How to Determine the Cost of WCB Premiums for Your Business: 7 Things You Need to Know

Posted in: Claims Costs,WCB Law,WCB Premium Reduction,Workplace | Posted by Rebecca Ingram on April 25, 2016

Workers’ compensation is a form of ‘no fault’ insurance for workers injured on the job. It has been a part of the Alberta labour workforce since 1918 when the Workers’ Compensation Act was established. Essentially, employers agreed to pay into a fund that would be used to cover the costs associated with a work-related injury or illness and in return, workers gave up their right to sue their employers as a result of getting sick or hurt on the job.

The fund was set up similar to an insurance policy where employers pay annual premiums to the WCB and workers file a claim with the WCB if they were injured as a result of their employment. The premiums collected, managed by the WCB, would then be used to cover the medical expenses, wage loss and other associated claims costs related to the injury.

How much employers pay in WCB premiums is a complex and intricate calculation with many components and claim costs are a key part of the equation.

WCB claims costs influence WCB premium rates and can have significant financial impact for an employer. The more claims an employer has and the amount of costs associated with those claims will cause premium rates to increase. Whether an organization is new to the workers’ compensation system, or a has been a part of it for years, understanding how WCB premiums are calculated is essential to ensuring the lowest rate possible.

Here are the seven important things you need to know about your WCB premium, and how it is determined:

1. Industry Classification

Employers who operate similar businesses and share the similar risks for their employees in the workplace are grouped together to create an industry classification. This classification contributes to determining your premium rate. The business you operate will determine the rate you pay, not the individual occupations of your workers.

It’s important to ensure that your organization is classified in the correct industry because premium rates can vary dramatically between classifications. WCB coverage is mandatory for most businesses however, there are some industries that are not covered under the Workers’ Compensation Act but may be eligible to obtain voluntary coverage.

2. Mandatory Minimum Premiums

A minimum annual premium of $200 is added to WCB costs for the maintenance of your WCB account.

3. How Premiums Are Calculated?

By definition, a premium rate is the amount you pay per $100 of insurable earnings. This rate is set on an annual basis, and is a reflection of the average losses in your industry, your company’s accident experience and your participation in injury reduction programs.

WCB uses a performance-based pricing model to determine different pricing programs for different size employees, the model with which your industry falls under will also affect WCB premiums.

4. Reporting Annual Returns for Employers

Employers must report the insurable earnings for their employees annually. This annual reporting includes employees’ insurable earnings for the previous year with a reasonable estimate of their earnings for the current year. The deadline for the submission of this information is the last day of February. Failure to report before this deadline can lead to fines and penalties.

If for any reason, some of your workers are not paid, such as a volunteer, you are still required to report the fair market value of their services to the WCB.

5. What is Included in Insurable Earnings Reporting?

  • Wages including any overtime
  • Salaries
  • Fair market value for unpaid workers such as volunteers
  • Piece work
  • Commissions
  • On-the-job-training earnings
  • Bonuses
  • Vacation pay
  • Recorded tips and gratuities
  • Pay in lieu of notice
  • Taxable benefits

6. WCB Audits

WCB conducts audits of employers financial records of workers’ insurable earnings to ensure compliance with the Act. Employers found in violation of the Act can be assessed fines and penalties.

Insurable earnings should be reviewed quarterly. If your actual earnings differ greatly from your estimate, you should provide a revised estimate to the WCB to avoid under-reporting fines or penalties.

Employers are fully responsible for payment of WCB premiums, it is against the law to take deductions for your workers’ earnings to cover the costs of WCB coverage.

7. Accident Experience Will Affect Your Premiums

Employers with poor accident experience will pay higher premiums than employers with average or better than average accident experience. Simply put, the more claims your organization incurs and/or the higher the costs associated with those claims, the greater your premiums. Conversely, the fewer accidents and/or lower claims costs the less your premiums will be.

For more information on WCB premiums and rate setting, click here, or if you would like additional explanation or further details on the WCB process or your specific premium rate, you can connect with us on Facebook, Twitter, or Linkedin. Or you can reach us via email at [email protected][email protected], and you can always contact us directly, during business hours, using our chat feature or by telephone at 1-844-377-9545.

WCB Savings Guide