If you’re a small business owner, you should be familiar with all legislation governing your industry or business. The worker’s compensation program in Canada comes with regulations and costs for employers, making it critical for you to understand how it works and how to remain compliant.
Worker’s compensation insurance was created to help provide a fair, affordable program for employees who:
- Are injured
- Become ill
- Lose their lives while on the job
It provides medical care, compensation for loss of earnings, and other related benefits to these workers.
A brief history
Workman’s comp was created over a century ago to address concerns about dangerous working conditions as efforts began to develop safer workplace conditions in Canada.
The program’s scope now covers five basic concepts that collectively protect both you as the employer and your workers.
These concepts are called the Meredith Principles, named for Sir William Meredith, an Ontario lawyer, politician, and judge who wrote a report that became foundational to the program’s creation.
This sounds reasonable, but many business owners are confused by the rules or don’t grasp how the program works or how to manage their costs.
In this blog post, we’ll explore:
- How worker’s compensation works in Canada
- Worker’s compensation and taxes
- Who pays for workman’s comp
- What worker’s compensation actually pays for
- How an employer can save money on it
How does the worker’s compensation program work?
The program acts like a safety net for employees to step in and provide financial support if a worker is hurt on the job or becomes ill from their work.
Most workers in Canada are eligible to apply if they are injured or become ill from their work.
Also known informally as “workman’s comp,” the program is governed by the Workers Compensation Act, the official legislation covering this program. It includes:
- Occupational health and safety
- The worker’s compensation system
- Compensation to injured workers and their dependents
- Employer assessments, reviews, and appeals
The act outlines the roles and responsibilities of both employers, workers, and the respective Workers’ Compensation Board (WCB) when injury or illness occurs on the job.
Each province has its own WCB that handles incidents within that province, covering areas such as:
- Determining which employers must carry worker’s compensation insurance
- Outlining the process for reporting and claims
- Who is eligible for coverage
- How much each employer must pay in premiums
- Programs to support safe working practices and injury prevention
- Supporting workers and employers in developing proactive return-to-work programs
When an injury, illness, or death occurs on the job, a claim is made with the appropriate WCB. Many small business owners feel unsure or stressed about handling these steps correctly, but the process is simple enough — as long as you make yourself aware of the steps and how quickly you need to act.
Here’s the general sequence of events:
A worker reports their injury or work-related illness to their employer.
An employer must report the injury to WCB within 72 hours if the worker needs treatment beyond first aid or if they’ll miss time from work past the day of the accident.
Employers are responsible for paying for that day’s work and any required transportation costs to get the worker to a medical facility, if required.
Next, the worker tells their doctor, who also is required to report the injury or illness, but this time within 48 hours.
The employee then reports their injury to WCB to ensure complete details are included in their claim.
Taxes and worker’s compensation
At tax time, any worker who has received wage replacement benefits will need to report these funds as income. However, the benefits are not considered taxable income, so they won’t pay income tax on the actual amount.
Workers will receive a statement of benefits to ensure they can accurately report the earnings on their tax return (while not taxable, these amounts may be used to calculate other benefits and still need to be reported.)
Who pays for the workman’s comp program?
There are often questions about which level of government is involved in managing worker’s compensation claims, so let’s have a look at a few important distinctions.
- The program itself is completely funded by employers
- Worker’s compensation legislation is regulated by each individual province or territory
- There is a federal worker’s compensation service that applies to federal government employees that operates in partnership with the provincial compensation boards.
These details are where things can get a bit confusing for employers, especially those that operate in multiple provinces.
The most important thing to know is that the worker’s compensation program is not funded by any level of government.
All the costs are paid by employers, who pay premiums for coverage, just like any other insurance structure. If you’re an employer, you’ll need to pay premiums based on the type of business activity your company carries out.
In return for these premiums, you get insurance that covers you if a worker is injured at your workplace or develops a work-related illness. As a result, you won’t be out of pocket paying for their medical or rehabilitation costs and will be protected from liability for covered injuries.
What does worker’s compensation cover?
Worker’s compensation steps in when a worker is injured or experiences job-related illness to replace lost earnings or wages. It also provides necessary medical care, rehabilitation services, and other benefits.
Wage loss replacement benefits align with the level of pay the worker was earning at the time of the work-related injury or illness.
Most of the costs of this program in Canada come from paying workers for the loss of earnings and wages. Canada’s public healthcare system ensures that there are fewer healthcare costs that need to be covered by the program.
3 tips to save money on worker’s compensation
Small business owners can lower their costs somewhat by looking for ways to reduce how much time workers spend away from work. This can be done by:
1. Offering modified duties to workers, where appropriate
These accommodations can reduce the overall time an employee spends away from their job or could mitigate the need to leave work in the first place
2. Creating a proactive return-to-work program
Companies should have a return-to-work program that helps workers return to their jobs safely and appropriately. This helps them return as soon as possible andcan prevent recurring claims from workers that return to work too soon, only to leave again.
3. Avoiding unnecessary claims
Creating a safe working environment and offering appropriate training can help prevent on-the-job injuries. Doing so can not only protect your workers but can protect you from rising premiums due to the number of claims arising from your workplace.
Worker’s compensation works for employers, too
If you’re a small business owner, remember that the system is set up to protect you from out-of-pocket expenses and liability that could be detrimental to your business.
Learning how the program works and accessing online resources to ensure you’re compliant can go a long way to ensure your experiences with WCB protect both you and your workers — just as it was created to do.
Editor’s note: Keep remote workers connected with Microsoft 365 from GoDaddy. You get the Teams messaging app, Microsoft Office and 24/7 support from GoDaddy’s award-winning customer care guides.