Please note: the following information is for 2012 Rate Setting.

The Rate Setting Model at a Glance

Rates for all employers are calculated using a rate setting model that seeks to:

• promote safe workplaces to reduce the number of injuries,
• promote effective disability management in the event of workplace injuries,
• ensure fairness for all employers, and
• ensure the WCB generates adequate revenue.

The rate setting model accomplishes these objectives through a structure where all employers share the costs needed to pay the claims of injured workers and the cost of running the workers compensation system based on their own claims experience, the claims experience of their industry, and how these circumstances compare to average employers throughout the province. Further, the model has limits in place to ensure excessive claims costs do not hinder employers ability to continue in business while still ensuring there is a connection between their claim experience and their rates.

The basis for all rates begins with the WCB's annually announced average rate. The average rate is the rate all employers would pay to fund the WCB's revenue requirements if the rate model were not experience based. In 2012, the average rate remains at $1.50.

Once the average rate is established, the rate setting model then calculates what each employer's rate should actually be based on their direct costs to the workers compensation system. 

Employer's premiums are then calculated based on their rates and payroll for 2012.

The following 8 Steps explain how your rate was determined for 2012.

Step 1 - Restated Rate

Your  2011 rate is the starting point to establish your 2012 rate. Since the average rate remained at $1.50 for the second year in a row, your 2011 rate remains as the starting point for the calculation of your 2012 rate.

Step 2 - Establish a “Target Rate” for Each Employer

Your target rate represents what you would pay if the WCB's rate model did not place limits on your rate and is the key factor in determining if your rate will increase or decrease in 2012. Your claim costs from October 1, 2010 to September 30, 2011 are compared to average employers' claim costs for the same period. The ratio of your costs compared to average employers' costs are multiplied by the average rate to determine a target rate.

Generally, if an employer’s 2012 target rate is above their 2011 assessment rate, the employer will receive a rate increase to a maximum of no more than their target rate, or conversely, if their target rate is below their 2011 assessment rate, the employer will receive a rate decrease to no less than their target rate.

Employers with no claim costs or minimal costs would have a target rate of zero, or close to zero; however an assessment rate would still apply because of shared WCB costs. 

Step 3 - Apply the Basic Change Limit

The WCB rate setting model has built-in limits to prevent your rate from increasing or decreasing too quickly. Rate changes are limited based on the number of years your rate has trended in the same direction. As such, consistent claims costs over the years will move an employer more quickly toward their target rate, whereas a random event in one year will have a more limited impact.

The following table illustrates what percentage an employer's rate can move in either direction based on the number of years they have trended either up or down.

*First means the first year that an employer changes from a rate increase to a rate decrease or vice versa.

Step 4 - Apply the Claim Duration Change Limit

Costs of claims for each employer are quantified for the purposes of the rate setting model by frequency and duration. Both the duration and number of injuries are measured against the average for all employers and then weighed against the employer's prior year rate to determine if a further rate increase toward the target rate is warranted.

The Claim Duration Change Limit is based on a point system and an accumulation of points can generate an additional 5% increase or decrease to your rate. The point system, detailed below, is based on the number of time loss claims and the length of time they were in pay for the same period used for costs. If the claim duration limit is trending in the opposite direction of the basic change limit, an employer will not receive either a 5% increase or decrease.

If the additional 5% (either up or down) is not warranted, the Claim Duration Change Limit will not apply and the Basic Change Limit remains as determined in step 3.

Step 5 - Apply the Category Rate Range

All employers are assigned to an industry based on their business activities. Each industry is assigned to one of nine risk categories based on claim cost trends over a period of several years.  Each risk category has a rate range from 40 percent below to 200 percent above the category average rate.

This step ensures that an employer’s rate stays within the industry rate range. The average rate for each category is a fixed percentage of the overall current year's average rate as detailed in the following table (for example, the average rate for Category 120% is calculated as $1.50 X 120% = $1.80): 

Step 6 - Apply the Additional Increase for a Fatal Accident

Employers who experience a fatality in their workplaces will be assigned $250,000 per fatality to their claim cost record regardless of the actual costs associated with the claim.  The $250,000 is used to calculate the employer’s target rate.

In addition to the Basic Change Limit and the Claim Duration Change Limit, the employer will receive an additional 25% increase limited by their target rate.

Step 7 - Apply the Balancing Adjustment to All Employers

Before running the 2012 rate setting model, the WCB determines how much revenue is required for current and future claim costs and to operate the WCB system.  To ensure the WCB meets its 2012 revenue requirement, a final balancing adjustment is applied equally to all employers.  Note that the balancing adjustment can move an employer’s rate outside of the current rate range.

In 2012 the Balancing Adjustment is +2.99%.

Step 8 - Apply the Safety Association Levy for Represented Industries

The WCB collects revenue on behalf of four independent safety associations from the employers who are obligated to participate based on their industry. If you are classified in one of the following industry codes, the amount required to fund the safety program is the last item added to your rate. 

Note: The addition of the safety program levy may also move an employer outside of the current rate range.

The WCB has approved an opportunity for a discount for employers in the construction industry (10% in the first year of accreditation and 5% in subsequent years when all criteria are met). To be eligible for the discount, construction firms must receive safety accreditation through the above noted construction safety program.  Please contact your safety program representative for further information.

Calculating Your Premium

Once your rate is calculated, your premium for the coming year is calculated by multiplying your rate by your payroll and then dividing by 100.

It is important to note that reportable (assessable) payroll will only include your individual worker's earnings up to the annual maximum earnings level. The maximum assessable earning level in 2012 is set at $104,000 per worker.

For More Information

If you require more detailed information about how these 8 steps apply to you specifically, please call the Assessment Services Department at 954-4505, or toll free in Canada at 1-800-362-3340.