACC Cover Plus (“CP”) base compensation primarily on earnings last year, and does not recognise the variations in income which self employed people can experience. There is a better ACC scheme than CP, and we encourage our clients to use it. It is Cover Plus Extra (“CPX”) , which offers self employed people the ability to choose their level of cover. For example, a person in a low income start up phase may decide that whereas their earnings might be only say $25,000, in the event of an accident they would need more ACC cover than the $385 per week that CP would offer them. On CPX they can buy the extra guaranteed cover that they need.
Other advantages that Cover Plus Extra offers include:
No arguments: Some readers will know from bitter experience that proof of loss of earnings under CP cover can be a difficult and protracted experience. And worst of all, it comes at a time when you least need your difficulties compounded. With CPX the cover is pre agreed and that’s what you get.
100% cover: Most business people know that injured or not, they cannot afford to be off work, and most will limp back for as many hours as they can as soon as they can. Under CP they may well be penalised for that diligence. But under CPX, cover continues until full time work resumes.
Limitation of cover: For business people who are able to obtain better or cheaper accident cover privately, CPX offers the ability to limit ACC cover to a minimum of about $500 per week. That reduces the ACC cost and subsidises the chosen private cover cost.
ACC Cover Plus Extra is a no brainer for most self employed people.
Multiple activities: The second challenge I’m writing about is for the business that has more than one activity. ACC rules require that all employees be levied at the highest rate applicable to the business. I have one classic example of a business that does both management consulting and silverculture. Yes, it’s a strange business combination, but if we don’t manage it well, then the business will pay the same levy for the office workers as they do for the tree pruners. That could be a difference of as much as 3.5%. Business profits are frequently below 10% of gross income, so an extra 3.5% loading on the costs of a labour intensive business is a big number.There are three ways to manage this:Chance your luck, by only declaring the low risk category. We don’t recommend this.
If you do have multiple activities in your business paying one ACC levy rate, don’t ignore the problem. Get good advice.
For more information on how we can help your business, get in touch