Governments in Alberta, Manitoba, Ontario and New Brunswick considering changes
Payroll professionals in a number of provinces across Canada may see workers’ compensation changes over the next few years.
Governments and workers’ compensation bodies in Alberta, Manitoba, Ontario and New Brunswick are currently considering changes or implementing them.
In Manitoba, the Workers Compensation Board (WCB) is phasing in a new model for setting employer premium rates between 2016 and 2020. While the new model will not affect the way employers report assessable payroll, it will change the way the WCB determines employer premium rates by putting more emphasis on collective liability and differentiating employers based on size.
To move to the new funding model, the board is gradually changing the way an employer’s premium rates can move up or down within the category the board places the employer based on its accident/injury risk.
Under the old model, all employers, regardless of size, could have rates that ranged from 40 per cent below the average rate in their category to as high as 200 per cent above the average.
“We are going to make the lows higher and the highs lower and the collective pool will pick up more of those costs rather than you as an individual firm having to pay 200 per cent of your category average,” says Warren Preece, director of communications at the Manitoba WCB..
This year, the board reduced the upper boundary for all employers from 200 per cent to 120 per cent. For small and medium-size employers, it also increased the lower boundary from 40 to 30 per cent. Next year, it will raise the lower boundary to 20 per cent below category average.
Beginning in 2018, the ranges that apply for rate movement will be fully based on employer size. The range for large employers will be 40 per cent below category average to 120 per cent above. For medium-size employers, it will be 20 per cent below to 60 per cent above, while for small employers, it will be 10 per cent below to 30 per cent above.
The WCB has also capped the maximum amount an employer’s premium rate can go up or down in a year at 15 per cent.
“In our old model, you would go up really fast and come down really slow,” Preece says. “Our model was quite aggressive, which is to say it punished you more for claims costs and it rewarded you more than other models across the country (for no claims costs),” he adds.
The WCB will also implement a new experience factor in 2018. It will give different weights to an employer’s individual claims costs for workplace accidents based on its size. Under the new model, a large employer’s individual claims costs will have a greater impact on its premiums than its industry’s experience. The reverse will apply for small- and medium-size employers.
The new model will also increase the period in which an employer’s claims costs are accumulated for calculating its experience factor. Currently, the system accrues one year of claims costs and five years of costs on all of those claims. The new model will look at three years of costs for claims incurred in the last three years.
Having three years of costs in the system will motivate employers to put more emphasis on accident prevention, says Preece.
“There (will be) a bigger bulk of costs longer in our system. Before, if you had a claim, you got lots of bang for your buck to stop the claim from going to the next year because we only count one year’s worth of claims.”
Ontario changes
In Ontario, the Workplace Safety and Insurance Board (WSIB) is working towards implementing a new rate-setting framework in 2019. It would change the way the board classifies employers and sets premium rates. It would also eliminate the board’s experience rating programs.
Under the proposed changes, the WSIB would replace its current system for classifying employers with one based on a North American Industry Classification System (NAICS). The WSIB says NAICS, which was developed by statistical agencies in North America, will be simpler to use and easier to understand since it groups businesses based on type of economic activity and is updated more frequently than the current system.
Using NAICS, the WSIB would group employers into 34 industry classes. Within each class, the board would put employers into risk bands based on their individual risk profile compared to others in their class. The board is proposing to have over 2,500 risk bands, with each class having between 40 and 80.
The new classification system would also eliminate the need for employers with more than one business activity to have multiple accounts with the WSIB, each with different premium rates. Instead, these employers (with exceptions for temporary employment agencies) would be grouped into a single class based on their predominant business activity, determined by the largest percentage of their annual insurable earnings.
The new framework would then use a two-step process to set premium rates. The first step would be to set a projected premium rate at the class level. Briefly put, it would be based on the collective experience of all employers in a class, taking into account liabilities for the costs of new injury and illness claims, past claims costs and administrative costs.
In the second step, the WSIB would use the class projected premium rate to help it set an individual employer’s premium rate. Simply put, an employer’s rate would then be based on factors such as its insurable earnings, number of claims, actual claim costs and how much the board could rely on the employer’s past claims to predict future ones.
Since the new rate-setting approach would use an employer’s own claims experience to set its premium rate for an upcoming year, the board says it would eliminate its current experience rating programs, which provide rebates or impose surcharges retrospectively.
However, the WCB says it plans to recommend to the board of directors that the new framework include a surcharge mechanism for employers with repeatedly high claims costs.
New Brunswick changes
In New Brunswick, in 2013, the government announced a three-phase review of its Workers’ Compensation Act. Phase II wrapped up last fall, with the release of a consultants’ report. To date, the government has not said when the final phase would begin.
The phase II review examined requirements around a three-day waiting period for benefits. New Brunswick requires injured workers to serve a waiting period, where they do not receive any employment-related pay before workers’ compensation benefits are paid.
Labour representatives wanted the waiting period eliminated, while the employer community was split on the issue. WorkSafeNB has recommended reducing the waiting period to two days to align it with requirements in Nova Scotia and Prince Edward Island.
The review also looked at employer top-ups of workers’ compensation benefits. Under the act, injured workers may only receive a maximum of 85 per cent of their pre-accident earnings. If employers make payments to workers while they are receiving workers’ compensation benefits, WorkSafeNB will reduce its benefits so that the maximum combined payment does not exceed 85 per cent.
WorkSafeNB wants the act amended to specifically address the types of payments that would be offset from workers’ compensation benefits. WorkSafeNB has recommended the government replace a provision in the act covering top-up payments with “explicit legislation to identify the types of remuneration that are to be offset from benefits, which are actual earnings, vacation pay, sick and disability pay, employment insurance and employer top-ups.”
Alberta changes
In Alberta, the government has appointed a panel to review the province’s workers’ compensation system. Among the issues it will consider is whether the current funding model promotes fair compensation and proper rehabilitation for injured
workers.
Governments and workers’ compensation bodies in Alberta, Manitoba, Ontario and New Brunswick are currently considering changes or implementing them.
In Manitoba, the Workers Compensation Board (WCB) is phasing in a new model for setting employer premium rates between 2016 and 2020. While the new model will not affect the way employers report assessable payroll, it will change the way the WCB determines employer premium rates by putting more emphasis on collective liability and differentiating employers based on size.
To move to the new funding model, the board is gradually changing the way an employer’s premium rates can move up or down within the category the board places the employer based on its accident/injury risk.
Under the old model, all employers, regardless of size, could have rates that ranged from 40 per cent below the average rate in their category to as high as 200 per cent above the average.
“We are going to make the lows higher and the highs lower and the collective pool will pick up more of those costs rather than you as an individual firm having to pay 200 per cent of your category average,” says Warren Preece, director of communications at the Manitoba WCB..
This year, the board reduced the upper boundary for all employers from 200 per cent to 120 per cent. For small and medium-size employers, it also increased the lower boundary from 40 to 30 per cent. Next year, it will raise the lower boundary to 20 per cent below category average.
Beginning in 2018, the ranges that apply for rate movement will be fully based on employer size. The range for large employers will be 40 per cent below category average to 120 per cent above. For medium-size employers, it will be 20 per cent below to 60 per cent above, while for small employers, it will be 10 per cent below to 30 per cent above.
The WCB has also capped the maximum amount an employer’s premium rate can go up or down in a year at 15 per cent.
“In our old model, you would go up really fast and come down really slow,” Preece says. “Our model was quite aggressive, which is to say it punished you more for claims costs and it rewarded you more than other models across the country (for no claims costs),” he adds.
The WCB will also implement a new experience factor in 2018. It will give different weights to an employer’s individual claims costs for workplace accidents based on its size. Under the new model, a large employer’s individual claims costs will have a greater impact on its premiums than its industry’s experience. The reverse will apply for small- and medium-size employers.
The new model will also increase the period in which an employer’s claims costs are accumulated for calculating its experience factor. Currently, the system accrues one year of claims costs and five years of costs on all of those claims. The new model will look at three years of costs for claims incurred in the last three years.
Having three years of costs in the system will motivate employers to put more emphasis on accident prevention, says Preece.
“There (will be) a bigger bulk of costs longer in our system. Before, if you had a claim, you got lots of bang for your buck to stop the claim from going to the next year because we only count one year’s worth of claims.”
Ontario changes
In Ontario, the Workplace Safety and Insurance Board (WSIB) is working towards implementing a new rate-setting framework in 2019. It would change the way the board classifies employers and sets premium rates. It would also eliminate the board’s experience rating programs.
Under the proposed changes, the WSIB would replace its current system for classifying employers with one based on a North American Industry Classification System (NAICS). The WSIB says NAICS, which was developed by statistical agencies in North America, will be simpler to use and easier to understand since it groups businesses based on type of economic activity and is updated more frequently than the current system.
Using NAICS, the WSIB would group employers into 34 industry classes. Within each class, the board would put employers into risk bands based on their individual risk profile compared to others in their class. The board is proposing to have over 2,500 risk bands, with each class having between 40 and 80.
The new classification system would also eliminate the need for employers with more than one business activity to have multiple accounts with the WSIB, each with different premium rates. Instead, these employers (with exceptions for temporary employment agencies) would be grouped into a single class based on their predominant business activity, determined by the largest percentage of their annual insurable earnings.
The new framework would then use a two-step process to set premium rates. The first step would be to set a projected premium rate at the class level. Briefly put, it would be based on the collective experience of all employers in a class, taking into account liabilities for the costs of new injury and illness claims, past claims costs and administrative costs.
In the second step, the WSIB would use the class projected premium rate to help it set an individual employer’s premium rate. Simply put, an employer’s rate would then be based on factors such as its insurable earnings, number of claims, actual claim costs and how much the board could rely on the employer’s past claims to predict future ones.
Since the new rate-setting approach would use an employer’s own claims experience to set its premium rate for an upcoming year, the board says it would eliminate its current experience rating programs, which provide rebates or impose surcharges retrospectively.
However, the WCB says it plans to recommend to the board of directors that the new framework include a surcharge mechanism for employers with repeatedly high claims costs.
New Brunswick changes
In New Brunswick, in 2013, the government announced a three-phase review of its Workers’ Compensation Act. Phase II wrapped up last fall, with the release of a consultants’ report. To date, the government has not said when the final phase would begin.
The phase II review examined requirements around a three-day waiting period for benefits. New Brunswick requires injured workers to serve a waiting period, where they do not receive any employment-related pay before workers’ compensation benefits are paid.
Labour representatives wanted the waiting period eliminated, while the employer community was split on the issue. WorkSafeNB has recommended reducing the waiting period to two days to align it with requirements in Nova Scotia and Prince Edward Island.
The review also looked at employer top-ups of workers’ compensation benefits. Under the act, injured workers may only receive a maximum of 85 per cent of their pre-accident earnings. If employers make payments to workers while they are receiving workers’ compensation benefits, WorkSafeNB will reduce its benefits so that the maximum combined payment does not exceed 85 per cent.
WorkSafeNB wants the act amended to specifically address the types of payments that would be offset from workers’ compensation benefits. WorkSafeNB has recommended the government replace a provision in the act covering top-up payments with “explicit legislation to identify the types of remuneration that are to be offset from benefits, which are actual earnings, vacation pay, sick and disability pay, employment insurance and employer top-ups.”
Alberta changes
In Alberta, the government has appointed a panel to review the province’s workers’ compensation system. Among the issues it will consider is whether the current funding model promotes fair compensation and proper rehabilitation for injured
workers.
