6.3 Employer Workers’ Compensation Premiums

6.3.1 Employer Contributions to Workers’ Compensation Funds

Canadian employers contribute to workers’ compensation funds administered by Workers’ Compensation Boards (WCBs). The purpose of WCBs is to provide a no-fault scheme that compensates employees for work-related injuries or illnesses. “No-fault” means that the employer does not have to be proven negligent or otherwise at fault in court; instead, workers with a work-related injury or illness can apply to their province or territory’s WCB for compensation. The WCB assesses the workers’ injury or illness claim, investigates, and determines whether the worker is eligible for benefits and compensation. If the claim is approved, the injured employee receives medical treatment, wage replacement, and potentially other necessary supports such as vocational rehabilitation. Employers contribute to a collective fund that supports these benefits.

Each province and territory has its own WCB, except Northwest Territories and Nunavut, which share a WCB. There is a federal workers’ compensation service for federal government workers, but it does not cover private employers in federally regulated industries. Employers in all industries are covered by their provincial or territorial WCB, except those industries exempted by provincial or territorial law, and except for federal government workers, who are covered by a federal workers’ compensation service. Provincial and territorial exemptions vary widely (Mehta, 2022). As an example, Alberta’s exemption list can be found here: WBC Alberta  Exempt Activities

Although each jurisdiction has specific, designated WCB premiums that employers must pay, in general, employers pay premiums based on industry classification and the assessed risk of work-related injuries for their specific sector. Premiums are calculated based on factors such as payroll size, historical injury claims volume, and the employer’s accident record.

Payroll should track industry-specific rates and rate changes for the employer organization to calculate the employer’s WCB premium. The process may differ between jurisdictions, but the following steps will likely apply:

1. Calculate the net assessable earnings (NEA) for employees. The WCB will have a maximum assessable earnings amount for each employee. For example, if the maximum assessable earnings are set at $90,000 per year, the employer will only be assessed premiums on $90,000 for an employee who earns more than the maximum threshold per year. Net assessable earnings are gross earnings minus any earnings over the maximum assessable earnings threshold. The net assessable earnings for all employees should be calculated using this method.
2. Determine the premium rate. Each jurisdiction will have different criteria for setting premium rates; however, in general, premium rates depend on an employer’s industry classification (some jobs are more prone to accidents than others), which is based on historical injury claims volume in that industry. The premium rate may appear as a percentage or as an amount per $100 of NEA (mathematically the same).
3. Calculate the WCB premium. Multiply the NEA (all employees) by the premium rate.

Rates can vary widely, both within and across jurisdictions. Here are some examples (2023 rates):

References

Mehta, S. (2022, April 5). How does workers compensation work in Canada? Canadian Payroll Services. https://canadianpayrollservices.com/workers-compensation-canada/

Workers’ Compensation Board (WCB) – Alberta. (2018a). Exempt activities. https://rm.wcb.ab.ca/wcb.ratemanual.webserver/ExemptActivities

Workers’ Compensation Board (WCB) – Alberta. (2018b). Premium rate manual. https://rm.wcb.ab.ca/WCB.RateManual.WebServer/

Workplace Safety and Insurance Board (WSIB) Ontario. (2023). Employer classification manual. https://safetycheck.onlineservices.wsib.on.ca/safetycheck/ecm/naics/611210?lang=en

WorkSafeBC. (2024). Find your classification unit, industry, or rate. https://www.worksafebc.com/en/insurance/know-coverage-costs/find-classification-industry-rate

Image Credit

Workers’ Compensation Board (WCB) – Alberta. (2024). Home page [Logo]. https://www.wcb.ab.ca/