What is Workers Compensation in Canada?
There is a lot of confusion around Workers Compensation (WCB). This article is designed to share with you what is Workers Comp and why is it important. I will also share other important details everyone should know about WCB in Canada.
This will help you understand your options if faced with questions about the WCB system or a particular claim / appeal.
Note- to assist with understanding the WCB system, references will be made to car insurance.
Let’s get started.
Is workers compensation required in Canada?
Workers compensation is required in Canada. Each province made their own laws about WCB. So while there are similarities across Canada, each province may be slightly different.
WCB in Canada is an insurance company like any other. It is legislated to be in place by the government to protect both workers and companies in the event an employee is injured.
What does workers compensation cover?
Workers compensation covers both a worker and an employer in the event of a workplace injury.
The employer is protected from lawsuit by the employee. In exchange the worker received wages replacement if they have to miss time from work, and their medical expenses are also covered if the injured worker requires it.
Specifically, Workers Compensation insures a company’s employees. If you think of car insurance, you pay premiums to the insurance company to insure your vehicle. If you get in an accident the insurance company covers the costs so you don’t have to pay them.
The same is true in WCB. The company insures it’s workers so if an employee gets injured, WCB (not the company) pays the costs of the claim. This continues until the worker is able to return to work.
Who pays workers compensation Canada?
In Canada, the company pays for workers compensation. It is a common myth that the employee does, but this is incorrect. The injured worker receives benefits, but does not pay the WCB premiums.
What does workers compensation cover?
Workers compensation coverage protects the company from being sued in the event of a workplace injury to one of their employees.
If WCB didn’t exist, then the courts would be filled with cases of companies getting sued by workers. Workers would have to wait years to get benefits and compensation. Which is why the WCB system was created.
In addition, WCB is considered “no fault” insurance. Which means, it doesn’t matter if the injury happened because of something the worker did, or the company did. If the claim meets the WCB policy for a claim…it will be accepted.
Is it mandatory to pay workers compensation?
In Canada, WCB is mandatory if you operate a business with employees. There are some provinces where depending on the industry you work in, WCB is not mandatory. In these cases, you can choose whether or not to have WCB coverage.
It’s highly encouraged that if you’re not sure whether you need coverage as a company owner, to call WCB directly and speak with their Employer Accounts Department. The representative will be able to guide you.
We have provided you with an easy to navigate contact list here.
To quickly summarize, WCB is important because:
- It protects all parties from being sued in the event of a workplace injury
- It allows an injured worker to get benefits and compensation quickly.
- The WCB is “no fault” insurance. As long as the situation meets WCB policy, they will protect the company and the worker from lawsuit.
How much does workers compensation pay in Canada?
In Canada, the workers compensation boards typically pay a percentage of your NET income. This means they take the total that you make, take off the taxes, and then pay you a percentage (which can vary between provinces) of the remaining income.
E.G. A worker makes $1,000 per week. After taxes their take home is $850 per week.
WCB pays 90% of the net income.
This injured worker would receive $850 X 90% = $765 per week.
Can you collect EI and WCB?
Technically, you wouldn’t be able to collect EI and WCB at the same time. The rare cases where an injured worker would get EI and then WCB is when waiting for a WCB decision.
This is where a worker is no longer employed by their company, and they are waiting for a decision from WCB regarding a possible claim. In that case, the injured worker could apply and receive Employment Insurance (EI) benefits.
However, if the WCB accepts the injured worker’s claim and issues wage replacement benefits during the same time the worker was receiving EI, the injured worker would need to repay that amount back to EI.
This is to prevent “double dipping” of benefits.
If the injured worker’s claim is denied, then they would not be required to pay back EI.
How does WCB protect businesses in Canada?
As mentioned previously, the WCB protects businesses from lawsuit and costs associated with an injury to the company’s employee.
In addition to protection from lawsuit, when an employee gets hurt the WCB will:
- Confirm that the reported symptoms meet the criteria for an acceptable WCB claim
- If time is missed from work because of the injury they will pay the worker
- All medical costs related to the accepted symptoms/injuries are paid by WCB NOT the company
This protects the company from financial strain or catastrophe as a result of a workplace injury.
If you use the example of car insurance. You pay a premium of $200 per month and in exchange, if you’re in a car accident, the insurance company covers all the costs. They will pay for your repairs, the other person’s car repairs, medical bills, rentals, etc. If you didn’t have insurance, you could be personally liable for all of these costs.
Workers compensation works in a similar way. The company pays a premium and WCB covers the cost of the workers lost wages, medical bills, etc.
How does WCB protect workers in Canada?
WCB also protects a worker from being sued if the company feels that the reason for injury was caused by the worker’s actions.
More importantly, workers compensation is supposed to protect workers from financial strain because of a workplace injury.
They do this by:
- Covering the cost of medical expenses, prescriptions, assistive devices in case of a workplace accident
- If the injury results in a worker having to miss time from work, the WCB can provide wage replacement to the worker. (Usually the wage replacement is a percentage of the net income)
- In the event there is permanent disability, WCB can provide retraining into a different job
- Where a workplace injury prevents a worker from doing their previous job forever, they can provide a pension or wage “top – up”
How does WCB charge premiums to a company?
Does anyone know how your car insurance company comes up with the premium you need to pay? The answer is most likely “no.”
Car insurance rates can be affected by:
- A person’s age (suggests likelihood of them getting in an accident)
- The type of car they drive (a Ferrari is more to insure than a Ford Tempo)
- How many accidents you have
- How many speeding tickets you have
With WCB it’s easier to focus on 3 things. A company’s premiums are influenced by:
- The industry you work in.
- The size of your payroll
- The total cost of WCB claims charged to your company
Just like car insurance for a Ferrari is more expensive than a Ford Tempo, the industry you work in can have a higher or lower chance of your employee getting injured. A company that works in roofing for example will have a higher rate than an accounting firm where everyone sits in a nice office.
An employee works for a company and gets paid by the company.
In WCB’s eyes: payroll = employee.
While some employees make more or less, the WCB will look at the total payroll a company is paying in a given year.
A company with a payroll of $10 million will pay higher premiums than a company with $500,000 in payroll.
Lastly, WCB will look at how much money did they spend on claims made by your employees over the past few years. (Each province does this slightly different, but the cost of a WCB claim is the main focus.)
If WCB spent more than what they consider an average on WCB claims, you will have higher premiums. If they spent less, they would discount your premiums.
This is how all insurance company’s work. The more claims you have and the more money it costs the insurance company, the higher your premiums will be the next year.
For those of you wondering WCB premiums are an expense that can be written off by the company at tax time.
Side note:
WCB premiums are an expense that can be written off by the company at tax time.
What can a company do to control WCB premiums?
Typically you can’t change the industry or adjust payroll to reduce premiums. The way most companies can control and reduce premiums is by limiting the costs of a WCB claim when they happen.
There are different ways of doing this. The most common approaches are:
- Have a solid WCB program to properly respond to injuries / illnesses reported by your employees
- Familiarize yourself with medical clinics and hospitals around your company
- Offer modified duties
- Train staff on roles and responsibilities when / if a WCB claim occurs
- Know what documents need to be completed and the time frame to submit to WCB
If you have more questions or feel like you would benefit from assistance, my company Workers Comp Simplified has a tonne of great resources to help you.
To find out more, click the “contact an expert” button and send us a message.
You can leave me a note of what type of assistance you’re looking for and I will get back to you.
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