How Does Workers Compensation Work in Canada

How Does Workers Compensation Work in Canada?

Understanding Workers’ Compensation in Canada: Policies and Procedures

One point of confusion for US companies hiring in Canada is our worker’s compensation system. Some aspects of Canada’s worker’s comp system will seem familiar to US companies, but others are very different; the biggest one being that in Canada, employers fund workers’ comp through premiums. Canada’s worker’s compensation system is managed provincially. Each province has its own Worker’s Compensation Board (WCB) and different rules for who needs to register, how premiums are calculated, and how worker support plans are managed.   

That’s why so many US companies work with an Employer of Record to ensure they stay compliant with hiring, taxes, and worker’s compensation.  

How Worker’s Comp Works in Canada vs the US  

What is Worker’s Comp?  

Worker’s compensation is a form of workplace insurance that aids people who are injured on the job. Worker’s comp provides wage-loss benefits, medical coverage, and support to help people get back to work. It also provides industry-specific health and safety information and resources to employers, designed to prevent workplace accidents from happening in the first place.  

How Does Worker’s Comp Work in Canada?  

In Canada, independent provincial Worker’s Compensation Boards are funded by mandatory employer premiums; you cannot choose to opt out of worker’s comp in favour of private insurance. Their organization is based on the following four-part principle:  

  • That employers bear the direct cost of compensation, receiving protection from lawsuits arising from injuries 
  • Workers give up the right to sue their employers and receive compensation benefits at no cost for work-related injuries 
  • Negligence and fault for the cause of injury are not considerations 
  • A system administered by a neutral agency would have exclusive jurisdiction over all matters arising out of the enabling legislation 

A subtler difference between Canadian and US worker’s compensation systems is what primarily drives costs. Because Canada has social healthcare and its Employment Insurance leaves program, some of the pressure is taken off the worker’s compensation system. WCBs tend to have lower administrative costs than American ones, and Canadian workers rely less on employer or WCB benefits. In Canada, wage-loss benefits account for most of what WCBs provide.  

Worker’s compensation premiums are determined by provincial WCBs and are regularly updated. Worker’s comp Ontario, or WSIB, recently updated all their premiums and their rate-setting model.  

Is Workers Comp Mandatory?  

Is worker’s compensation mandatory in Canada? For the most part, yes. If you have employees, you need to register with the provincial Worker’s Compensation Board, in your employees’ province of work. In most provinces, incorporated businesses register with the relevant WCB board, while sole proprietors can apply for optional coverage. There are exceptions, however. For example, in the Northwest Territories, all businesses must register for workers comp, regardless of size or setup. In Nova Scotia, you only must register if you have three or more employees.  

Provincial Worker’s Compensation Exemptions

Navigating workers’ comp rules in Canada can be difficult. While guided by the same principles, each provincial WCB has different requirements, exceptions, and premiums.

Province/Territory Worker’s Compensation Exemptions
Newfoundland and Labrador Persons employed at a private residence Persons employed by an individual in the construction or renovation of a private residence Professional athletes
Prince Edward Island Artists, entertainers, exhibitors Volunteers, clergy, officials, company directors and officers Outworkers and persons employed at a private residence Door to door sales, newspaper delivery people, canvassers Professional athletes, coaches, and instructors
Nova Scotia Businesses with less than two employees, sole proprietors
New Brunswick Businesses with less than two employees Fishing businesses that have less than 24 employees
Quebec Sole proprietors Professional athletes Persons employed at a private residence Volunteers, student workers, and interns Officials, company directors, and officers, union officers Police officers and firefighters
Ontario Company officers, owners, and directors, Trade Unions Banks, Insurance Companies, Trust Companies, Credit Card Companies, and other Financial Institutions Law Firms, Real Estate Agencies, Business Associations
Manitoba There are non-mandatory industries
Saskatchewan Farming, ranching
Alberta Outworkers Professional athletes and coaches Stuntpersons Homeowners applying for their own coverage
British Columbia Self-employed people
Northwest Territories/Nunavut Temporary employers

Consequences of Not Registering with Worker’s Compensation

However, even if you believe that your business is exempt from registering with a provincial WCB board, it’s a good idea to check with an expert. The consequences of failing to comply with relevant WCBs include, but are not limited to,  

  • Administrative penalties 
  • Administrative non-compliance charges and interest
  • Writs of seizure and sale  
  • Laying charges and prosecution  
  • Recommending charges  
  • Initiating a civil action 

How to Register with a Canadian Workers Compensation Board  

Employers who aren’t exempt must register for worker’s compensation in every province they do business. If your employees frequently travel across borders, coverage can become complicated. To register with a WCB, you must first register your business. Most WCBs require the same information as you will need to open a subsidiary, along with details about how your business operates and how your employees will spend their day-to-day.

The deadlines for worker’s compensation registration vary from province to province. For example, WSIB the Ontario WCB requires employers to register within 10 days of hiring their first employee.  

Once you have registered with WSIB or another WCB, the board will determine what premiums are appropriate for your business. It is then your responsibility to report and pay your premiums on time. You will be issued a clearance number, indicating that you are in good standing with the WCB, after you begin paying premiums. Some WCBs allow you to pay a small fee to get your clearance number immediately. Clearance numbers are accessible to the public.  

The worker’s compensation process is complicated. For US companies looking to hire in Canada without opening a local subsidiary, there is an easier option: working with an Employer of Record provider.  

How Working with an Employer of Record Can Help  

Worker’s compensation in Canada can be tough for local businesses to manage, never mind global companies exploring the market for the first time. But there is a solution. Employer of Record providers, like Canadian Payroll Services, hire your employees and then lease them back to you to direct. This allows you to expand your team internationally without opening local subsidiaries.

The core service of every Employer of Record is compliance. We ensure that your employees have locally compliant offer letters, employment contracts, and onboarding experiences, and are registered for worker’s comp.  

Canadian Payroll Services specializes in helping global companies hire in Canada. Our completely local team of experienced HR account managers and certified payroll administrators keeps on top of changes in employment legislation and worker’s compensation premiums so that you don’t have to.  

Want to learn more about how we can help? Contact us today!  

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