Classification by contract in construction

When a business takes a contract to carry out a construction activity, the overall purpose of the contract determines the business activity and classification unit (CU) for the contract. This means that only one CU, and one premium rate, apply to the entire contract. In most cases, the business cannot break down the contract and report earnings in more than one CU based on trades when more than one trade works on the project. The exception is when a special operation is carried out as part of the main contract.

Frequently asked questions

What determines the business activity of the contract?

We work together with you to review your contract and determine the overall purpose of the contract based on the work and/or services outlined in the contract.

Example 1: Multiple trades

Domino Paving takes a contract to build a highway and is involved in all aspects of the work. The contract includes drainage and electrical work in addition to paving, but the overall purpose remains the construction of a highway. The overall purpose then determines the business activity and the CU that applies to the contract, in this case CU 4121-001 (Highways, Streets, and Small Bridges, Rate Group (RG) 711-02). Domino must report all insurable earnings for the contract (including drainage and electrical work) under this CU and premiums are billed at the corresponding premium rate.

Example 2: Subcontracting

XYZ Contracting takes a contract to construct an office building. XYZ subcontracts most aspects of the work such as excavation, form work, plumbing, electrical, etc. to businesses registered with the WSIB. The only direct earnings for the project are paid to unskilled labour on the site. XYZ also has employees engaged in ancillary operations, such as clerical and administrative work, that support the main business activity.

The overall purpose of the contract is to construct an office building. XYZ must report all the insurable earnings for both the unskilled labour and the ancillary operations under CU 4021-099 (Industrial, Commercial, and Institutional Construction, RG 723-02).

Example 3: Scope of contract

Standard Concrete takes different kinds of contracts to repair or restore parking garages.

3A. The business takes a contract to repair a parking garage. The work involves concrete repairs requiring minor incidental work such as rewiring. The overall purpose of the contract is concrete repair work, and Standard must report all insurable earnings for the contract under CU 4224-002 (Concrete Cutting and Drilling, RG 751-09).

3B. The business takes a contract to restore a parking garage. The work involves extensive renovations requiring electrical work, paving, and landscaping in addition to concrete repair. The overall purpose of the contract is to do major restorations and renovations to a parking garage. Standard must report all insurable earnings for the contract under CU 4021-099 (Industrial, Commercial, and Institutional Construction, RG 723-02).

What if there is no written contract?

Written contracts provide important information for determining the overall purpose of the contract including:

  • who is doing the work (the business) and for whom (the principal)
  • scope of project and details of work and/or services to be performed
  • associated costs
  • general timeframes to complete the project

When there is no written contract, you are responsible for substantiating the overall purpose of the project. You may use invoices when determining the overall purpose of the project and the applicable CU.

If the invoices do not show the overall purpose of the project, then other supporting documents may determine the appropriate CU. These may include documents, like:

  • work orders
  • work proposals/tenders
  • building permits

What if there are no documents that identify the overall purpose of the project?

When there are no documents to clearly identify the overall purpose of the project, we will determine the single business activity and CU that best captures the project.

What is a special operation?

When carried out as part of a larger contract, the following activities are special operations:

  • Large Bridge Construction (CU 4121-002, RG 732-02)
  • Millwright and Rigging Work (CU 4255-000, RG 737-01)
  • Wrecking and Structural Demolition (CU 4211-001, RG 748-01)
  • Structural Steel Erection (CU 4227-000, RG 748-03)
  • Form Work (high-rise) (CU 4222-001, RG 748-09)
  • Steel Reinforcing (CU 4223-000, RG 751-08)

If the construction contract includes a special operation necessary to carry out the contract, different rules apply when classifying the contract.

What’s the general rule for reporting a special operation?

You would first determine the overall purpose of the contract and identify the CU for it. Then, regardless of the size of the special operation compared to the contract as a whole, you must identify the special operation and its corresponding CU. (See exceptions below).

Example 4: special operation

Comfort Heating takes a contract to install the heating, air conditioning, and duct work in a small office building, so the overall purpose of the contract falls under CU 4241-099 (Plumbing, Heating, and Air Conditioning, Installation, RG 707-02). Included in the contract is the hoisting of large air conditioning units to the roof, and the firm hoists these units using their own employees. This activity is a special operation falling under CU 4255-000 (Millwright and Rigging Work, RG 737-01).

In this scenario, the premium rate for Rate Group 737 is higher than the premium rate for Rate Group 707.

If the payroll for the special operation is properly segregated, then the direct insurable earnings are classified under that CU. Payroll is considered to be properly segregated when separate and verifiable wage records are kept and are based on direct labour time spent on each of the business activities/CUs. Payroll is properly segregated when the wage records and labour time spent on the hoisting are clearly separate from the wage records for the air conditioning installation. The remaining direct insurable earnings are then classified in the CU that applies to the overall purpose of the contract, which in this case is the installation of heating, air conditioning, and duct work.

4A. Comfort maintains a segregated payroll for the direct insurable earnings relating to the hoisting. The hoisting earnings amount to 15 per cent of the total direct insurable earnings for the contract. The firm must report the hoisting earnings in CU 4255-000 (Millwright and Rigging Work, RG 737-01), and the remaining insurable earnings in CU 4241-099 (Plumbing, Heating, and Air Conditioning, Installation, RG 707-02).

If the payroll for the special operation is not properly segregated, the total insurable earnings for the contract are classified in the CU with the higher premium rate.

4B. Comfort does not maintain a segregated payroll for the direct insurable earnings relating to the hoisting. They estimate that 15 per cent of the total direct insurable earnings for the contract relate to the hoisting. The firm must report the total insurable earnings for the contract in CU 4255-000 (Millwright and Rigging Work, RG 737-01).

Are there exceptions to the rules for construction contracts with a special operation?

An exception may apply when the direct insurable earnings for the special operation are less than 10 per cent of the business’ total direct insurable earnings for the contract. In these cases, there is no requirement to report the special operation separately, and the insurable earnings for the special operation are classified in the CU that applies to the overall purpose of the contract.

In the examples below, the exception applies whether or not the firm maintains a segregated payroll.

4C. Comfort maintains a segregated payroll for the direct insurable earnings relating to the hoisting. The hoisting earnings amount to seven per cent of the total direct insurable earnings for the contract. Comfort reports the total insurable earnings for the contract in CU 4241-099 (Plumbing, Heating, and Air Conditioning, Installation, RG 707-02).

4D. Comfort does not maintain a segregated payroll for the direct insurable earnings relating to the hoisting. They estimate that seven per cent of the total direct insurable earnings for the contract relate to the hoisting. They report the total insurable earnings for the contract in CU 4241-099 (Plumbing, Heating, and Air Conditioning, Installation, RG 707-02).

Small businesses 

The rules for classification by contract and project apply to all businesses, including small businesses (a business with annual insurable earnings of less than five times the annual maximum insurable earnings ceiling). However, the rules about special operations don’t apply to small businesses.