By Laura Jones, Vancouver Sun Columnist
Published May 31, 2016
WorksafeBC provides a no-fault workers’ compensation insurance program that is fully paid for by employers. The premiums are used to pay workers who experience workplace injuries and help them return to work. For most employers in British Columbia, paying WorksafeBC premiums is mandatory.
In any given year, WorksafeBC’s financial position depends on three main things: employer premiums, investment returns, and safety outcomes. Ideally, all workers’ compensation boards across Canada should ensure that there is enough money coming in from premiums and investments to protect worker benefits, while preventing premiums from being volatile, but not so much that it is overcharging employers for the insurance services provided. This can be a tricky balance.
To evaluate how well workers’ compensation boards across Canada do at achieving this equilibrium, it is reasonable to look at how well-funded each board is by comparing total assets and total liabilities. A ratio of assets to liabilities between 100 per cent and 110 per cent is reasonable since it is unrealistic to expect a system to consistently have a perfect 100 per cent funding ratio.
Additionally, a ratio that falls between these targets allows for enough financial resources to pay for workers’ benefits against unexpected events, while providing more accurate assessments to employers. A board whose funding ratio is consistently above or below this range suggests either chronic under-funding or over-funding — each problematic for different reasons.
An underfunding problem is easier to understand. A workers’ compensation board that can’t pay its bills puts worker insurance at risk and suggests structural problems that need to be addressed.
An overfunding problem is troubling for different reasons. When a board consistently takes more money than it needs from employers, it is simply unfair. It means employers have less than they should to invest in their businesses, which could mean new and safer equipment, pay increases to help retain valued employees, or improving customer service.
Both the Alberta and Saskatchewan boards have found themselves in a massively over-funded position in the past few years, and each has been pushed by small businesses to refund the extra money. In 2014, Saskatchewan’s funded position was 132 per cent, resulting in a $141-million surplus, well above what is considered fair or balanced. Initially, the board was only going to rebate 50 per cent, but after some intense prodding by small business, it refunded the entire amount to employers.
The Saskatchewan board’s 2015 annual report revealed another over-funded position of 144 per cent, or a $281-million surplus. It’s no surprise employers are upset to learn the board is proposing to only rebate one-fifth of the surplus money in 2016.
Alberta businesses have received rebates amounting to over a billion dollars in the past two years, also thanks to some not-so-gentle nudges from small business. Alberta’s Workers’ Compensation Board, even through the latest recession, continued to be over-funded in excess of 130 per cent.
WorkSafeBC is now a member of the overfunded club. In 2014, its funding ratio was 130 per cent. Its recently released annual report confirms that the 2015 position was even more unbalanced at 138 per cent. WorkSafeBC has done a good job minimizing costs and maximizing returns. Business owners and their employees have also done a good job of reducing accidents and creating safe workplaces.
Unfortunately, WorkSafeBC has not yet moved to provide rebates. They should. A rebate announcement now would likely be viewed as a welcome boost by small business owners — much like when you overpay your taxes and get a refund from the government. Wait too much longer and employers will be scratching their heads wondering why WorkSafeBC is not returning money that really isn’t theirs to keep.
Laura Jones is executive vice-president of the Canadian Federation of Independent Business. Follow her on Twitter @CFIBideas.
This story was originally published in the The Vancouver Sun