Workers’ compensation provides medical and wage benefits to employees injured on the job. As part of employee benefits in Canada, this mandatory insurance program protects both workers and employers. But how exactly does it work?
This guide covers everything you need to know about workers’ compensation in Canada.
What is Workers’ Compensation in Canada?
Workers’ compensation is an insurance program that provides benefits to employees who suffer work-related injuries or illnesses.
Unlike other countries, Canada has a national workers’ compensation system. Each province and territory has its own Workers’ Compensation Board (WCB) that administers policies and claims.
The workers’ compensation system aims to support injured workers while protecting employers from legal action.
How Does Workers’ Compensation Work in Canada?
Canada’s workers’ compensation system is funded entirely by mandatory premium payments made by registered employers.
Employers pay premiums to their provincial or territorial WCB based on factors like the industry risk level of their business, payroll size, and claims history. Companies demonstrating strong workplace safety measures typically pay lower premiums.
When an employee is injured on the job, they can submit a claim for benefits to their provincial Workers’ Compensation Board (WCB). The compensation board investigates the claim to determine whether:
- The injury or illness was caused by the worker’s employment.
- Medical treatment was necessary
- Time off work is required for recovery
If the claim is accepted, the WCB pays for healthcare expenses and wage replacement income directly to the injured employee. The employer does not pay these individual claim costs. Rather, the WCB distributions are funded from the collective pool of premiums paid by all employers.
Who Pays for Workers’ Compensation Coverage in Canada?
In Canada, employers are responsible for paying for workers’ compensation coverage.
These premiums are mandatory for all employers except those in exempt industries. Exempt categories include:
- Banking and insurance
- Real estate
- Professional services like law firms
Aside from these exempt sectors, any company or organization with paid employees in Canada is required to register for workers’ compensation through its provincial board.
Check with your province’s WCB to confirm if your industry requires coverage. Companies with employees must register and begin paying premiums shortly after hiring their first worker.
Sole proprietors and independent contractors are not required to carry workers’ compensation coverage. However, they can opt into the system if desired.
The mandatory participation by employers spreads risks across industries while ensuring support is available for injured staff.
What Benefits Does Workers’ Compensation Provide in Canada?
When an employee injury claim is approved by the WCB, the workers’ compensation system provides a robust set of benefits to support their recovery and rehabilitation:
Medical and Rehabilitation Expenses
All healthcare and treatment costs related to workplace injury are covered. This includes:
- Hospital fees
- Doctor visits
- Prescription medications
- Assistive devices like crutches or wheelchairs
- Physical therapy
- Massage therapy
- Psychologist visits
- And more…
Medical benefits also extend to travel costs associated with treatment, such as gas mileage or ambulance fees. These expenses are fully paid for by the WCB with no upper limit.
Wage Replacement Benefits
Approximately 80-90% of an injured worker’s gross wages prior to their accident are replaced by the WCB while they recover from injury. This aims to compensate for lost income during time off work.
Wage replacement rates vary slightly by province. Most claims pay between 85% and 90% of the employee’s pre-injury earnings.
Amounts are subject to a maximum insurable earnings amount. For example, the 2022 maximum in Ontario was $102,800. Employees earning above that threshold would have benefits capped.
Source: Workersโ compensation in Canada – godaddy.com
Permanent Impairment Benefits
For employees who suffer permanent lifelong disability due to their workplace injury, permanent impairment benefits provide additional income support.
The exact amount depends on the extent of disability and loss of function. More severe impairments warrant higher benefit payments from the WCB.
Disfigurement Benefits
In severe cases where a workplace injury causes significant disfigurement, like extensive scarring or burns, disfigurement benefits offer extra financial compensation.
Vocational Rehabilitation
If an employee can no longer perform their previous job duties due to the effects of their workplace injury, WCBs help facilitate new skills training and job placement services.
The goal is to retrain injured staff so they can transition into a new, sustainable career that suits their abilities. This rehabilitation also boosts their future earning capacity.
Death Benefits
If a workplace fatality occurs, death benefits provide monthly payments to the surviving spouse and dependent children of the deceased worker. Benefits continue until dependents come of age or pass away themselves.
By covering medical care, income replacement, and rehabilitation services, Canada’s workers’ compensation system aims to make injured employees whole again while protecting businesses from excessive liability.
How Do I Register My Company for Workers’ Compensation?
To maintain compliance, employers must register for workers’ compensation shortly after hiring their first employee.
Required timelines vary across Canada. Many provinces enforce registration within 30 days of hiring, but some require it within as little as 10 days.
The registration process involves:
Step 1: Submit Business Details
Provide your company’s legal name, ownership structure, industry classification, contact information, and other identifying details.
Step 2: Estimate Your Insurable Payroll
Provide an estimate of what your total annual payroll spending will be for insurable employees. This allows the WCB to estimate your premium costs.
Step 3: Pay Applicable Registration Fees
Most jurisdictions require a small initial registration fee, ranging from $25 to $ 200 or more. This contributes to the administrative costs of setting up your account.
Once registered, you will receive a clearance letter from the WCB indicating your business now has active workers’ compensation coverage in place.
Your premium rates will then be reassessed annually based on your actual payroll amounts and claims history. Maintaining up-to-date information with your board is crucial.
How Are Premium Rates Calculated in Canada?
Each provincial WCB uses industry risk levels to determine workers’ compensation premium rates.
Higher-risk industries like manufacturing, construction, and mining pay higher base premium rates since they historically incur more claims. Lower-risk sectors like retail, education, and finance pay lower premiums.
See the table below illustrating Average Workers’ Compensation Premium Rates by Province (2022):
| Province/Territory | Average Premium Rate per $100 of Insurable Earnings (2022) |
| Alberta | $1.17 |
| British Columbia | $1.55 |
| Manitoba | $0.95 |
| New Brunswick | $1.31 |
| Newfoundland and Labrador | $1.69 |
| Northwest Territories and Nunavut | $2.40 |
| Nova Scotia | $2.65 |
| Ontario | $1.30 |
| Prince Edward Island | $1.37 |
| Quebec | $1.50 |
| Saskatchewan | $1.28 |
| Yukon | $2.09 (2020) |
Source: Guide to Workers’ Compensation in Canada – deel.com
Your company’s specific premium also depends on its claims history. Firms with lower workplace injury rates typically pay lower premiums.
Most provinces also apply a performance-based pricing model that offers financial incentives for improving safety and reducing accidents.
How Do I File a Workers’ Compensation Claim in Canada?
Employers must report workplace injuries requiring medical treatment to their provincial WCB within 3 days.
Employees should notify their employer immediately following an injury. They can then submit a claim directly to their WCB, usually within one year of their accident.
The standard process is:
- Report the injury to the employer.
- Seek any necessary medical treatment.
- File a claim with provincial WCB (online, mail, fax).
- Provide supporting documents like accident details and medical reports.
- WCB will investigate and communicate a claim decision.
- If approved, begin receiving wage replacement and/or healthcare benefits.
Different forms may be required based on the type of injury and benefits sought. Maintaining detailed records will help expedite claims processing.
Are Workersโ Compensation Benefits Taxable Income in Canada?
Workersโ compensation benefits paid to injured employees or their survivors are not considered taxable income in Canada.
This includes any wage loss, disability, or survivor benefits paid by a provincial workersโ compensation board. Even though these payments partially replace employment income, they are non-taxable for recipients.
Employees who receive workersโ comp benefits will be issued a T5007 statement by their compensation board indicating the total amounts received in a tax year.
This slip needs to be declared on annual tax returns for transparency, but the benefits shown on it do not get added to total income.
Since benefits are non-taxable, income tax will not be deducted from workersโ compensation payments.
The bottom line
Canada’s workers’ compensation system strikes a balance between employee rehabilitation and employer affordability across all sectors.
By registering for coverage, paying premiums, reporting incidents, and supporting injured staff, businesses can optimize their WCB experience. Employees gain access to fast medical treatment and wage support if they are injured on the job.
To stay compliant and promote a safe workplace, itโs essential to work closely with your provincial workersโ compensation board.
FAQs related to Workers’ Compensation in Canada
How do I report a workplace injury in Canada?
Immediately notify your employer if you suffer a work-related injury or illness. Seek any necessary medical treatment, then file an injury claim directly with your provincial workers' compensation board by phone, mail, fax, or online submission. Provide details on how, when, and where the incident occurred along with medical documentation.
What is the waiting period for workers' comp benefits?
There is generally no waiting period for wage replacement or healthcare benefits from workersโ compensation in Canada. Payments begin promptly after a claim is approved. However, different waiting periods may apply for termination notices and discrimination complaints.
Why is workers' compensation mandatory in Canada?
Requiring employers to pay workersโ compensation spreads risks across industries and ensures ample support is available when workplace injuries occur. Mandatory participation provides injured staff with efficient access to medical treatment and wage replacement without resorting to litigation.
When do I need to register for workers' compensation?
Businesses with employees must register with their provincial workersโ compensation board within a few weeks of hiring their first worker. Required timeframes range from 10 days up to 30 days post-hiring. Check your jurisdictionโs regulations to ensure timely registration and compliance.
Is workers' compensation taxable income?
No, any workersโ compensation wage replacement or disability benefits received for workplace illnesses or injuries are not considered taxable income in Canada. However, benefits must still be declared as non-taxable earnings on annual tax returns.
How long do I have to file a workers' comp claim?
Every province has strict claim submission deadlines, typically ranging from 1-3 years from the date of injury. Reporting incidents and filing claims promptly helps facilitate faster processing, so notify your WCB as soon as possible after any workplace accident.
