Any construction business, with or without employees, must have Workplace Safety Insurance Board WSIB coverage. Known as expanded compulsory coverage, all operators must register with the WSIB within ten calendar days.
Furthermore, the coverage includes independent operators, sole proprietors with employees, partners in a partnership, and executive officers of a construction corporation. There are some exemptions to these, as we will see further down.
What is an independent contractor?
A business is considered an independent contractor by the WSIB if it:
- Performs or manages Class G construction work
- It has no employees
- It takes on contractor or subcontractor work for more than one person within 18 months
- Its owner reports as self-employed to a government agency, e.g., Canada Revenue Service
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What are the exemptions to compulsory coverage in construction?
Compulsory coverage in construction has two exemptions:
- When an individual, partnership, or corporation performed home renovation work only and was hired and paid directly by the owner or tenant. However, anyone running a home renovation business with employees must have WSIB registration that insures their employees, but they are exempt from coverage. However, even if they take on one contract that no longer meets the criteria of home renovation, then they need to register with the WSIB and pay premiums for the coverage on all their work, including home renovation, for a minimum of three months.
- Anyone exempt from expanded compulsory coverage is not entitled to any benefits. However, they can apply for optional insurance, and the exemption applies to corporations and partnerships with employees, corporations without employees but with several executive officers, and partnerships without employees.
Only one executive officer or one partner can apply for an exemption. To qualify, the individual must not perform construction work; only occasional site visits are allowed.
Are there lower premium rates for low-risk work?
Low-risk work means lower premium rates for people like executive officers and partners. They can visit construction sites occasionally but cannot perform any construction work there. The term construction work covers any skill or unskilled manual work, including the operation of equipment or machinery. These people may also not provide direct-on-site supervision of employees.
How does WSIB coverage work?
The WSIB works out the cost of coverage according to the type of business activities and on the person’s earnings which have an annual maximum.
Furthermore, construction industry businesses can report and pay according to their estimated annual total insurable earnings monthly, quarterly, or annually.
How do you calculate insurable earnings?
For construction, your business type will determine how you calculate your insurable earnings:
Independent Operators
Premium = Insurable earnings x premium rate ÷ 100
- Insurable earnings are based on the amount billed for labour in invoices and contracts for residential and commercial work.
- The total amount billed as labour (up to the annual maximum) for the reporting period (e.g., quarterly or monthly) represents the insurable income.
- an independent operator providing labour only declares 100% of the contract value
- an independent operator providing labour and supplying major materials without adequate verification for labour portion must use 60% of the contract value to determine their insurable income
- an independent operator providing labour, construction equipment, and with or without major materials must use 33.3% of the contract value to determine insurable income
- Then they must multiply their insurable income by the premium rate on the premium rate summary statement.
- Finally, they divide the total by 100 to get the total premium payable for their reporting period.
Sole Proprietors
Calculating premiums for sole proprietors is based on the gross wages paid to the employees they are responsible for insuring. These are called insurable earnings.
Premium = Insurable earnings x premium rate ÷ 100
- Using the earnings reported to the Canada Revenue Agency (CRA), they can estimate their earnings for the current year.
- They divide the sum by the number of times they report in a year (e.g., quarterly or monthly).
- They then add this figure to their employees’ gross wages to get their insurable earnings for the reporting period.
- They multiply the insurable earnings by the premium rate found on their premium rate statement.
- Finally, they divide this number by 100 to get the total premium payable for the reporting period.
- A new business can use 33.3% of the annual insurable earnings to estimate and add this figure to their employee gross wages. Then, they can report any differences in their earnings to the WSIB.
Partners in partnerships
The premiums for partnership partners are calculated based on the insurable earnings paid to the employees they must insure.
Premium = Insurable earnings x premium rate ÷ 100
- A partner in a partnership can use the net business income reported to the Canada Revenue Agency (CRA) in the previous year.
- They use the net business income to calculate each partner’s share and divide this by the number of times they report in a year.
- They add this figure to their employees’ gross wages for the reporting period to find the total of their insurable earnings.
- They multiply the insurable earnings by the premium rate found on their premium rate statement.
- Finally, they divide this number by 100, giving them the total premium payable for the reporting period.
- A new business can take 33.3% of its annual insurable earnings maximum to add to its employees’ gross wages. Then they can calculate its total insurable earnings.
Partnerships with employees are responsible for reporting and paying premiums for them and partners who are not exempt from coverage.
Executive officers in corporations
Construction businesses must estimate the total of their premiums owed based on the insurable earnings paid to their employees and executive officers.
Once again, the WSIB sets a minimum insurable income for a construction corporation’s executive officers if it has existed for less than a year. They calculate based on 33.3% of the annual maximum insurable earnings amount.
Premium = insurable earnings x premium rate ÷ 100
- The corporation must report the actual incomes of executive officers paid a regular employment income throughout the year for each reporting period up to the annual maximum. The corporation must do the same for its employees’ earnings.
- In cases where executive officers are not paid regular employment income throughout the year, the corporation must evaluate and report the annual insurable earnings it will pay to executive officers for each reporting period.
- They add this figure to their employee gross wages for the reporting period and multiply the result by the premium rate found on their premium rate statement.
- They divide this number by 100, giving them the total premium payable for their reporting period.
