The inclusion or exclusion of dividends in payroll

A dividend is a distribution of surplus or profit to a stockholder or shareholder of a corporation. The amount is declared by a board of directors and is usually dependent on the type of stock owned. As this money is paid based on ownership of a business, not for services rendered, it is not remuneration for WC purposes.

The Basic Manual makes no reference to dividends either as inclusions or exclusions to remuneration. Historically the ICRB has concluded that dividends are not remuneration. A dividend received by a stockholder is not based on services performed for the corporation, but rather on the number of shares owned. As indicated in Basic Manual Rule BM‐CHAN‐R63AE, “Premium is calculated on the basis of the total payroll paid or payable by the insured for services of individuals who could receive workers compensation benefits for work-related injuries as provided by the policy.”  Remuneration is a function of services, whereas dividends are a function of ownership and thus not considered remuneration.

Distribution of Accumulated Profits

The inclusion or exclusion of undistributed profits or distribution of accumulated profits can be handled in one of two ways. The key question is: are these profits distributed as a dividend or bonus? If these profits are treated as a dividend, then they are not considered remuneration. If these profits are treated as a bonus, then they are considered remuneration.