COMPENSATION A Guide for New Brunswick ... - WorkSafeNB

Premium Calculation cont’dManagement CompanyManagement companies are assigned to the sameclassification as their associated companies. They arenormally combined with the associated companies foraccident cost history and rate-setting purposes.What is the Experience Rating System?WorkSafeNB introduced the Experience Rating Systemin 1990. The two main purposes of the system are toimprove equity in sharing workers’ compensation costsamong employers, and to improve awareness of safetyin the workplace by providing discounts and surchargesbased on employers’ claim costs.How does the Experience Rating System work?The Experience Rating System has been designed withthe collective liability principle in mind. The systemintroduces individual assessment rates for participatingemployers, allowing their basic assessment rate (assignedat the classification stage) to be adjusted upward ordownward to reflect their actual claims cost experiencerelative to their assigned rate group.Only costs and assessable earnings from the previousthree years are used in the calculation. For example, for2010 rates, 2006, 2007 and 2008 assessable earnings andcosts paid on 2006, 2007 and 2008 accidents are used.An employer’s total claims costs are divided by theirtotal assessable earnings to arrive at an employer ratio.The same calculation is performed for the rate group asa whole, and the two ratios are compared. An employerwill receive a discount or surcharge of 1% for each 2.5%variance from the rate group ratio.The assessment rate adjustment is limited to a maximumdiscount of 40%, or a surcharge of 80%. This limitprovides incentive for employers to improve their claimsexperience, while ensuring that all employers support theongoing costs of workers’ compensation.Who can participate?Employers with a basic average annual premium of $1,000or more are automatic participants in WorkSafeNB’sExperience Rating System. For these employers, thesystem acts as the final factor in calculating theirpremium.More than 50% of the province’s employers participate,representing in excess of 90% of all premiums collectedand injury claims costs paid by WorkSafeNB.Experience RatingHow do I find out about my experience rating?In the fall of each year, employers receive anExperience Rating Statement that provides a detailedlisting of claims costs, total assessable earnings, andthe experience rating adjustment to be applied to thefollowing year’s basic assessment rate.19