Checking the UWV’s WGA ERD premium against WGA ERD premium via an insurer

Case study: at a construction and decorating company (80 employees) in 2016, we advised on the ‘WGA ERD’ (the ERD (Bearing the Excess) under the WGA (the Dutch Return to Work (Partially Disabled Persons) Regulations))

The WGA ERD is a bonus-malus scheme instituted by the UWV (the Dutch Employee Insurance Agency) that is linked to the number of employees who become partially disabled and receive a WGA benefit.  The principle is that the ‘polluter’ pays. On the face of it a good idea, but it can mean that companies with a wage bill of 1.5 million euros or more are suddenly confronted by a huge increase in the tax they pay.

For years now, this construction and decorating company had not had any inflow and paid the UWV a WGA ERD premium of 0.33% x € 3,000,000 = € 9,990 per year. In 2015, 4 employees (after two years of illness) became occupationally disabled. They receive a WGA benefit that is allocated to the employer as a ‘malus’ (financial penalty) for the next 10 years. For 2017, this means a premium levied by the UWV of 2.64% and for 2018, of 3.04%. Instead of € 9,900, as at 1.1.2017 the company would now have to pay the UWV € 79,000!

Many companies do know that this is how it works but don’t know exactly what the financial implications are. Every year, we carry out a scan to estimate the future increase of premium. Our scan make things very clear and we advised this company to become its own risk carrier as at 1.1.2017 and to place the risk with an insurer for a premium of 1.48%. Sadly this is still an increase compared to the UWV’s previous premium but it is still 50% less than the UWV’s new malus premium.