Workers Compensation Audits New Measures Being Employed By Auditors

Introduction

In the Province of Ontario, if you are an employer, you can be sure to have a visit from a field auditor from the Workplace Safety and Insurance Board (WSIB). The WSIB has made it part of its initiative to audit most business organizations to ensure that employees are registered and properly classified.

What Is The WSIB?

The WSIB is a government agency that promotes workplace health and safety, and provides a no-fault insurance system that compensates workers who are injured on the job. New employers are required to register with the WSIB within 10 days of hiring the first full-time or part-time employee.

The WSIB administers a fund made up entirely of employer premiums. The premiums are determined based on the classification of the employer. The WSIB will look at the various factors in classifying an employer, in particular, its industry and the business organization’s health and safety records.

Upon registration, it is wise for business organizations to seek out their Chartered Accountant to ensure that the WSIB is provided with the proper information. This includes details about its officers and directors, payroll, and business activity.

WSIB Audits

A WSIB audit is a thorough inspection of an organization’s documents, which includes a review of payroll records, financial statements, minute books, contracts, invoices and records with contractors, to ensure that the WSIB’s registration requirements for employees are being adhered to. Failure to comply with the WSIB can result in a person or organization facing severe fines and possibly criminal penalties.

Particular Concerns For Owner-Operated Businesses And Corporations

In many owner-operated businesses, employees often include family members. One of the most common errors uncovered in WSIB audits, is the organization’s failure to make WSIB contributions on behalf of that family employee.

When an employee is hired, the employer is required to submit premiums to the WSIB for an employee, regardless of his or her relation to the employer.

The WSIB has strict rules regarding the classification of a worker, and failing to contribute to the WSIB by an employer is not exclusive to owner-operated businesses. However, there are mechanisms to avoiding the mandatory premium requirement, which all businesses, including owner-operated businesses can rely on.

If a business organization is incorporated, premiums are not required for employees on the corporation’s board of directors or officers of the corporation, such as a president, secretary or treasurer.

These designations should be well articulated in the corporation’s minute books, internal documents and public records.

If a business organization is not incorporated, a WSIB premium need not be made on behalf of an employee if that worker is an “executive officer”.

The WSIB retains the authority to determine if an employee is an executive officer, but among the auditor’s considerations will be if the individual is among the “directing minds” of the entire business. The WSIB retains the authority to determine if an employee is an executive officer, but among the auditor’s considerations will be if the individual is among the “directing minds” of the entire business.

Further, the named party should be active in the corporation, which should be prepared to deliver all required statements and records to support the executive officer’s role.

Conclusion

It is our firm’s practice that if any of our clients are contacted regarding any type of audit, including the WSIB audit, they are to be conducted at our office. Therefore we can “control” the audit process and oversee the audit to minimize the effects if any, to our clients.

There are many strategies that our firm has developed to maximize the benefits of WSIB coverage to our clients and their employees.

As well, we have also undertaken a review of premiums paid by our clients to minimize the costs of WSIB, as there are various interpretations correctly or incorrectly assumed by the WSIB organization when rates are established.

In addition, there are effective ways of minimizing the high premium rates that are assessed by WSIB to administrative and management staff.

Joseph A. Truscott has been advising clients in the area of Workplace Safety and Insurance Board registrations, audits and other related WSIB premiums by incorporating various strategies resulting in substantial savings. If you would like to engage Joe’s services, please do not hesitate to contact Joseph A. Truscott, Chartered Accountant at 905-528-0234 ext: 224, or email Joe at joetruscott@josephtruscott.com.

November 2012