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.
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.
The program acts like a safety net for employees. It provides them financial support if they are hurt on the job or become 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.
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.
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.
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.)
Small business owners can lower their costs somewhat by looking for ways to reduce how much time workers spend away from work while they are recovering from a work-related illness or injury. 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.
In some Provinces, this is recommended, and in others it’s legislated.
In British Columbia, as of January 1, 2024, employers are required to maintain an ill or injured worker’s employment if:
They regularly employ 20 or more workers
Have employed the injured worker for at least one year before their injury
This means that employees cannot be let go if they can no longer do the duties they were doing before they were injured on the job. Workers have a duty to cooperate with these plans.
3. Avoiding unnecessary claims
Creating a safe working environment and offering appropriate safety 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.
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.
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Workers' comp is an insurance policy that works for both employers and employees in Canada. If an employee is injured on the job, or becomes ill from their job, workers’ comp covers the cost of lost wages and rehabilitation.
For employers, it protects them from having to cover the costs of the employee’s medical bills and lost wages.
Workers’ comp is provincially administered; how it works differs slightly from province to province. It is not government-funded in any way; all costs are covered by fees paid by the employers.
Is workers’ compensation mandatory in Ontario?
It depends. In Ontario, workers’ comp is covered by the Workplace Safety and Insurance Act (WSIA).
If you have employees, or if your business is in the construction industry, then yes, you are required to have WSIA.
If you are a solopreneur, meaning you own your business but don’t have any employees, you are not required to have it.
You may still choose to have it if you like, and if you hire employees, you may choose to add yourself to the policy.
In British Columbia, workers’ compensation is administered by WorkSafeBC. Every worker in BC is automatically covered under WorkSafeBC for any work-related injury, disease, or illness.
WorkSafeBC will work with the employee and the employer to ensure that 90% of the sick employee’s wages will be covered while they are recovering. They will also help support the employee’s recovery and rehab — even put together a return-to-work plan.
WorkSafeBC also helps prevent workplace injuries by offering education on workplace safety and injury prevention.
While employers are required to pay into WorkSafeBC, individual employers do not have to bear the burden of expensive claims. The cost of claims is shared by all employers in that industry.
While you are unable to work because of a work-related injury, the Worker’s Compensation Board of Alberta pays 90% of your gross earnings from when you were working.
Depending on when your injury took place, there is a cap as to how much you can get from the benefit.
If your injury took place in 2020 or 2021, your earnings are capped at a maximum of $98,700.
If your injury took place in 2023, your earnings are capped at a maximum of $102,100.
Again, the benefit you receive is based on your salary at the time of your injury. So if you were making $35K at the time of your injury, you’d be eligible for 90% of that, or around $496 per week.
What are the requirements for receiving workers’ compensation?
Worker’s compensation can only be received if an employee gets injured on the job. This can include the employee:
Needing medical attention
Losing consciousness
Being unable to return to work in the subsequent days after an accident at work
In order to receive compensation, a claim must be filed with your Provincial Worker’s Comp branch and supporting documentation of the injury be submitted.
What are some examples of a worker’s comp claim?
Let’s say you own a restaurant. While on the job one morning, one of your prep cooks cuts themselves, and the cut is serious enough to require stitches.
You quickly wrap their hand up and get them to the hospital. Your employee gets the stitches, and they are okay, but doing their job is not going to be possible for at least a few days while they heal.
The employer or employee must report the injury to the Provincial Worker’s Compensation branch within 72 hours. Most Worker’s Comp boards have an online portal that you can submit your claim through.
You will need to submit:
Your contact information
Details of the injury
The worker’s schedule and rate of pay
Aback-to-work plan
You’ll be assigned a claim number, and then, assuming your claim is accepted, you will be compensated for lost wages, and any other medical expenses, like rehab or physiotherapy.
In cases where the employee reports the incident, the compensation may go directly to them.
What is the purpose of workers’ compensation?
Worker’s Compensation protects both the employer and the employee.
It saves the employer from paying injured staff out of pocket.
For the employee, it will cover lost wages while they recover, plus additional medical expenses.
What is the difference between worker's compensation and disability insurance?
Worker’s compensation covers injuries sustained while working. Additionally, the workers’ comp premiums are paid by the employer.
Disability Insurance is paid for by the employee, not the employer. It covers workers’ in the case of an injury or illness, whether that occurs on the job or not.
How much is workers’ compensation in Canada?
The price of coverage varies based on what industry you are in, and in which Province you live and work.
Rates range from around $1/100 of coverage (in the Prairies), to around $3/100 of coverage in Yukon, Nunavit, the Northwest Territories, and Nova Scotia.
The information contained in this blog post is provided for informational purposes only and should not be construed as an endorsement or advice from GoDaddy on any subject matter.
