Allowances for Self-employment Policy 21-410 | Effective Date: December 13, 2013

Purpose

The purpose of this policy is to:

  • Define the criteria for determining if WorkSafeNB will assist in funding self-employment as a return to work option;
  • Provide staff with decision-making tools for determining if the self-employment option is feasible and will generate a salary (net profit) that could reduce or offset the injured worker’s loss of earnings; and
  • Communicate the responsibilities of both the injured worker and WorkSafeNB in the self-employment initiative.

Scope

This policy applies to injured workers who request that WorkSafeNB consider self-employment as a suitable rehabilitation option when no other reasonable return to work option is identified in the injured worker’s rehabilitation plan.

Injured workers, who do not qualify for an allowance for self-employment, may still gain some of the benefits of working by pursuing personal hobbies or activities that improve the quality of life. For more information, see Policy 25-003 Home Care and Independence and Fee Schedule 29-555 Quality of Life Grants.

Statements

1.0 General

WorkSafeNB may provide injured workers with rehabilitation to lessen or remove barriers resulting from the injury that limit injured workers’ return to work opportunities. In providing rehabilitation, WorkSafeNB under s. 43 of the Workers’ Compensation Act may take whatever measures and make expenditures it determines necessary to help an injured worker return to work.

Policy 21-420 Return to Work – Principles is used to guide all return to work activities. These principles support WorkSafeNB’s commitment to preparing injured workers to return to safe and productive work whenever possible. WorkSafeNB identifies rehabilitation goals appropriate for the injured worker and prioritizes the goals in the following order:

  1. Returning to pre-accident work with the accident employer;
  2. Returning to alternate work with the accident employer;
  3. Returning to pre-accident work with a new employer;
  4. Returning to alternate work with a new employer; or
  5. Returning to work through self-employment.

WorkSafeNB uses Policy 21-421 Vocational Rehabilitation and Policy 21-417 Identifying Suitable Employment to evaluate the appropriateness of the rehabilitation goal and the suitability of the return to work options

WorkSafeNB recognizes that self-employment opportunities may be beneficial to some injured workers when it creates an opportunity that typically is not available in the labour market. This may include, for example, creating opportunities that:

  • Match injured workers’ unique set of skills, abilities, and qualifications; and/or
  • Provide a more flexible work environment for injured workers.

In order to demonstrate that an injured worker has an interest and a willingness to commit to a self-employment venture, injured workers are required to apply to WorkSafeNB for a self-employment allowance. Applications will be considered when no other reasonable return to work option is identified by WorkSafeNB.

When making a decision to provide a self-employment allowance, WorkSafeNB considers factors such as whether the work is suitable for the injured worker or whether the business is feasible. This policy provides further information for evaluating the self-employment option including:

  • Determining if self-employment is suitable for the injured worker (Section 2.0);
  • Evaluating the feasibility of the self-employment option (Section 3.0);
  • Determining financial requirements (Section 4.0);
  • Gathering the necessary business documentation (Section 5.0); and
  • Adjusting Long-term disability benefits at six months following start-up (Section 6.0).

2.0 Determining if Self-employment is Suitable for the Injured Worker

WorkSafeNB considers self-employment to be a suitable return to work option when the injured worker has the skills, abilities, and qualifications to perform the identified type of work. WorkSafeNB determines if self-employment is a suitable option by weighing and evaluating the available information. This may include, for example, information relating to whether the injured worker:

  • Is functionally capable of doing the identified type of work;
  • Has transferable skills that would assist in doing the identified type of work;
  • Has previous experience in operating a business; or
  • Has recently completed or will be able to complete an entrepreneurial skills development program with a WorkSafeNB-approved provider.

WorkSafeNB may provide funding for an injured worker to participate in a WorkSafeNB- approved entrepreneurial skills development program to help prepare the injured worker for self-employment. This may include, for example, a program administered by the YM-YWCA or the Business Development Council of Canada. 

For more information on planning and managing rehabilitation activities for injured workers, see Policy 21-421 Vocational Rehabilitation.

3.0 Evaluating the Feasibility of the Injured Worker’s Self-employment Proposal

WorkSafeNB evaluates if the injured worker’s proposed self-employment venture is feasible by considering whether it is likely that the business will:

  • Generate a salary (net profit) that could reduce or offset the injured worker’s loss of earnings over time; and
  • Remain sustainable in the long-term as outlined in the business plan and confirmed through WorkSafeNB’s evaluation.

To evaluate the feasibility of the business, WorkSafeNB, as necessary:

  • Conducts an analysis of WorkSafeNB’s costs versus benefits of pursuing the self-employment option; and
  • Funds an independent feasibility study to evaluate the viability of the business.

3.1 Cost-benefit Analysis

WorkSafeNB uses a cost-benefit analysis to assist in determining whether self-employment is a cost-effective return to work option by considering the amount of award (WorkSafeNB’s investment) and the value of the injured worker’s remaining loss or earnings benefit.

The cost-benefit analysis is used to compare the cost of the self-employment option for WorkSafeNB to no further vocational rehabilitation. It should include information on the:

  • Costs of the self-employment option, including the:

-           Amount of the allowance;

-           Cost of entrepreneurial training, if needed;

-           Cost of the independent feasibility study; and

  • Injured worker’s current and future loss of earnings benefits, including the amount of estimated capable earnings, if:

-           Self-employment is pursued; and

-           No further vocational rehabilitation is pursued (i.e., the worker’s current estimated capable earnings).

Estimated Capable Earnings

In completing the cost-benefit analysis, WorkSafeNB establishes the estimated capable earnings to calculate the injured worker’s remaining loss of earnings benefit amount. WorkSafeNB uses the greater of the:

  • Injured worker’s salary identified in the feasibility study;
  • Actual earnings from the self-employment; or
  • Average earnings of a manager in a similar field of employment.

Prior to providing an allowance, WorkSafeNB communicates to injured workers what their loss of earnings benefits will be:

  • During the six-month start-up phase; and
  • Following the six-month start-up phase.

3.2 Independent Business Feasibility Study

WorkSafeNB may fund an independent feasibility study to evaluate the self-employment option and to:

  • Assess if there is a viable market for the business;
  • Identify the risks and challenges that may limit the success of the business; and
  • Determine if the business has the potential to be profitable.

When WorkSafeNB determines that a feasibility study is required, WorkSafeNB contracts a business consultant to complete the study. The terms and conditions of the study must be written and agreed upon in advance by WorkSafeNB and the business consultant.

The scope of the feasibility study is specific to the proposed business venture. At a minimum, the study must include the following information:

  • A complete description of the business and the injured worker’s role and responsibilities in the business;
  • An evaluation of the current and future markets and competitors;
  • The financial requirements of the business (i.e., the investment);
  • A summary of all start-up costs including fire, theft, and loan protection for any personal property used as an asset;
  • A sales forecasts for at least five years;
  • Pro forma cash flow statements for a period of at least five years including a reasonable projection of the injured worker’s earnings from the business for the first five years;
  • A break-even analysis (outlining when the company will begin making a profit);
  • A repayment schedule for any money borrowed; and
  • An explanation of the underlying assumptions used in the feasibility study.

 Generally, WorkSafeNB considers a business to be feasible when:

  • Financial information shows that the business will generate a salary (net profit) that could reduce or offset the injured worker’s loss of earnings over time; and
  • WorkSafeNB is satisfied that the assumptions underlying the feasibility study are reasonable.

4.0 Determining Financial Requirements

Once WorkSafeNB determines that self-employment is a suitable option for the injured worker (section 2.0) and the self-employment option is financially feasible (section 3.0), WorkSafeNB may award a one-time self-employment allowance to offset the injured worker’s costs of pursuing the self-employment venture.

To determine the amount of the self-employment allowance, WorkSafeNB reviews the financial requirements for the business.

The allowance is the lesser of:

  • 25% of the future value (capitalized value) of the loss of earnings benefit award, when no other reasonable return to work option is identified; or
  • 75% of the start-up costs of the business; or
  • $60,000.

WorkSafeNB continues to pay loss of earnings benefits in the six–month period following the business start-up that is the date agreed to by WorkSafeNB when approving the self-employment award.

Prior to awarding a self-employment allowance, WorkSafeNB requires the injured worker to make a financial investment in the business of no less than 25% of the start-up costs of the business. The injured worker’s investment can include, but is not limited to:

  • Savings or personal assets that may be required to operate the business;
  • A personal or business loan from a bank, credit union, or leasing company;
  • A personal loan or investment from a family member or friend;
  • A loan, grant, or investment acquired through a federal or provincial agency when participating in a business development program; or
  • An investment by a venture capital company (e.g., Business Development Bank of Canada or New Brunswick Workers Investment Fund).

WorkSafeNB may only accept personal assets as an injured worker’s investment when a WorkSafeNB-approved appraiser has estimated the value of the assets.

5.0 Gathering the Necessary Business Documentation

As part of the business start-up phase and prior to awarding an allowance, the injured worker may be required to provide documentation that includes, but is not limited to:

  • Verification of fire, theft, and personal liability insurance for the business;
  • Confirmation that the business is registered in the injured worker’s name;
  • Personal or real property security on the allowance provided by WorkSafeNB (e.g., a lien, chattel papers, realty mortgages, and floating or fixed debentures on the full amount of the allowance); and
  • A signed declaration of understanding by the injured worker and WorkSafeNB.

WorkSafeNB prepares the declaration of understanding outlining the terms, conditions, expectations, and responsibilities of all parties involved including the:

  • Responsibilities of WorkSafeNB;
  • Responsibilities and financial requirements of the injured worker;
  • Estimated capable earnings and remaining long-term disability benefit amount of the injured worker following the six-month start-up;
  • Financial reporting requirements; and
  • Responsibilities of WorkSafeNB should the self-employment venture fail within the first six months of operation.

6.0 Adjusting Long-term Disability Benefits at Six Months Following Start-up

At six months following approval of the funding, WorkSafeNB typically considers the business to be viable and recalculates the injured worker’s loss of earnings benefits using the estimated capable earnings projected for the self-employment option (section 3.1).

However, if before, or at the six-month period, the worker provides financial reports and other evidence to support that the business is not viable, the injured worker can apply to WorkSafeNB to have the self-employment option re-evaluated.

WorkSafeNB, or a WorkSafeNB-approved financial consultant will review this evidence and determine if the self-employment option continues to be viable.

If based on the evidence provided by the injured worker, WorkSafeNB determines the business continues to be viable, WorkSafeNB:

  • Reduces the injured worker’s loss of earnings benefits by the estimated capable earnings as identified in the cost benefit analysis (section 3.1);
  • Releases the property security on the allowance provided by WorkSafeNB; and
  • Reviews annually any residual loss of earnings in accordance with Policy 21-270 Annual Review of Compensation Benefits.

If based on the evidence provided by the injured worker, WorkSafeNB determines the business is not viable, WorkSafeNB will:

  • Determine the injured worker’s estimated capable earnings with no further intervention; and
  • Take the steps necessary to recover WorkSafeNB’s financial investment through the property security provisions.

7.0 Special Situations

On a case-by-case basis, WorkSafeNB may consider self-employment as the best return to work option even though other return to work options may be feasible (e.g., retraining).

To be considered as a return to work option, the:

  • Injured worker must identify self-employment as their preferred return to work option; and
  • Cost-benefit analysis must show that the self-employment option would reduce the injured worker’s long-term loss of earnings more than the other return to work option. In this case, the cost-benefit analysis would be used to compare the self-employment option to other return to work options.

The amount of the allowance would be limited to the lesser of the costs of:

  • The self-employment allowance calculated in accordance with this policy; or
  • The other suitable return to work option.

Policy 21-210 Calculation of Benefits

Policy 21-270 Annual Review of Compensation Benefits

Policy 21-400 Rehabilitation

Policy 21-417 Identifying Suitable Employment

Policy 21-420 Return to Work – Principles

Policy 21-421 Vocational Rehabilitation

Policy 25-003 Home Care and Independence

Fee Schedule 29-555 Quality of Life Grant

Appeals Tribunal – means the Workers’ Compensation Appeals Tribunal established under the WHSCC & WCAT Act.

Estimated capable earnings – earnings that the injured worker is estimated to be capable of earning, at a suitable occupation, after the injury, or recurrence of injury.

Return to work – the act of re-introducing injured workers to safe and productive employment that eliminates or minimizes wage loss, as soon as medically possible.

Suitable employment – appropriate employment that a worker who suffered a personal injury by accident is capable of doing, considering the worker’s physical abilities and employment qualifications and which does not endanger the health, safety, or physical well being of the worker. (WC Act)

Vocational rehabilitation – a course of action taken by WorkSafeNB that provides injured workers with the resources to pursue suitable employment.

WorkSafeNB – means the Workplace Health, Safety and Compensation Commission or "the Commission" as defined by the WHSCC & WCAT Act.

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