The Accident Compensation Corporation scheme is one of the more unusual pieces of public policy in the developed world. In exchange for giving up the right to sue for compensatory damages for personal injury, New Zealanders receive cover for the consequences of any accident regardless of who caused it.
Employees fund part of it through the earners' levy, deducted from wages and salary at a rate of roughly 1.5% up to an annual maximum income.
What the levy buys
- Weekly compensation at around eighty percent of pre-injury earnings while unable to work, after an initial period covered by the employer for work injuries.
- Treatment costs, including surgery, physiotherapy and rehabilitation, whether or not the injury happened at work.
- Support at home such as childcare and home help where the injury prevents ordinary activity.
- Lump sums for permanent impairment.
- Cover for dependants in the event of a fatal accident.
The coverage extends beyond the workplace, which is the feature that distinguishes it. A skiing accident, a fall at home and a car crash are all covered on the same terms as an industrial injury.
How the scheme is funded
The employer levy varies by industry classification, which gives businesses in higher risk sectors a direct financial incentive to improve safety. Experience rating adjusts an individual employer's rate based on its own claims history.
What it does not cover
The scheme covers injury, not illness. Sickness, gradual degenerative conditions and most mental health conditions fall outside it, and are dealt with through the health system and the welfare system instead.
The boundary between an injury and a gradual process condition is the most litigated part of the scheme. Back conditions, occupational overuse and hearing loss all sit near that line, and the distinction determines whether a claim is accepted.
Weekly compensation is capped at a maximum, so high earners are covered for less than eighty percent of their actual income. Private income protection insurance exists to bridge that gap and is common among professionals and the self-employed.
What this means for comparisons
A New Zealand net salary figure is after a levy that purchases comprehensive accident cover. Comparing it with a country where equivalent protection is bought privately, or not at all, understates what the deduction delivers.
It also means New Zealand has no separate employee unemployment insurance contribution and no compulsory health insurance premium, both of which appear on payslips elsewhere. The country has one of the simplest deduction structures on this site: income tax, the ACC levy, and KiwiSaver if you are in it.
KiwiSaver is covered in KiwiSaver explained, and the comparison with Australia in why Australian payslips beat New Zealand ones.
Related: KiwiSaver explained