Your WCB Alberta Premiums increased. The anger, panic, and frustration sets in. It is this moment that you look for answers and become my client.
I thought I would start with free advice.
As a business owner I can appreciate how important it is to track and be aware of overhead costs. While some companies pay the WCB premiums and don’t give it any more thought, for others this becomes a very stressful time.
If you’re one of the folks that own or work for a company where WCB premiums have increased, then here are some areas you want to check to find out where the issue is and how to fix it.
When you’re the Health and Safety person responsible for WCB in your company, answers don’t come easy.
I am assuming that you already are familiar with the WCB system and its purpose in your company. If not, then go check out my article:
As you read this article, I highly recommend getting a copy of your Alberta WCB premium rate statement. That is because this article will walk you through your premium rate statement
I’ve created a step-by-step guide to help you find your WCB Alberta Premium Rate Statement:
Quick Start guide to diagnosing your WCB premium issue
Here are 3 quick answers to why your WCB premiums may have increased:
Your company payroll increased
The WCB insures payroll. Payroll to WCB = people. The more payroll you have would suggest to WCB you have more people working for you.
If your payroll went from $1 million last year to $3 million this year, your premiums will naturally increase.
WCB charges premiums based on $100 of payroll. For every $100 of pay roll a company must pay a certain amount.
E.G. A welding company has a rate of $2.50 for every $100 of payroll. Which means that for every $100 they pay their employees, they have to pay WCB $2.50.
Your industry rate changed
WCB classifies all companies into industries. You want to make sure you’re in the same industry. Sometimes WCB will change your industry and that new industry will have a higher rate than the previous one.
Your company had WCB claims
When WCB pays medical expenses and wages to a worker that’s on WCB, they call this “claims costs.” The more claims costs there are on a company’s account the more premiums they will pay in future years. If your company doesn’t have a history of WCB claims, but then they had a few last year, it’s possible this is the reason your WCB premiums are going up.
What do I need to pay attention to in my Alberta WCB Premium Rate Statement?
Now that we know WCB uses industry rates and payroll. Let’s dig deeper into our WCB premium rate statement.
When you’re reviewing your WCB premium rate statement and trying to locate the issue, you want to focus on the following areas of the document:
- Employer Rate calculation
- Your claims costs
- Industry Average claims costs
(If you notice that your premium rate statement doesn’t have this, it could be because you are in a small business program.)
I will now explain each of these 4 elements in more detail.
Why do I need to check the industry on my Alberta WCB Premium Rate Statement?
For an insurance company to work properly they need to know the risks of what they are insuring. The “risk” in WCB’s eyes is how likely is a worker to get injured while working.
If a worker is in construction, their likelihood of getting hurt is much greater than someone in an accounting firm. For this reason, all construction companies have to pay $2.50 for every $100 of payroll. All accounting firms pay $0.60 for every $100 of payroll.
This means that if both companies had a payroll of $1 million, the construction company would pay WCB Alberta $25,000 in premiums where the accounting firm would pay $6,000 to WCB.
Make sure your industry is accurate. A $1 change in rate can result in tens of thousands of dollars in savings.
What is the Employer Rate Calculation on my WCB Premium Rate Statement?
Every company is in an industry. Every industry has a specific rate. This is like the “starting point” for how much WCB is going to cost you.
From there, WCB will add a surcharge or a discount depending on the costs of the WCB claims against your account.
This surcharge or discount is added to “the starting point rate.”
The starting rate for an industry is $2.04. The company has a 22% surcharge because they had a lot of messy claims.
WCB adds $0.45 to the starting rate. ($2.04 X 22% = $0.45)
The total rate for your company specifically is $2.49.
Where then does the surcharge or discount on WCB premiums come from?
The explanation is an experience ratio.
What on earth is an “experience ratio”?
To put it simply, it’s a comparison of the costs WCB spent on your claims for your workers and then comparing this to the industry average over a 3-year period.
There is a technical way of understanding what is the “industry average.” I prefer the easier model of calling an industry average a “benchmark.”
The benchmark is the number I need to keep the total costs of all my WCB claims under. IF I can do that, I am guaranteed to be in a discount with my WCB premiums.
This is because if I go over this number, I will be in a surcharge.
For this premium rate statement, the bench mark of costs is $118,264.
Which means that I have to make sure the total costs of all my WCB claims are less than $118,264.
In this example, you can see that the costs are higher than the benchmark as they are $170,218.
How many years does Alberta WCB use when setting your company premiums?
The WCB in Alberta uses the first 3 of the last 4 years.
Think about it, if you want a loan from he bank, the bank will look at the last few years of your personal records. If you want car insurance they look to see how many accidents or speeding tickets you have.
This is all used to help them consider your premiums, but one year doesn’t tell the whole story.
WCB is the same. Which is why they use the first 3 of the last 4 years.
Why doesn’t WCB use this past year?
Your rates are issued in November / December of each year. Not all the costs are in for this year, so they skip it.
WCB calls this a lag year.
As you can see, the years in which the claims costs used for the 2022 premium rate statement can be seen next to “Your claim costs (2018-2020).”
Which means only claims costs in 2018, 2019, and 2020 will be used. Any claims costs in 2021 will start to affect your company in 2023.
Using the example in this image, you will see that the total WCB claims costs for the company from 2018-2020 is $170,218.
For the company to be in a discount, they would need to reduce these costs below the “benchmark” of $118,264.
What can a company do to reduce Alberta WCB premiums?
There are many different reasons why a company would have high claims costs. Too much to go through here. Instead, lets briefly discuss some of the things your company can use to reduce costs in the future.
Health and Safety Program
First and foremost a strong health and safety program will go a long way in preventing WCB claims from happening in the first place.
Claims Management Program
Prevention is key. The true cost of a claim is determined by how a company manages their worker’s symptoms. To be able to do this effectively, a company needs:
- To know that a worker has symptoms (reporting procedure)
- Have a way to capture key information (documentation)
- Include the worker in the return-to-work process (modified duties)
- Ensure everyone knows what to expect from this situation (regular communication)
Understand WCB claims costs
A company can have a health and safety program, manage claims, and still have claims costs against their account. The issue is they don’t know why or where these costs came from. Our company can take a look and help you find out where the gaps are that is costing you money.
Simply go to our website and click the “contact an expert” button and request an account review.
WCB premiums are by far the most confusing thing to understand when it comes to the WCB system. Which is why I do these articles and videos. The truth is though, this is not enough. If you really want to know how WCB costs affect your account you want to get trained.
Workers Comp Simplified offers course and coaching to help you:
- Understand WCB reports
- Identify areas that need to be fixed
- Show you how to put together an inexpensive action plan to save you time and money
Want to learn more? Contact us.