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Guide to Workers' Compensation Insurance

Having Workers' Compensation Insurance Benefits Your Business

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Guide to Workers' Compensation Insurance

Is He Covered?

Image (c) Ana Abejon/ Getty Images

Does your business have to have Workers' Compensation insurance?

In most cases, if you have any employees, the answer is yes, which means you have to register your business with your provincial Workers' Compensation Board (WCB)and pay Workers' Compensation insurance (WCI) premiums based on your industry classification.

The Alternative is Worse

Before you start cursing, consider the alternative. What if one of your employees got injured on the job? Could your business afford to pay his or her medical bills, whatever damages were awarded by the courts, and the cost of his or her rehabilitation?

What if more than one worker was injured? Workers' Compensation insurance protects employers from claims resulting from injuries to employees. It protects your business from lawsuits and provides employees with compensation for on-the-job injuries.

The Principle of Workers' Compensation

The Workers' Compensation Act is based on the Meredith Principle, outlined by then Chief Justice of Ontario, Sir William Meredith, in his report on workers' compensation more than 80 years ago.

The four parts of the principle are that employers bear the direct cost of compensation, receiving protection from lawsuits arising from injuries; workers give up the right to sue their employers and receive compensation benefits at no cost for work-related injuries; negligence and fault for the cause of injury are not considerations; and a system administered by a neutral agency would have exclusive jurisdiction over all matters arising out of the enabling legislation. This neutral agency became the Workers' Compensation Board (WCB).

Your Responsibilities as an Employer

As an employer, your responsibilities, (besides registering with the appropriate WCB and paying premiums), are to work with employees to prevent illness and injury, and to report injuries and help injured employees return to work.

As you've already guessed, Workers' Compensation is administered provincially rather than federally, which means that exactly which businesses must carry Workers' Compensation insurance and which businesses may choose to carry Workers' Compensation insurance varies from province to territory.

Who Has to Register?

Generally, if your business is incorporated, or if you have any employees, you must register with your provincial Workers' Compensation Board or WCB (and pay Workers' Compensation insurance premiums). Sole proprietors or independent operators running unincorporated businesses with no employees don't have to register for Workers' Compensation insurance, although they may choose to carry optional coverage.

This isn't always the case, however; in the Northwest Territories, all businesses need to register with the WCB within 10 days of commencing operation, even if the business has no workers, as you can't get a business license without a certificate of compliance from the WCB.

In B.C., virtually every employer has to register with WorkSafe Online, including people who are building their own homes, and people who hire casual domestic help on a regular basis, such as gardeners, cleaners, or nannies. (Yes really; see "Do I Have To Register?".)

If you're a really small business, the number of employees you have may determine if you have to register for Workers' Compensation insurance. In New Brunswick, for instance, you must register for coverage if you employ three or more workers; in Nova Scotia, you must register if you have two or more workers. In other provinces, such as Alberta, where you must register with the WCB within 15 days of hiring your first full- or part-time worker, or Ontario, where you must register within 10 days of hiring your first full- or part-time worker, it makes no difference. If you're not in one of these provinces, check this list of WCB sites by province.

Corporate Regulations Vary Province to Province

In Alberta, directors (registered officers) of corporations are not automatically covered, although they may apply for optional personal coverage. However, if your company is incorporated in B.C., all shareholders or officers who are actively engaged in the company business are regarded as employees of the company.

In New Brunswick, employers who operate a limited company must include in their annual reported payroll all individuals receiving salary from the company, regardless of age, including the owners, executive officers, directors and managers, which means you will have to include your children in your report if you're paying them to work for your corporation. Other provinces have age restrictions.

It doesn't matter if the employees are full-time, part-time, or casual, or if they're contract workers or subcontractors. In many provinces, such as Alberta, if you hire a proprietor (an individual who operates a company but doesn't have any employees) to do work for you, the proprietor is considered to be one of your workers, unless he maintains his own WCB account.

Even if he does, you're still not off the hook. In Alberta, If you hire contractors or subcontractors with their own WCB accounts, you have a responsibility to ensure that these accounts are in good standing, which you can do by obtaining a clearance from the WCB. This protects you from becoming liable for payment of your contractor's or subcontractor's premiums. This fact sheet, Your Responsibilities For Contractors/Subcontractors, gives more information about clearances.

You May Want Workers' Compensation Insurance Even if You Are Exempt

Some industries are exempt from mandatory Workers' Compensation insurance. In Ontario, computer programmers, private health care practices such as those of doctors and chiropractors, private day cares, travel agencies, photographers, and taxidermy are among the exempt industries. Industries that are exempt in one province may not be in another, so you'll need to check with your provincial WCB to be sure.

Even if Workers' Compensation insurance isn't mandatory for your business, you may still want to purchase it voluntarily. If you're a contractor, for example, you may find that principals prefer to deal with contractors who have their own Workers' Compensation insurance, and some companies will insist on proof that you have your own coverage.

When you purchase optional personal Workers' Compensation insurance coverage, be sure to base the amount you buy on your insurable earnings, as this is the amount that will be used to determine compensation if you do suffer a work-related injury. If you purchase only the bare minimum, you won't receive enough benefits to replace your lost income.

Because the rules for mandatory registration differ depending on where your business is, I've put together a list of sites with Workers' Compensation insurance registration information for each province or territory.

Some of these sites allow online registration for Workers' Compensation insurance. Whether they do or not, they all include a lot of information to make dealing with Workers' Compensation insurance easier for employers, such as fact sheets and Employer Handbooks.

The Cost of Workers' Compensation Insurance

The cost of Workers' Compensation insurance depends upon what industry category your business is in. All the WCBs classify businesses according to the industry in which they operate, because it's assumed that businesses with similar operations share similar risks.

When you first register with the WCB, you have to supply a complete description of your business operations to determine your industry category. The rates for Workers' Compensation insurance are calculated per $100 of insurable earnings. The Association of Workers' Compensation Boards of Canada has various statistics on provincial assessment rates and rates by industry classification (see Assessments & Premiums).

There's quite a difference in the average premium rates between provinces. In 2013, for instance, Alberta had the lowest premium rate at $1.12 per $100 of payroll. The second lowest average assessment rate for 2013 was New Brunswick, at $1.44.

Meanwhile, at the other end of the scale, Newfoundland's 2013 average assessment rate was $2.75, followed by Nova Scotia with an average assessment rate of $2.65.

All WCBs use a performance-based pricing system, which will also affect the cost of your premiums for better or worse. On the positive side, employers who reduce the number of accidents and injuries in their operations pay less. The downside is that employers with poor accident and injury track records pay higher premiums.

This experience plan means that you can earn discounts on your Workers' Compensation insurance premiums over time. Some provinces, such as Alberta, provide even more incentive; you can earn an additional discount of up to 20% by participating in the Partners in Injury Reduction program.

The Advantage of Being Covered

Registering with the WCB and paying Workers' Compensation insurance premiums are definitely not among most business people's favorite activities, but they are necessary. Think of what could happen to your business because of even a single judgment for a work-related injury. The WCB insurance programs provide employers with protection, allowing them to pool the risk and share the cost.

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