Everything You Need to Know About Canada Workers' Compensation
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Workers' compensation is an employer-paid benefit that provides medical care and recovery assistance to Canadian employees who experience on-the-job injuries or develop occupational illnesses.
The worker's compensation program has deep historical roots. In 1889 the Royal Commission on the Relations of Labor and Capital reported on the high rate of workplace injuries and the difficulties workers faced in having to sue their employer for compensation. In 1913 judge William Meredith produced a report on the subject. The Meredith Report outlined the following basic principles of worker compensation in Canada:
- No-fault insurance: the worker receives support regardless of who caused the accident
- Security of benefits: the employer sets aside funds in advance to guarantee availability in case of an incident
- Collective liability: all employers contribute to and share a common fund
- Independent administration: the organization that provides workers’ compensation insurance is separate from the government
- Exclusive jurisdiction: only official organizations can offer workers’ compensation
Today, every Canadian province and territory has a Workers' Compensation Act that defines how injured workers are compensated and assisted in recovering.
The basics of Canadian workers' compensation
The Association of Workers' Compensation Boards of Canada (AWCBC) gathers and publishes statistics regarding Canadas' worker's compensation system. It is a valuable resource for anyone interested in starting a business or hiring in Canada.
Before diving into that data, familiarize yourself with these WC basics.
Canadian employers pay for workers' compensation
Anyone running a business with employees in Canada must offer workers' compensation insurance to their workforce. You must first register your company with the WCB (Workers' Compensation Insurance Board) and then pay workers' compensation insurance premiums.
However, employers' responsibilities don't end with paying for insurance. They must implement adequate safety measures to protect workplace health and promote injury prevention. In case of an accident, the employer must report it to the WCB to help the injured worker in their recovery and return to work.
Rules vary by territory, but the WCB requires employers to report a workplace injury or illness within three days (72 hours) of knowing the employee needs professional medical treatment.
Some employers worry WCI is a massive burden on their company budget. But it’s cost-effective to offer insurance than to deal with each employee's medical and rehabilitation bills individually.
Workers' compensation eligibility depends on sector
Most Canadian workers who get injured at work or are diagnosed with occupational diseases have the right to apply for workers' compensation.
That’s because the vast majority of employers must contribute to workers’ compensation. Independent contractors and self-employed workers with no employees are common exceptions to this requirement, but they usually have the option to purchase personal coverage if desired.
While workers’ compensation is usually only provided to employees, some provinces require businesses to provide insurance to non-employees too, like contractors. For example, if you run a business in Alberta and you hire an independent contractor without WCI, you may be responsible for their insurance premiums.
Even if you contract with someone who already has WCI, check whether it's in good standing. If their coverage is expired, you might be on the hook for paying their overdue premiums. To avoid this situation, obtain a clearance letter that certifies whether or not your contractor is currently covered.
WBCs oversee workers' compensation in each province
WBC is an abbreviation for the Workers' Compensation Board. WBCs manage the compensation benefits for their jurisdiction. Each WCB determines when companies are required to provide workers' compensation insurance, how and when employers are required to report work-related accidents and illnesses, and who is eligible for such coverage. WBCs must:
- Review workers' compensation claims to determine compensation benefits entitlement
- Review employee complaints and make a decision based on evident
- Interpret and enforce workers' compensation legislation in their respective jurisdictions
- Issue medical benefits (or loss of wages benefits)
- Schedule independent medical examinations
Workers' compensation laws vary from province to province
Workers’ compensation is a provincial matter, so requirements vary from one province to the next.
In some provinces, whether you must register with WBC will depend on the number of employees your business employs. For instance, in Ontario, you must register within ten days after employing your first full-time employee or part-time employee. In Alberta, you must do the same within 15 days.
Some regions require companies to register even with zero employees. Such is the case with the Northwest Territories, where a business owner must register within ten business days of launching operations. Otherwise, they can't get a business license.
The number of employees is a determiner in Nova Scotia and New Brunswick, too. New Brunswick employers managing a team of three or more full or part-time employees must register for coverage. The same is in Nova Scotia.
Workers' compensation laws reduce the chance of lawsuits
Aside from showing you care about your employees' well-being by ensuring workplace safety, a workers' compensation system protects you from claims caused by an employee's work-related injury or illness. WIC is a safety net for both employees and business owners.
Workers' compensation rates in Canada
WCBs differ by industry, because some industries tend to be riskier and therefore have higher costs to insure. Companies with similar risks receive similar benefits at a similar price. The WCB determines a premium rate for your industry, which is the cost of the coverage per $100 of insurable earnings.
Each provincial or territorial Worker Compensation Board sets their own premium rates. For example, the Workers Compensation Board of Manitoba has an average premium rate at $0.95, the lowest in the country. In 2022, the average premium rate in Ontario is $1.30 per $100.
For 2022, most boards maintained or reduced premium rates for employers.
Average rate (per $100 insurance earnings), 2022
Newfoundland and Labrador
Northwest Territories and Nunavut
Prince Edward Island
Workers' Compensation Boards typically apply a performance-based pricing model when determining individual premium rates. Companies that successfully reduce injuries and accidents and focus on occupational health pay lower premiums. Those with more injuries and accidents pay more.
What if I have Canadian workers in more than one province?
If you employ workers who normally live and work in a different province that the one you’re based in, you’ll need to purchase coverage for these out-of-province workers from their resident workers’ compensation board in charge. Otherwise, they won’t be covered if they become injured on the job.
If a worker travels to another province to work, they may still retain coverage in their home province depending on how long they stay out of province and how many external trips they make over a year. Eligibility rules vary from province to province, so consult with a legal professional for guidance.
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Canadian vs. US workers’ compensation: similarities and differences
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Canada and the US’s workers' compensation programs share many similarities but are not identical.
WCBs in the US vs. WCBs in Canada
Both the US and Canada have WCBs that operate independently from the government. Employers, not the government, fund them.
In the US, as in Canada, workers’ compensation insurance is not mandatory in some industries, such as insurance, banking, and dentistry. However, whereas Canadian companies required to purchase WCI must purchase it from WCBs, that's not the case in the US. You can purchase insurance coverage from private companies in the US.
Cost drivers in Canada and the US
Unlike the United States, Canada's most significant cost drivers are loss of earnings and wage-loss benefits. Canada has a publicly-funded healthcare system that involves:
- Less use of healthcare benefits associated with a workers' compensation claim, resulting in lower medical costs in total
- Fewer administrative and healthcare costs applied to employers' experience ratings
In the US, the most expensive part of workers’ compensation is often covering medical bills from an accident.
Return-to-work programs in Canada and the US
Unlike the United States, Canada's medical providers are not involved in the employee's return to work process. Instead, theycomplete functional-ability forms and give them to an employer and WBC, who then assign tasks according to an employee's capabilities.
Typically, employers don't consult with the doctor regarding an employee's sick leave length. The exception is when an employee experiences severe pain and a doctor prescribes narcotics. An employer can request an independent medical examination by the doctor recommended by a WCB or their own choice if they have reasonable suspicion the employee is abusing the leave.
Other mandatory employee benefits in Canada
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Mandatory employee benefits in Canada, in addition to workers’ compensation, are:
- Pension: Canada Pension Plan (CPP) is a contributory savings plan guaranteed to all Canadian employees
- Legislated leaves: employers are responsible for maintaining an employee's position until they are capable of returning to work
- Parental leave: employees in Canada (except Quebec) are entitled to paid parental leave
Employment insurance: employees on sick leave, maternity, or parental leave are entitled to income
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Managing workers' compensation in just one province of Canada may be challenging; doing it in multiple territories is a true rollercoaster—especially if your business isn’t based in Canada. However, you can partner with an employer of record (EOR) to make global benefits, global payroll, and compliance with Canadian labor laws simple.
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Disclaimer: This article is provided for informational purposes and should not be treated as legal or financial advice. Check with a payroll professional and consult official sources for the latest information.