Assigning insurable earnings

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The WSIB sets an annual maximum for insurable earnings. For 2020, the annual maximum was $95,400. If you are closing an account in 2021, the 2021 annual insurable earnings maximum is $97,308.

NAICs codes (NCs) are assigned to your account based on your business activity(ies), and insurable earnings are reported under the NCs.

For accounts with only one NC, all earnings are direct earnings and are reported under the one NC.

Segregated earnings records

To assign insurable earnings when the account has multiple NCs, you must maintain properly segregated earnings records for each CU.

The proper segregation of earnings must be based on the direct labour time spent on each business activity and must be verifiable through earnings records.

  • For employees who work in one business activity, all earnings are assigned to the NC for that business activity.
  • For employees who divide their time among two or more business activities, you must use your segregated records to assign the earnings to the appropriate NCs according to the direct labour time spent in each NC.

Example 1

Segregating earnings based on labour time spent in the business activity of the NC
A business does four different business activities and is classified in four different NCs. Some employees do work only related to one NC
. Others do work related to more than one NC.

You must keep segregated records that show the amount of direct earnings each employee has for each NC. Therefore, the employer is able to directly assign the insurable earnings of each employee to the appropriate NC based on labour time spent in each business activity.

Optional insurance amounts or earnings from ancillary operations that can be directly assigned to a NC.

Assign these earnings directly to the appropriate NC if:

  • they support more than one NC, and
  • their earnings records are segregated by NC

Example 2

How to assign direct earnings for ancillary operations

The business in the previous example has three office staff whose work supports all four business activities. The business keeps segregated earnings records for each office employee.

The business assigns each persons earnings to all the NCs according to the direct labour time spent supporting the business activity in each NC. All the earnings of the ancillary operation in this case are direct earnings and can be directly assigned to a NC.

See  our policy on Classification Scheme for more information on ancillary operations.

Common earnings

For businesses with more than one NC, common earnings are any earnings from ancillary operations or optional insurance amounts that cannot be directly assigned to a single NC, and cannot be supported by segregated earnings records. These are called common ancillary earnings as they support more than one business activity and must be assigned to the relevant NC on a prorated basis.

If the business in example 2 (see above in Segregated earnings records) was not able to segregate the earnings of the three office staff performing ancillary work to support the four business activities, then the insurable earnings for the office employees would be considered common ancillary earnings.

The business will have to prorate the common earnings based on the direct earnings for each NC and then assign the appropriate prorated amount to each NC.

Assigning common earnings

For businesses with multiple NCs and common earnings, the total insurable earnings for a NC equals the NC's direct earnings plus the prorated common earnings for the NC.

Example

Here is how to determine how much to assign to each NC. Use the blank worksheet below to calculate and allocate common earnings. For each step, the corresponding calculation in the example is explained below.

In the example account, there are four NCs with both direct and common earnings: 1921-000, 1931-000, 1993-000, and 1999-000.

 

Step Example
  1. Determine the direct earnings for each NC. Write the amounts in column 1 beside the NC description.
See column 1.
  1. Total the direct earnings from all NCs. Write the total in box 1.
Total direct earnings is $500,000 (see box 1).
  1. Determine the total common earnings. Write the total in box 2.
Total common earnings is $48,000 (see box 2).
  1. Divide the direct earnings for each NC by the total direct earnings for all NCs. This results in the proportion of common earnings to use for each NC. Then multiply each amount by 100 to get the percentage. Write the percentages in column 2 beside the applicable NC description (complete this calculation for each NC.)
For NC 314110, the direct earnings ($100,000) in column 1 is divided by the total direct earnings ($500,000) in box 1 and multiplied by 100. This gives the percentage (20%) in Column 2, which is used to determine the amount of common earnings to assign to each NC.
  1. Multiply the percentage for each NC by the total common earnings box 2. This gives the amount of common earnings to assign to each NC. Write the amounts in column 3 beside the applicable NC description. (Do this calculation for each NC.)
For NC 314110, multiply the percentage (20%) in column 2 by the total common earnings of $48,000 in box 2. This gives the amount of common earnings of $9,600 in Column 3.
  1. Total the common earnings entered in column 3. Write the total in box B.
Total prorated common earnings is $48,000 (see box 3). The amounts in box 2 and 3 should match.
  1. Add the common earnings amount in column 3 plus the direct earnings in column 1 for each NC. Write the totals in column 4 beside the applicable NC (complete this calculation for each NC).
For NC 314110, the common earnings ($9,600) in Column 3 plus direct earnings ($100,000) in column 1 equals insurable earnings of $109,600 in Column 4.
  1. Total the insurable earnings in column 4 for each NC. Write the total in box 4. This total equals the total direct box 1 plus common earnings box 2.
Total insurable earnings is $548,000 (see Box 4). This total equals the direct earnings ($500,000) in box 1 plus the common earnings ($48,000) in box 3.
  1. Transfer your calculations from the worksheet to your reconciliation form.
 

 

 

Worksheet example:
Calculating and allocating common earnings

  Column 1 Column 2 Column 3 Column 4
Classification Direct Earnings % of Total
Direct Earnings
Prorated Common
Earnings
Insurable
Earnings
NC
Code
NC Description   Column 1 ÷ Box 1
x 100
Box 2 x Column 2
÷ 100
Column 1 + Column 3
314110 Carpet and rug mills $100,000 20% $9,600 $109,600
314910 Textile bag and canvas mills $250,000 50% $24,000 $274,000
314120 Curtain and linen mills $60,000 12% $5,760 $65,760
314990 All other textile product mills $90,000 18% $8,640 $98,640
Total
BOX 1
$500,000
100%
BOX 3
$48,000
BOX 4
$548,000
Total Common Earnings
BOX 2
$48,000
     

Assigning insurable earnings for construction

Multiple NAICs codes (NCs)

If you have more than one NC, the insurable earnings may be considered either 'common' or 'direct'. The insurable earnings of sole proprietors, partners and executive officers are considered common earnings if they cannot be segregated properly.

The earnings in the reduced premium rate for non-exempt partners and executive officers are an exception to the rules for prorating common earnings. Insurable earnings for the eligible partners or executive officers are assigned the reduced premium rate and are not considered common earnings. The reduced premium rate for non-exempt partners and executive officers is not to be used for the purpose of prorating common earnings.

For more information, visit Mandatory Coverage in Construction.

Example: Corporation with multiple NCs including non-exempt partners and executive officers

The Riel Construction Inc. has two executive officers. The corporation takes commercial roofing contracts and siding contracts, and has dedicated employees for each business activity.

One executive officer attends job sites with the employees. The other executive officer does not perform any construction work, but has chosen not to be exempt from WSIB coverage. The WSIB has confirmed the addition of the reduced premium rate for the non-exempt executive officer who does not perform any construction work.

For this example only, the premium rate for roofing (NC 1) is $8 per $100 of insurable earnings, the premium rate for siding (NC 2) is $10 per $100 of insurable earnings, and the reduced premium rate for non-exempt partners and executive offiers (NC 3) is $0.25 per $100 of insurable earnings.

The direct insurable earnings for the roofing employees is $200,000 and $50,000 for the siding employees. The insurable earnings for the executive officer in non-exempt partners and executive officers is $70,000 (box 2A – Separate Earnings) and $80,000 (box 2 – Common Earnings) for the executive officer performing construction work.

 

In the example, there are three NCs with both direct and common earnings:

Step Example

1.  Determine the direct earnings for each NC, excluding non-exempt partners and executive officers for the year. Write the amounts in column 1 beside the NC description

NC 1= $200,000
NC 2 = $50,000

 

2.  Total the direct earnings from all NCs for the year. Write the total in box 1.

The corporation's total direct earnings are $250,000

 

3.  Determine the total common earnings including insurable earnings for the executive officers working in construction, if they cannot properly segregate their earnings. Write the total in box 2.

For this example the common earnings are for the one executive officer performing construction work who cannot segregate their earnings. Total common earnings is $80,000 for 2020. (see box 2)

4. Determine the total insurable earnings for non-exempt partners and executive officers. Write the total in box 2A and in column 4, opposite the NC description for this rate.

The total insurable earnings for the executive officer under non-exempt partners and executive officers. NC 3 = $70,000

 

5.  Calculate the proportion of common earnings to use for each NC by dividing each NC by the total direct earnings calculated in step 1.

NC 1, divide direct earnings ($200,000) in column 1 by the total direct earnings ($250,000) in box 1 and multiplied by 100. The percentage (80%) in column 2, is used to determine the amount of common earnings to assign to NC 1.

 

NC 2 divide direct earnings ($50,000) in column 1 by the total direct earnings ($250,000) in box 1 and multiplied by 100. The percentage (20%) in column 2, is used to determine the amount of common earnings to assign to NC 2.

6. Multiply the percentage for each NC by the total common earnings box 2. Write the amounts in column 3 beside the applicable NC description.

For NC 1:
(80 X 80,000 ÷100 = 64,000)

For NC 2:
(20 X 80,000 ÷100 = 16,000)

7.  Total the common earnings entered in column 3. Write the total in box 3. This should equal the amount from step 3.

The total prorated common earnings for the corporation is $80,000.

 

8. Add the common earnings amount in column 3 plus the direct earnings in column 1 for each NC, excluding non-exempt partners and executive officers. Write the totals in column 4 beside the applicable NC.

 

NC 1, the common earnings plus direct earnings equals insurable earnings.
(64,000 + 200,000 = 264,000)

NC 2, the common earnings plus direct earnings equals insurable earnings.
(16,000 + 50,000 = 66,000)

 

10. Calculate the total premium rate.

 

NC 1: (264,000 X 8 ÷100 = 21,120)
NC 2: (66,000 X 10 ÷100 = 6,600)
NC 3: (70,000 X .25 ÷100 = 175)
Total premium due: (21,120 + 6,600 +175 = 27,895)

 

 

Worksheet example: Calculating and allocating common earnings - Construction

  Column 1 Column 2 Column 3 Column 4
Classification Direct Earnings % of Total
Direct Earnings
Prorated Common
Earnings
Insurable
Earnings
NC
Code
NC Description   Column 1 ÷ Box 1
x 100
Box 2 x Column 2
÷ 100
Column 1 + Column 3
NC 1 Roofing $200,000 80% $64,000 $264,000
NC 2 Siding $50,000 20% $16,000 $66,000
NC 3 Reduced premium rate for non-exempt partners and executive officers       $70,000
           
Total
BOX 1
$250,000
100%
BOX 3
$80,000
BOX 4
$600,000
Total Common Earnings
BOX 2
$80,000
     
Total Separate Earnings
BOX 2A
$70,000
     

Apply these steps for calculating your premiums for the reconciliation period (calendar year). Riel Construction Inc.’s premium is $27,895 for 2020.

Use this blank worksheet (PDF) to calculate amounts for Section B of the Reconciliation Form. If you are in the construction industry, refer to the Worksheet for calculating and allocating common earnings in construction (PDF).