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Workplace Safety and Insurance Board Consulting Regarding New System for Calculating Employer Premiums

Written by on November 27, 2015. Posted in Labour & Employment, News

Most employers in Ontario are subject to the Workplace Safety and Insurance Act (the “WSIA”), with the majority of those employers falling under Schedule 1 of the legislation. For Schedule 1 employers, contact with the Workplace Safety and Insurance Board (the “WSIB”) generally occurs only after a workplace accident, during the workplace re-integration process, or when disputing responsibility for claims costs.

Employers may not be aware, however, that the process by which their WSIB insurance premiums are calculated has been the subject of an extensive review process. Recently, the WSIB has announced the proposed method by which premium rates will be determined in the future and it represents a significant change to the current practice.

Rate Framework Review

Employers that are required to have WSIB coverage are likely aware of the complicated collection of rating systems in place that are used to determine premium rates. Under the current system, Schedule 1 employers are grouped based on business activity and they pay premiums based on the assumption that business activity is an accurate indicator of expected claims costs. As a result, employers engaged in similar business activities are placed into “classification units” within the same premium “rate group” regardless of their actual claims costs or injury rates. To some degree, this arguable lack of fairness was addressed by the WSIB’s creation of three experience rating programs (NEER, CAD-7 and MAP) that provide adjustments to employers under certain circumstances.

In September 2010, the WSIB began a multi-phased examination of this rate framework through a consultation process led by Douglas Stanley. Mr. Stanley’s report (the “Stanley Report”), released in 2014, recommended an integrated system that includes an improved classification scheme based on the North American Industry Classification System. As a result, employers will be classified within only 20-25 different rate groups (as opposed to the nearly 155 that presently exist).

Under the proposed new system, employers will still be subject to a premium rate initially calculated based on the claim experience of everyone in the rate group. However, actual premium rates will be based on which “band” an employer is placed into (i.e. High, Medium or Low) based on the employer’s individually-assessed risk profile. The actual number of bands in a classification will depend on the scope of risk in the classification; classifications with greater risk will likely have a larger number of bands.

The Stanley Report also recommends changing the way in which the WSIB addresses its unfunded liability; that is, the short-fall between the money in the accident fund and the money needed to pay future benefits for all established claims. The government has legislated a plan that requires the WSIB to reach 100% funding by 2027. Currently, Schedule 1 employers are levied a fee depending on the nature of their business. For example, in 2013 manufacturing employers contributed $362,000,000 to the WSIB’s unfunded liability.

In early November 2015, the WSIB announced that its short-fall reduction initiatives were ahead of schedule, and that employers could expect average rate reductions of between 10 and 15 per cent are possible over a five year period, starting in 2017. The Stanley Report recommends that, in the future, all employers will be subject to a “modest” charge, as well as further amounts based on the employer’s sector (i.e. manufacturing, construction, etc.) and the employer’s new claims costs.

If implemented, the Stanley Report’s proposals will result in significant changes to the way premium rates will be calculated for Schedule 1 employers. This, in turn, would likely result in rates increasing (or decreasing) for certain employers.

The WSIB has been engaged in consultations with stakeholders regarding the transition to the proposed new system for most of 2015, with the objective of gradually implementing the new system throughout 2016. Submissions received to date can be read on the Rate Framework Modernization website, which can be accessed here.

We will keep you apprised of any new developments as they occur.