Workers’ Compensation Boards Could Give Small Businesses $3 Billion Boost by Rebating Excess Funds: CFIB

Stacks of cargo containers are seen at port during a strike by International Longshore and Warehouse Union Canada workers in the province of British Columbia, causing significant harm to small businesses across Canada, in Vancouver on July 12, 2023. (The Canadian Press/Darryl Dyck)

Small businesses in Canada could receive a $3 billion boost if five underfunded workers’ compensation boards (WCBs) across the country rebated their excess funds, according to the latest research snapshot by the Canadian Federation of Independent Business (CFIB).

“Workers’ compensation boards are holding onto billions in extra money, while over half of small businesses (60 percent) are still carrying their pandemic-related debt, at an average of $126,000. Getting excess WCB money back to small businesses would be game-changing,” said Marvin Cruz, CFIB director of research, in a July 20 news release.

“Businesses could reinvest the funds or use them to keep up with inflation, maintain jobs or pay down their pandemic-related debt.”

According to the research report, Funding Fairness: State of Workers’ Compensation Funding, the workers’ compensation boards or commissions are overfunded in Prince Edward Island (PEI), New Brunswick, British Columbia, Manitoba, and Yukon, meaning that each of those boards has more funds than required to cover its expenses, including unforeseen costs. Boards are entirely funded through employer-paid premiums and investment earnings.

Four of those boards are greatly overfunded, the CFIB reported. The PEI board is funded at 148 percent and the New Brunswick board is funded at 147 percent, when both of those provinces’ own funding targets are just 125 percent. B.C.’s board is funded at 146 percent and Manitoba’s board is funded at 145 percent, when both of those provinces’ own targets are just 130 percent. For the Yukon, its board is funded at 131 percent, slightly above its target of 129 percent.

The research said that if those overfunded boards were to return all funds accumulated beyond the upper bound, $3 billion in rebates could be returned to small businesses in those jurisdictions. This would amount to rebates of $2.5 billion in B.C., $289 million in New Brunswick, $190 million in Manitoba, $35 million in P.E.I., and $3 million in the Yukon.

It noted that 9 of the 12 boards across Canada have a policy of returning funds to employers: Yukon, Northwest Territories/Nunavut, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, PEI, and Newfoundland and Labrador.

Ontario is the only province to legislate a mandatory rebate distribution, which occurs when the funding is at least 125 percent, the CFIB said, noting that continues to call on other jurisdictions to follow Ontario’s lead and legislate surplus rebates.

To ensure fairness not small businesses, the CFIB said all boards should either rebate surplus funds to employers or lower employer premiums if their funding ratio exceeds their target funding. The organization is also calling on all boards to legislate surplus distribution polices,\ and implement mandatory distribution policies where none exist.

“It is only fair that any surplus amounts collected be directly returned to employers, 72 percent of whom cite payroll taxes as the most harmful type of tax to their business,” the research snapshot said.