For many employers in the U.S., Canada offers an attractive market for business expansion. Culturally and economically close, Canada shares a strong western economy, one of the world’s largest disposable incomes, a higher paid price for goods, and on occasion, less competition for market share.
Even with all the advantages, businesses should also be aware of the risks when considering expansion across the border. Workplace legislation and the legal policies companies must follow are significantly different from those in the United States. Notably, the Workers’ Compensation system has some unique and costly elements.
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No employer wants to see an accident or injury in the workplace, but when they do happen, employers in Canada need to understand how to negotiate the complex maze of the local Workers’ Compensation Board.
The Canadian Workers’ Compensation system
The Canadian Workers’ Compensation system is more than 100 years old and was cultivated in the rich and hazardous landscape of a booming industrial and economic revolution. In 1910, Chief Justice of Ontario, Sir William Meredith, was asked to head a Royal Commission studying Workers' Compensation systems throughout the world.
In his Royal Commission report, Meredith said that the true aim of compensation law was to provide for both injured workers and their dependents. He identified five basic principles for a compassionate system: no-fault compensation, security of benefits, collective liability, exclusive jurisdiction and administration by independent boards. The most significant of these was the idea of “no-fault compensation.” This means the workers give up their right to sue their employers in exchange for no-fault income security in the event of a workplace injury. Employers pay for the system in return for protection against liability.
Today, the system in Canada is still built on the founding Meredith principles. It is a quasi-government run system, 100% employer-funded and provincially administered through individual boards. In each province these boards operate under different names and have different maximum benefit levels, legislative provisions, and penalty programs (See Table 1).
If not managed carefully, the cost of Workers’ Compensation penalties can have a significant and serious financial impact on a company’s bottom line. This often takes employers by surprise at the end of the year when they receive a large bill that is due and payable in 30 days. The penalties are sometimes so heavy they wipe out entire profit margins.
To navigate rough (and potentially damaging) legislative waters, it is important for businesses to chart the cause of penalties and unique differences in each relevant province and map out the best course to manage risk.
In putting any strategy together, the following factors are particularly important to note.
The experience rating program
The majority of the Provincial Workers’ Compensation boards have an experience rating program in place. The employer’s premium is based on the perception of their risk and historical cost. If a company’s experience is poor, it can more than double the premium cost for a business.
Related: Here's how to manage a successful workers comp claim
In Canada, these programs can vary quite a bit from province to province. In Alberta, there are two experience ratings programs (one for large and one for small employers). Next door in British Columbia, there is one program for all and in Ontario, there are three systems in place (one for small employers, one for construction companies and one with surcharge penalties or refunds for everyone else).
Most experience rating programs compare employers that are in the same industry classification. Groups are classified by the nature of work the employees perform. As a word of caution, a company may not always be in the correct group classification, so discovering and correcting this can sometimes lead to significant cost savings.
For example, in Ontario where the clothing retail rate is $1.59 per hundred of assessable payroll, on a salary base of $50 million the base premium would equate to $795,000, but the year-end experience rating penalty could be up to $1,000,000 due and payable 30 days from the receipt of the invoice.
There are specific strategies to contain these costs and manage claims. The stakes are high and the solutions sometimes hidden for employers not familiar with the system.
Table 1: Workers’ Compensation System
|
Province |
Name |
Maximum Assessable Earnings |
Experience Rating Program |
|
British Columbia |
WorkSafeBC |
$78,600 |
Yes – Premium rate will increase or decrease based on experience up to 500% increase or 40% decrease |
|
Alberta |
Workers’ Compensation Board of Alberta |
$95,300 |
Yes – Premium rate will increase or decrease based on experience up to 200% increase or 40% decrease |
|
Saskatchewan |
Saskatchewan Workers’ Compensation Board |
$65,130 |
Yes – Premium rate will increase or decrease based on experience up to 100% increase or 25-40% decrease |
|
Manitoba |
Workers’ Compensation Board of Manitoba |
$121,000 |
Yes – Premium rate will increase or decrease based on experience up to 200% increase or 40% decrease |
|
Ontario |
Workplace Safety and Insurance Board (WSIB) |
$85,200 |
Yearly penalty or refund based on experience. An invoice is issued for up to 200% of the premium at year end. |
|
Quebec |
Commission de la Sante et de la Securite du Travail (CSST) |
$70,000 |
Three-tiered program: 1. Yearly penalty or refund based on experience. An invoice is issued for up to 100% of the premium at year end. Want to continue reading? |
