Changes made earlier this year to the workers’ compensation and unemployment tax system have led to significant savings for Washington businesses heading into the new year.
Gov. Chris Gregoire said Thursday that there would be no increase to businesses’ workers’ compensations rates — a significant change from the 12 percent increase businesses saw last year.
Gregoire also announced that most businesses will pay a lower unemployment tax rate in 2012. Lawmakers earlier this year passed a bill to lower tax rates that is expected to save businesses more than $500 million through 2012. Nearly 90 percent of state businesses will pay a lower rate next year than they did this year.
Local businesses said they were particularly relieved to hear there will be no increase in workers’ compensation insurance rates — though some individual companies may see rates climb or drop, depending on their industry and details of individual claims.
“It’s a welcome surprise for employers,” said Kelly Parker, president and chief executive officer of the Greater Vancouver Chamber of Commerce.
Parker said local businesses have been extremely concerned about workers’ compensation premiums. “In every chamber meeting when we talk about legislative issues, employers who are trying to keep good people employed say L&I makes it more difficult,” she said.
In September, the Department of Labor & Industries proposed an average workers’ compensation rate hike of 2.5 percent for 2012, but director Judy Schurke said that they heard from businesses who said they couldn’t even afford that increase.
Business groups and Gregoire pushed for widespread changes in the system despite the objections of labor officials, who believe the overhaul will lead workers to accept less money than they are entitled to receive.
The plan approved by the Legislature earlier this year allows injured workers to take settlements instead of a lifetime of payments. It is expected to save the state $1 billion over the next four years, Gregoire said.
But many in the 250-member Southwest Washington Contractors Association had hoped to see the creation of a private workers’ compensation insurance market in Washington state, a change they did not succeed at pushing through.
Some Clark County contractors are worried that rates could start climbing again in 2013, said Eric Sander, a member of the association’s board of directors and senior vice president for USI, a Portland-based surety bond company.
“A lot of people say (the state) will need a 20 to 25 percent increase in 2013 to make it work,” Sander said.
Nevertheless, the announcement that workers’ compensation rates will stay the same — even if it is only for one year — is good news for contractors, one of the industries hardest-hit by economic downturn, said Mike Bomar, executive director of the Southwest Washington Contractors Association.
“It’s becoming more and more difficult to hire employees because of the increasing cost of workers’ compensation,” Bomar said. “This is certainly positive news going into the new year. It’s certainly a good thing.”
“These reforms are the reasons rates are staying the same or dropping instead of going up,” Gregoire said. “It’s good news for our businesses, it’s good news for our workers and it’s good news for Washingtonians still looking for jobs.”
Independent Business Association of Washington executive director Gary Smith also applauded Thursday’s news.
“Higher costs in this economy will destroy jobs,” Smith wrote in a statement. “Most small businesses are doing everything they can to reduce their costs to the bone in order to keep their doors open and keep their employees working.”