WCB Alberta Employer Policy Review: Support Services
On October 1st, 2019, the Workers’ Compensation Board of Alberta (WCB) announced that it was entering Phase 2 of a high-level review of Employer accounts and premium policies and was looking for feedback, ideas and suggestions until December 2, 2019. Of particular interest to some Alberta employers are changes to Policy 07-01, Part II, Application 1, regarding businesses providing support services to an industry and how that business is classified. The WCB is proposing the following addition to the current policy:
- How does WCB classify a business providing support services to an industry?
Businesses providing coordination, marketing, management or administration of a specific service which generates revenue from another business, will be classified in the industry it supports. For example, a fast food franchisor that provides only administration services will be classified in the restaurant industry.
While this may seem to make sense at first glance, the reality is that it could have a significant impact on some employers’ premiums.
What does this mean for employer premiums?
On one hand, the WCB classification philosophy suggests that employers should be classified based on ‘what they do’, not who they do it for. This Policy change would see an accounting firm that specializes in providing accounting services for trucking companies, classified as a trucking company instead of an accounting firm. If the business test contemplated above were in place today, it would result in many businesses being classified as a ‘trucking’ company, when they don’t own trucks, employ drivers or indeed do trucking at all. This would result in an increase in WCB premiums for these businesses based on a higher risk industry rather than the lower-rated administrative premium rates.
It may be that the WCB is attempting to circumvent businesses from being classified in voluntary industries such as 86901 and 86902, both of which carry low industry rates given the ‘office’ type work conducted by the businesses and have them classified in a much higher industry sector.
This argument has been taken to the Appeals Commission on a number of occasions where it has met with success in having a support service business removed from an industry classification and moved to a classification that more accurately represents their operational risk.
Typically, administrative businesses or low-risk businesses pay a premium rate in the range of $0.18 to $0.20 per 100 dollars of payroll, however, higher risk industries such as Trucking pay premiums in excess of $3.00 per 100 dollars of payroll. Even restaurants and recreational businesses, such as ski resorts and golf courses pay a premium rate of $0.80 or more. Therefore, there is a significant difference in the amount of premiums an organization would pay if they are being assessed based on the industry they are supporting rather than the actual work they perform.
On the other hand, this could be a situation where the WCB wants to clamp down on industries that outsource a part of their operations to another business as a way of ensuring the premium rates are equal for all businesses operating in the same industry.
For example, a trucking firm would have a Human Resources (HR) and accounting department, and everyone who works in the HR or accounting department would be on the payroll of the trucking company (so their earnings would be included in the firm’s payroll for WCB rate-setting purposes). If the system is designed to assume that at least a portion of any industry includes workers who are doing low-risk office work, the WCB is collecting payroll for the entire company including the low-risk jobs in Human Resources or accounting departments.
If that same trucking company chooses to outsource their HR and accounting departments they are left with only reportable earnings for the higher risk jobs like the truckers themselves. This can distort the risk, for example if company A is reporting $10M of payroll and has a mixture of truckers, accountants and human resource professionals and Company B is also reporting $10M in payroll but only has truckers and swampers, their premium rate would be the same but their actual risk would be different.
Either way, it would seem WCB needs to clarify the intent of the policy change and fully understand the impact that this will have on the already stressed Alberta economy. No business should be paying higher WCB premiums than they need to and yet there needs to be standardization within all industries to ensure equalization of the assessment of payroll dollars.
What can employers do about this?
Providing feedback to the WCB prior to the December 2, 2019 cutoff will ensure that employer concerns are considered before sweeping changes are made to the policy that could have a significant financial impact on Alberta businesses.
WCB policy reviews are an ongoing process and you can check out what’s new on the WCB website here. If you would like further details or how WCB policy updates may affect your business, you can contact us directly at [email protected], [email protected], by phone, at 1-844-377-9545 or you can connect with us on Facebook, Twitter, or LinkedIn.