Workers’ Compensation in Canada: How to Get Covered

Workers’ compensation provides medical and wage benefits to employees injured on the job. As part of employee benefits in Canada, this mandatory insurance program protects both workers and employers. But how exactly does it work?

This guide covers everything you need to know about workers’ compensation in Canada.

What is Workers’ Compensation in Canada?

Workers’ compensation is an insurance program that provides benefits to employees who suffer work-related injuries or illnesses.

There is no single national workers’ compensation system in Canada. Instead, each province and territory has its own independent Workers’ Compensation Board (WCB) with its own rules on coverage, claims, and benefits. Also, most federal government employees are covered under a separate system called the Government Employees Compensation Act (GECA).

The purpose of this system is to provide benefits to injured workers and, in exchange, protect employers from being sued over workplace incidents.

How Does Workers’ Compensation Work in Canada?

Canada’s workers’ compensation system is funded entirely by mandatory premium payments made by registered employers.

Employers pay premiums to their provincial or territorial WCB based on factors like the industry risk level of their business, payroll size, and claims history. Companies demonstrating strong workplace safety measures typically pay lower premiums.

When an employee is injured on the job, they can submit a claim for benefits to their provincial Workers’ Compensation Board (WCB). The compensation board investigates the claim to determine whether:

• The injury or illness was caused by the worker’s employment.
• Medical treatment was necessary
• Time off work is required for recovery

If the claim is accepted, the WCB pays for healthcare expenses and wage replacement income directly to the injured employee. The employer does not pay these individual claim costs. Rather, the WCB distributions are funded from the collective pool of premiums paid by all employers.

Who Pays for Workers’ Compensation Coverage in Canada?

In Canada, employers are responsible for paying for workers’ compensation coverage through premiums.

However, the rules for mandatory coverage are not the same across Canada; they vary significantly by province and territory.

For example, the approach in Ontario differs from that in British Columbia. Ontario’s legislation specifies which industries must have coverage, while B.C.’s legislation requires nearly all employers to have coverage unless they operate in a specifically exempted industry (for example: banking and insurance, real estate, law firms, etc)

Because the rules vary so much, you must always check with the workers’ compensation board (WCB) in the province where your employees work to know your specific requirements. Companies with employees must register and begin paying premiums shortly after hiring their first worker.

It is also important to note that in most jurisdictions, sole proprietors and independent contractors are not automatically required to carry workers’ compensation coverage for themselves. However, they can often choose to opt into the system for personal protection.

The mandatory participation by employers spreads risks across industries while ensuring support is available for injured staff.

What Benefits Does Workers’ Compensation Provide in Canada?

When an employee injury claim is approved by the WCB, the workers’ compensation system provides a robust set of benefits to support their recovery and rehabilitation:

Medical and Rehabilitation Expenses

When a claim is approved, workers’ compensation covers the costs of all necessary medical care and rehabilitation services related to the workplace injury. This can include:

• Hospital fees
• Doctor visits
• Prescription medications
• Assistive devices like crutches or wheelchairs
• Physical therapy
• Massage therapy
• Psychologist visits
• And more…

Medical benefits also extend to travel costs associated with treatment, such as gas mileage or ambulance fees. However, these costs are not unlimited. All payments are made according to the local board’s rules and fee schedules, which ensure the expenses are necessary and reasonable.

Wage Replacement Benefits

When a workplace injury prevents an employee from working, they can receive wage-loss benefits to compensate for lost income. A common misconception is that these benefits are based on gross pay; however, the calculation is almost always based on a percentage of the worker’s net (after-tax) earnings.

Furthermore, there is no single “Canada-wide” rate. Each province and territory sets its own percentage. For example, benefits from WorkSafeBC (British Columbia) are typically 90% of net earnings, while Ontario’s WSIB provides 85% of net average earnings, and Alberta’s WCB uses a rate of 90% of net earnings.

These payments are also subject to an annual maximum insurable earnings ceiling, which is set and updated by each provincial board. An employee earning above that threshold would have their benefits calculated based on the maximum amount, not their full salary.

Permanent Impairment Benefits

For employees who suffer permanent lifelong disability due to their workplace injury, permanent impairment benefits provide additional income support.

The exact amount depends on the extent of disability and loss of function. More severe impairments warrant higher benefit payments from the WCB.

Disfigurement Benefits

In severe cases where a workplace injury causes significant disfigurement, like extensive scarring or burns, disfigurement benefits offer extra financial compensation.

Vocational Rehabilitation

If an employee can no longer perform their previous job duties due to the effects of their workplace injury, WCBs help facilitate new skills training and job placement services.

The goal is to retrain injured staff so they can transition into a new, sustainable career that suits their abilities. This rehabilitation also boosts their future earning capacity.

Death Benefits

If a workplace fatality occurs, death benefits provide monthly payments to the surviving spouse and dependent children of the deceased worker. Benefits continue until dependents come of age or pass away themselves.

By covering medical care, income replacement, and rehabilitation services, Canada’s workers’ compensation system aims to make injured employees whole again while protecting businesses from excessive liability.

How Do I Register My Company for Workers’ Compensation?

To maintain compliance, employers must register for workers’ compensation shortly after hiring their first employee.

Required timelines vary across Canada. Many provinces enforce registration within 30 days of hiring, but some require it within as little as 10 days.

The registration process involves:

Step 1: Submit Business Details

Provide your company’s legal name, ownership structure, industry classification, contact information, and other identifying details.

Step 2: Estimate Your Insurable Payroll

Provide an estimate of what your total annual payroll spending will be for insurable employees. This allows the WCB to estimate your premium costs.

Step 3: Check for Applicable Registration Fees

Registration costs are not the same everywhere. Some jurisdictions might require a small fee to set up your account, while others, like Ontario’s WSIB, offer registration for free. So you must always check the specific requirements of the board where you are registering.

Once registered, you will receive a clearance letter from the WCB indicating your business now has active workers’ compensation coverage in place.

Your premium rates will then be reassessed annually based on your actual payroll amounts and claims history. Maintaining up-to-date information with your board is crucial.

How Are Premium Rates Calculated in Canada?

Each provincial WCB uses industry risk levels to determine workers’ compensation premium rates.

Higher-risk industries like manufacturing, construction, and mining pay higher base premium rates since they historically incur more claims. Lower-risk sectors like retail, education, and finance pay lower premiums.

While each employer’s final rate is unique, the Association of Workers’ Compensation Boards of Canada (AWCBC) publishes provisional average assessment rates for each jurisdiction to provide a general benchmark.

The table below shows AWCBC Provisional Average Assessment Rates per $100 of Insurable Earnings (2025)

Source: https://ohsinsider.com/around-the-provinces-workers-comp-rates/

Important Note: These average rates should not be compared directly. A province’s rate depends on its unique mix of industries and benefit levels, so a higher average doesn’t automatically mean it’s more expensive for a specific business.

Your company’s specific premium also depends on its claims history. Firms with lower workplace injury rates typically pay lower premiums. This encourages businesses to invest in workplace safety.

How Do I File a Workers’ Compensation Claim in Canada?

Reporting deadlines for workplace injuries are strict and vary by province, so it is critical to act quickly. Employers must report injuries requiring medical treatment to their provincial WCB within the specific timeline set by their local board, which is often just a few days.

Employees should notify their employer immediately following an injury. They can then submit a claim directly to their WCB. The deadline for an employee to file a claim also depends on provincial rules, so it is important not to delay and to check with the local board.

The standard process is:

1. Report the injury to the employer.
2. Seek any necessary medical treatment.
3. File a claim with provincial WCB (online, mail, fax).
4. Provide supporting documents like accident details and medical reports.
5. WCB will investigate and communicate a claim decision.
6. If approved, begin receiving wage replacement and/or healthcare benefits.

Different forms may be required based on the type of injury and benefits sought. Maintaining detailed records will help expedite claims processing.

Are Workers’ Compensation Benefits Taxable Income in Canada?

Workers’ compensation benefits paid to injured employees or their survivors are not considered taxable income in Canada.

This includes any wage loss, disability, or survivor benefits paid by a provincial workers’ compensation board. Even though these payments partially replace employment income, they are non-taxable for recipients.

Employees who receive workers’ comp benefits will be issued a T5007 statement by their compensation board indicating the total amounts received in a tax year.

This slip needs to be declared on your annual tax return. While the benefits are not ultimately taxed, the amount must be reported as income and then claimed as an equal deduction. This is an important step because the reported amount is used in the calculation for certain government benefits and tax credits.

Since benefits are non-taxable, income tax will not be deducted from workers’ compensation payments.

The bottom line

Canada’s workers’ compensation system strikes a balance between employee rehabilitation and employer affordability across all sectors.

By registering for coverage, paying premiums, reporting incidents, and supporting injured staff, businesses can optimize their WCB experience. Employees gain access to fast medical treatment and wage support if they are injured on the job.

To stay compliant and promote a safe workplace, it’s essential to work closely with your provincial workers’ compensation board.

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