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Classification and rates FAQs
Classification FAQs
What is the purpose of a classification system?
A classification system facilitates fair and equitable assessment rates and ensures that the costs of compensation are distributed fairly among the industries responsible for those costs. All employers are classified on the basis of industry for insurance purposes, and each rate group collectively pays the cost of all injuries within that group. For rate setting purposes, the groups must be sufficiently large to provide an adequate spread of risk and some stability in the assessment rate.
How many classification units are there?
Approximately 200,000 employers are registered with WorkSafeBC and sorted into 573 classification units. These are grouped into 24 subsectors in seven sectors.
What are sectors and subsectors?
Sectors are large groups of employers that are involved in the same area of the economy at the broadest level. There are seven sectors: Primary Resource, Manufacturing, Construction, Transportation and Warehousing, Trade, Public, and Service. Subsectors are a further breakdown of sectors. For example, agriculture and fishing are two of the subsectors within the Primary Resource sector.
Does each classification unit have its own base rate?
Yes. However, to ensure that rates are stable, rates are set at the rate group level rather than at the classification unit level. The purpose of a classification unit is to enable WorkSafeBC to classify employers who are primarily engaged in the same industrial undertaking in the same classification, and to enable employers to readily confirm they are correctly classified.
How are employers classified?
The classification system is based on the principle that the cost of producing a product or providing a service includes the costs of injuries or diseases incurred by the workers who are involved in those activities. The classification structure is therefore constructed on the basis of industrial undertaking rather than on an occupational or hazard basis. As such, employers and independent operators are assigned to classification units on the basis of the industry in which the firm operates. In assigning the classification, WorkSafeBC considers such factors as the type of product or service provided, the processes and equipment used, and the type of industry with which the firm competes. Occupations of individual workers may be reviewed when assigning the classification, but only as an indicator of the type of industry engaged in by the firm. For more information, see the method of assigning classifications policy (1-37-1) in the Assessment Manual.
Can a firm have more than one classification?
Most employers are assigned a single classification unit. However, if your firm is involved in more than one industrial activity, it may be assigned to more than one classification unit. Each industrial undertaking must be distinct and separate. For more information, see the multiple classification policy (1-37-2) in the Assessment Manual.
Does the classification structure represent the economy in British Columbia?
Yes. WorkSafeBC continuously reviews the classification system to ensure that it remains current. As industries evolve or decline, or as new industries appear, the classification system is updated accordingly.
Rate setting FAQs
How are base rates calculated?
WorkSafeBC uses a classification and rate making system to ensure the costs of compensation are fairly distributed. Employers in industries with similar claim costs pay similar base rates. To ensure that rates remain stable, we combine similar industries into rate groups. Then, we estimate the total claim costs for each rate group and divide that by the group's estimated total assessable payroll. Employers in all rate groups also contribute to reserves for enhancement, disaster, and administration.
What is an industry group?
An industry group is made up of one or more classification units that have similar industrial activities and a reasonable expectation of similar cost rates. It can be one or a group of industries that together have 200 or more non-health care claims over five years with at least 25 non-health care only claims in each of the last two years.
An industry group exists to let WorkSafeBC calculate the historical cost rate of a relatively discrete group of industries. If large enough to be viable, an industry group may form its own rate group. Otherwise, industry groups are combined to form a rate group.
What is a rate group?
A rate group is made up of one or more industry groups. Rates are set at the rate group level as they provide a large enough payroll base to be statistically credible and to absorb short-term fluctuations in claims activity. This is possible because rate groups have minimum credibility levels that are 10 times that of industry groups. As such, a rate group must have 2,000 or more non-health care only claims over five years with a minimum of at least 250 in each of the last two years.
Why did my own rate increase?
Your rate increased because of one or more of the reasons below:
Increase in your base rate
Base rates are based on the cost of claims within an industry. Like any insurance plan, an industry's base rate will increase if the costs associated with its claims increase. Visit key trends for each rate group for more information.
Change to your experience rating adjustment
Perhaps your firm's base rate is the same or less, but your experience rating discount or surcharge has changed. If the ratio of your claim cost to your payroll is higher than your peers, your experience rating discount may have decreased or you may even be paying a surcharge. This impacts your net rate. See the section on experience rating for more information.
Why did some base rates go up?
In recent years, rates in B.C. have dropped progressively, mainly because healthy financial returns from WorkSafeBC's investment portfolio have sheltered employers from rate increases. Investment returns are no longer assured in our global economy, and employers are now facing the true cost of claims in higher rates.
How often are base rates changed or reviewed?
WorkSafeBC reviews base rates each year. The information is analyzed by actuaries and risk managers before base rates are presented to the Board of Directors for approval. In July or August, WorkSafeBC announces the preliminary rates for the coming year. Final rates are approved and communicated each fall.
Do my premiums go into general provincial revenue?
No. WorkSafeBC, while administering a provincial statute, is independent of the provincial government in all areas including assessments, claims, industrial health and safety, and administration. Employers' premiums do not go to the government but are retained within WorkSafeBC for the payment of costs incurred in each industry.
I'm in a different rate group this year. Why?
Industry groups move from one rate group to another. Each industry group's claim cost average must be within 20 percent of the claim cost average of the entire rate group. If your industry group's claim costs fall outside of this range for three consecutive years, your industry group will be moved to a new rate group.
Experience rating FAQs
How can I find out what my experience rating discount or surcharge is?
Refer to your premium rate letter, also referred to as your annual rate notification letter mailed in October. It tells you your base rate, experience rating discount or surcharge, and net rate. It also provides a snapshot of your firm's claim costs, if applicable. If you have reported changes to your assessable payroll for previous years, had adjustments to claims, or changed classifications since you received your annual rate notification, refer to your most recent recalculated rate notification.
What factors contribute to an increase in my net rate?
Change to your experience rating adjustment
Perhaps your firm's base rate stays the same or less, but your experience rating discount or surcharge changes. If the ratio of your claim costs to your payroll are higher than your peers, your experience rating discount may decrease, or you may even be paying a surcharge. This impacts your net rate.
Which years were used to calculate my experience rating?
Claim costs and payroll for the previous three completed years are used to calculate an upcoming year's experience rating. For example: An experience rating for 2010 is determined by claim costs and payroll for 2008, 2007, and 2006.
What else do you use to determine my experience rating adjustment?
We consider your participation level, applying a calculation called graduated participation. This term refers to how much emphasis we place on the three-year window versus your overall experience trend with WorkSafeBC. The higher your annual premiums, the more emphasis we'll place on your performance in the three-year window and the less we'll place on your overall history with WorkSafeBC. The lower your premiums, the more we'll rely on your overall historical trend.
Graduated participation is sensitive to small businesses, and helps to ensure employers won't lose the discount they've earned over time as a result of an isolated claim. It also ensures that we place the most emphasis on the most recent years for large businesses. Graduated participation gives small and large businesses the same opportunity to enjoy savings if they have a safe workplace. At the same time, it protects small businesses from dramatic changes in their rates from year to year.
How high are the experience rating discounts and surcharges?
Maximum discounts are 50 percent and maximum surcharges are 100 percent. These are achieved over a period of time. Your participation level influences how quickly you will reach the maximum discount or surcharge. As a general rule, large businesses have a higher participation level than small businesses and thus reach the higher discount or surcharge more quickly. At the same time, the participation level protects small businesses from dramatic changes to their rates from year to year.
Do I automatically receive an experience rating?
Yes, but you won't receive a surcharge or discount unless you have reported assessable payroll in one of the three previous years. Until this time, you are charged the base rate.
What can I do to improve my experience rating?
There are three basic steps you can take to reduce the cost of injuries in your workplace and thus improve your experience rating:
1. Develop and implement a health and safety program.
The best way to reduce your insurance costs is to prevent injuries. And one of the best ways of doing this is to make safety a priority, 365 days a year. You can start with a comprehensive workplace safety program.
2. Make first aid a priority.
Research shows, the faster you treat an injured worker, the better - for everyone involved. By treating an injured worker right away, you can often reduce the severity of the injury and thereby minimize the costs associated with wage loss and doctors' fees.
3. Help injured workers return to work.
The lower your injury costs, the more you'll save. And one of the best ways to reduce costs is to help injured workers return to work - as soon and as safely as possible.
For more information, visit the Safety at work site.
How can I estimate my experience rating for future years?
WorkSafeBC has created a calculator that lets you estimate your experience rating discount or surcharge for future years. The experience rating calculator also shows you how a reduction in claim costs can save you money.
Are all injury costs included in my claim cost calculation?
No. Experience rating uses costs associated with short-term disability, long-term disability, survivor benefits, fatality costs, health care payments, vocational rehabilitation payments, and pension awards. But not all claim types are used for experience rating. For example, costs associated with hearing loss and industrial diseases such as asbestosis are excluded. Also, since one serious injury could result in costs as high as $1 million, it wouldn't be reasonable to include all costs in the experience rating calculation. After all, what is significant is your overall safety record with WorkSafeBC. Therefore WorkSafeBC places a limit on each claim that is included in your experience rating calculation. (For more information about maximum limits, see 1-42-1 in the Assessment Manual.) Note: For most fund types, the cost used for experience rating is based on payments made until June 30 of the calculation year. However, for pensions, the experience rating cost is the full award value, not just the payments to June 30.
How does WorkSafeBC notify employers of their rates?
Each year, every registered employer receives an annual rate notification letter. It tells you what your industry's base rate will be for the coming year. If your firm is eligible for experience rating, it also shows your experience rating discount or surcharge. Only employers who have reported assessable payroll will receive their discount.
When are annual rate notifications sent?
WorkSafeBC mails rate notification letters to all registered employers in late fall. The letters are also available on our web site.
Is the annual rate notification a bill?
No. It is a letter that informs you of your net rate (per $100 of assessable payroll). This is the amount you use to calculate your premiums each year. If you have an annual account (where you pay once a year) your payment is due with your Employer Payroll and Contract Labour Report. If you have a quarterly account (where you pay four times a year), you pay quarterly with your Employer's Remittance Form.
Is experience rating transferable?
Generally, when a firm's business operations or a significant portion or aspect of the firm's business operations move to an affiliated successor, the firm's experience rating adjustment - be it a discount or a surcharge - is assumed by the successor. For more details, including the exceptions to this general rule, see the policy for the transfer of experience between firms (1-42-3) in the Assessment Manual.