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Workers' Compensation Boards Should Refund Extra $7B Of Employers' Money

It's time for boards to show small business and other employers the same common decency you get if you are overcharged at the grocery store.

11/28/2017 10:39 EST | Updated 11/28/2017 10:49 EST
Francis Vachon/The Canadian Press Images
Workers Compensation Board of Manitoba offices are pictured in Winncmsipeg, Sunday. May 22, 2011.

When you overpay on your taxes, the government gives you a refund — one that many of us get pretty excited about. When you get home after a trip to the grocery store and find that you've been overcharged for an item, you go back to the grocery store and get a refund. It's basic fairness. It's basic respect.

But too many workers' compensation boards across Canada are violating this basic fairness principle by hanging on to money that isn't theirs to keep instead of giving refunds.

Workers' compensation boards collect all their premiums from employers. The money is used to promote safety and to compensate workers for time off work in case of injuries. They also invest some of the premiums to create another income stream. A well-functioning board has enough money to ensure that it can meet its obligations without undue premium volatility.

One good measure of a board's standing is its ratio of assets to liabilities, also called a funding ratio. Based on our analysis and discussions with experts in the field, funding ratios should fall within a range of between 100 per cent and 110 per cent to ensure smooth operations — a range that is targeted by five out of 12 boards.

Boards are depriving employers of billions of dollars that could be used to buy new machinery, invest in new websites, or give employees a raise or Christmas bonus.

Most boards are now far beyond that range — with British Columbia (141.7 percent), Alberta (133.8 per cent), Manitoba (145.9 per cent), Saskatchewan (133.1 per cent), Newfoundland and Labrador (126.1 per cent) and Prince Edward Island (159.4 per cent) being particularly bad offenders. Although it's worth noting that P.E.I. just announced it would be giving a partial refund, which is partial good news.

In total, boards are holding on to $6.8-billion more of employers' money than they need.

So, what's the problem with that?

Boards are depriving employers of billions of dollars that could be used to buy new machinery, invest in new websites, or give employees a raise or Christmas bonus.

Some boards such as British Columbia's are looking to lower future premiums. While that is better than a poke in the eye, it's not optimal. How would you feel if you overpaid your taxes and instead of getting a refund, you were told that everyone's taxes would go down for the next few years?

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Seven of the 12 boards (Yukon, Northwest Territories and Nunavut, Alberta, Saskatchewan, Manitoba, Newfoundland and Labrador, and Prince Edward Island) do have rebate policies in place, but these are triggered at the discretion of the board and are often exercised well beyond the 110-per-cent ratio. For example, Alberta recently issued rebates cheques for funding above 128 per cent.

For a business with five employees, the potential rebates would be significant. These rebates would range from $500 in New Brunswick to $8,165 in British Columbia. And governments in these provinces take note: you too would benefit from rebate cheques as employers.

For small businesses, who are facing a number of other cost pressures from minimum wage hikes to increase CPP taxes, the timing couldn't be better.

This isn't rocket science. This is basic fairness. When you take more than you should have taken, give a refund. It's time for boards to show small business and other employers the same common decency you get if you are overcharged at the grocery store.

This column was written is association with Marvin Cruz, senior research analyst at CFIB.

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