Workers’ Compensation Rates on the Rise

WorkSafeBC rates | BCBusiness
The new year will bring new WorkSafeBC rates for an estimated 65 per cent of B.C. employers.

B.C. businesses will soon be hit with the first increase in WorkSafeBC rates in almost a decade. But is the price hike warranted?

You know that feeling when you’re on holiday, or when you’re on a roll in the football pool, or when the kids have been absolute angels for a few weeks? It’s a good feeling, but you know the good times are going to end.

That’s what employers must have felt this summer when most learned that for the first time in nine years the rates they pay WorkSafeBC were increasing.

Starting in 2013, an estimated 65 per cent of B.C. employers are expecting to see their rates rise. (Conversely, 31 per cent may see their rates go down).

So, who’s going to be hit? It’s a vast and disparate bunch, including motel and motel owners, bus line operators, building management firms, dentists, auto repair shops, movie production companies, the road, home and bridge construction sectors, truckers and ski hill operators, just to name a few.

How come? Well, for some years, good investment income has enabled WorkSafeBC to keep rates artificially low.

Alas, the organization’s good run appears to have come to an end as well. At the time, my comments to reporters reflected the efforts of WorkSafeBC to keep rates stable, while questioning whether roughly $4.3 million paid to its employees in bonuses shouldn’t have instead been used to offset rates.

Having to pay more, even if you know you’ve also enjoyed paying less, is never fun. To employers, worker compensation rates are a requirement. Business owners pay the whole shot. It’s a cost to which they pay attention.

But all this also opens the door to muse a little about how much WorksSafeBC earns, how it should go about setting rates, and whether those rates should be smoothed over the long term, or whether surplus funds ought to be given right back to the employers who pay into the system.

In boom times, governments and their agencies benefit just as the markets do. More taxes are collected when people are in a position to spend more. When a certain sector heats up, WorkSafeBC is able to draw more premiums from the added jobs created.

Over the years, those surpluses were invested, and apparently managed well enough to blunt the costs of more expensive injury settlements. Additionally, the organization is considering something called net rate transitioning, which allows for gradual premium increases to employers who are first misclassified, and then face higher rates when the classification is corrected.

There is another point of view, however — one that suggests WorkSafeBC is collecting more money than it needs to, and maybe ought to think about giving some of it back.

Last year, the Canadian Federation of Independent Business released its Small Business Assessment of Workers Compensation, a report comparing a number of measures between Canada’s 10 provincial workers compensation organizations. While B.C. scored relatively high overall, two concerns stood out.
 
The first: the amount of private sector payroll subject to workers’ compensation. The issue? In the past, some boards have targeted lower-risk occupations, such as office or clerical work, that may not require mandatory protection. More workers in more occupations subject to workers compensation fees means more money in WorkSafeBC’s coffers. Some might argue that it’s too much more. CFIB scored B.C. the lowest of the 10 provinces, given that workers’ compensation applies in this province to the largest percentage share of private sector payroll, at 86.1 per cent.
 
Then there is the issue of financial sustainability. Now the good news is that B.C. is very well funded. If you compare WorkSafeBC’s current assets relative to its current and future liabilities, our system is sitting pretty, funded at a ratio of 123 per cent. Perhaps it’s sitting too pretty. While it’s far better than Ontario’s fortunes — the Ontario board is by far the most under-funded, with a 54.2 per cent funding ratio — the study concludes the ideal funding range is closer to 95 to 110 per cent.
 
The bottom line? Employers are going to put a premium on predictability and planning in their rates. A well-funded system is key to providing that. But we’re also left to ask ourselves: Might WorkSafeBC be collecting and sitting on too much in the kitty? And if that’s the case, what’s the best thing to do about it?