Policy in practice: insurable earnings in construction

Examples: Contractors who are employees of the principal

Example 1: labour portion indicated in records

Scenario: Fabio is a contractor in the construction industry who works alone (without employees), exclusively for ABC Plumbing and provides labour and major materials. As Fabio does not meet the definition of an independent operator in the construction industry, the principal (ABC Plumbing) is considered Fabio’s employer.

ABC Plumbing has been keeping detailed records they use the labour portion shown on Fabio’s invoices to calculate and report his insurable earnings to the WSIB up to the annual maximum amount.

Example 2: labour portion (major materials) – 60 per cent of contract value

Scenario: Pierre is a contractor in the construction industry who works alone (without employees), exclusively for Superior Finishing for the past year. As Pierre does not meet the definition of an independent operator in the construction industry, the principal (Superior Finishing) is considered Pierre’s employer.

Pierre’s invoices only indicate the total contract value and that he provides paint. As paint is considered a major material, Superior Finishing will use 60 per cent of the contract value to calculate the labour portion of the contract and report it as Pierre’s insurable earnings to the WSIB up to the annual maximum amount.

Example 3: labour portion (heavy construction equipment) – 33.33 per cent of contract value

Scenario: Stefano is a contractor in the construction industry who works alone (without employees), and exclusively for Brown Excavating. As Stefano does not meet the definition of an independent operator in the construction industry, the principal (Brown Excavating) is considered Stefano’s employer.

Stefano’s invoices to Brown Excavating only indicate the total contract value, and that he provided a backhoe. As heavy construction equipment is provided in the direct performance of the work, Brown Excavating will use 33.33 per cent of the contract value to calculate the labour portion of the contract and report it as Stefano’s insurable earnings to the WSIB up to the annual maximum amount.

Independent operators

Independent operators in construction must report their insurable earnings for all business activities even non-construction activities, whether or not the coverage of the non-construction business activities is compulsory coverage or by-application. The independent operator must report up to the annual maximum insurable earnings amount.

Insurable earnings are based on the labour portion shown in an independent operator’s records, such as invoices and contracts.

Example: Independent operators

Example 1: independent operator – compulsory construction business activity and by-application non-construction business activity

Scenario: Fabio is a contractor in the construction industry who works alone (without employees), exclusively for ABC Plumbing and provides labour and major materials. As Fabio does not meet the definition of an independent operator in the construction industry, the principal (ABC Plumbing) is considered Fabio’s employer.

ABC Plumbing has been keeping detailed records they use the labour portion shown on Fabio’s invoices to calculate and report his insurable earnings to the WSIB up to the annual maximum amount.

Example 2: labour portion identified in records (reporting quarterly)

Scenario: Justin has self-declared as an independent operator in construction and reports to the WSIB on a quarterly basis. His invoices detail separate amounts for labour and for materials. For each reporting period, Justin calculates his actual insurable earnings by totalling the labour portion of his contracts and multiplying the total by his rate per $100.

Justin follows these steps to calculate his premium:

Take the labour portion of all contracts for the quarter to get the insurable earnings amount:

$12,480(X)

Multiply the insurable earnings amount (X) by the premium rate ($8 per $100 of insurable earnings) to get the premium amount for the quarter:

(12,480 X 8 ÷ 100 = 998.40)

$ 998.40

Justin’s premium is $998.40 this quarter

Example 3: labour portion – 100 per cent of contract value (reporting quarterly)

Scenario: Justin has self-declared as an independent operator in construction and reports to the WSIB on a quarterly basis. His invoices detail separate amounts for labour and for materials. For each reporting period, Justin calculates his actual insurable earnings by totalling the labour portion of his contracts and multiplying the total by his rate per $100.

Justin follows these steps to calculate his premium:

Take the labour portion of all contracts for the quarter to get the insurable earnings amount:

$12,480(X)

Multiply the insurable earnings amount (X) by the premium rate ($8 per $100 of insurable earnings) to get the premium amount for the quarter:

(12,480 X 8 ÷ 100 = 998.40)

$ 998.40

Justin's premium is $998.40 this quarter

Example 4: labour portion (major materials) – 60 per cent of contract value (reporting quarterly)

Robert has self-declared as an independent operator in construction and reports to the WSIB quarterly. Robert's invoices do not identify the labour portion of each contract. His invoices, however, indicate that he provided ceramic tiles, which the WSIB considers a major material. It's July, and time to report and pay, so Robert totals all his invoices for the quarter. He uses 60 per cent of the total value of all contracts for this period to calculate his insurable earnings amount.

Robert follows these steps to calculate his premium:

Take the total amount of all contracts for the quarter:	$28,365(X)
Multiply X by 60% to get the insurable earnings amount for the quarter: (28,365 X 60 ÷ 100 = 17,019)	$17,019 (Y)
Multiply the insurable earnings amount (Y) by the premium rate ($8 per $100 of insurable earnings) to get the premium amount for the quarter: (17,019 X 8 ÷ 100 = 1,361.52)	$1,361.52
Robert's premium is $1,361.52 this quarter

Example 5: labour portion (heavy construction equipment) – 33 one-third per cent of contract value (reporting quarterly)

Scenario: Kathy has self-declared as an independent operator in construction. Kathy's invoices don't identify the labour portion of each contract. But her invoices show that she provides a Bobcat in the performance of her contracts. As the provision of the heavy equipment is shown on her invoices, Kathy uses 33.33 per cent of the value of all contracts to calculate the labour portion. She reports this as her actual insurable earnings for the quarter.

Kathy follows these steps to calculate her premium:

Take the total amount of all contracts for the quarter:	$42,360(X)
Multiply X by 33.33 % to get the insurable earnings amount for the quarter: (42,360 X 33.33 ÷ 100 = 14,118.59)	$14,118.59(Y)
Multiply the insurable earnings amount (Y) by the premium rate ($8 per $100 of insurable earnings) to get the premium amount for the quarter: (14,118.59 X 8 ÷ 100 = 1,129.49)	$1,129.49
Kathy's premium is $1,129.49 this quarter

Sole proprietors with employees

Sole proprietors report earnings throughout the year based on an estimated annual amount of insurable earnings. They may use line 135 of previous year’s T1 General as a guide to estimate. If the sole proprietorship has just started and has no previous information on which to base an estimate, they can use the minimum amount (1/3 of maximum insurable earnings) as an estimate.

However, they must report the difference between the actual and the estimated amount in the last reporting period of the current year if they report quarterly or monthly.

Example: Sole proprietors with employees

Example 1: estimate using T1 General (reporting annually)

Scenario: Arturo is a sole proprietor in construction with an employee and reports annually. In April, Arturo must estimate his insurable earnings, as well as his employee’s insurable earnings to report and pay his WSIB premiums. Line 135 of Arturo’s T1 General showed the previous year’s net business income was $15,823 so he used this as his current estimated insurable earnings and added this amount to the estimated insurable earnings of his employees, $4,000, for a total of $19,823.

In November, Arturo just completed a large construction project and realizes his actual insurable earnings are higher than he estimated. Arturo contacts us to revise his estimated annual insurable earnings of $19,823 to reflect his actual insurable earnings. He increases his estimated insurable earnings to $55,000. Arturo pays the difference between the original estimated and revised estimated insurable earnings for the current year.

Example 2: estimate using T1 General (reporting quarterly)

Scenario: Jane is a sole proprietor in the construction industry she has employees and reports quarterly. In April, Jane must estimate her own insurable earnings to report and pay her WSIB premiums. Line 135 of Jane’s T1 General shows her net business income for the previous year as $31,068 so she uses this as her estimated insurable earnings for the current year.

Jane follows these steps to calculate her premium:

Take the estimated annual insurable earnings for the sole proprietor	$31,068(X)
Divide X by the reporting frequency (quarterly, i.e., divide by 4) (31,068 ÷ 4 = 7,767)	$7,767(Y)
Add Y to the actual insurable earnings of all employees ($24,126.34) to get the total insurable earnings amount to be reported for the quarter. (7,767 + 24,126.34 = 31,893.34)	$31,893.34(Z)
Multiply the insurable earnings amount (Z) by the premium rate ($8 per $100 of insurable earnings) to get the premium amount for the quarter: (31,893.34 X 8 ÷ 100 = 2,551.47)	$2,551.47
Jane’s premium is $2,551.47 this quarter.

Example 3: estimate not using T1 General (reporting quarterly)

Raymond is a sole proprietor in the construction industry and has employees. He reports to the WSIB quarterly. It’s April, and it is time to make a report and payment to the WSIB. Raymond must estimate his own insurable earnings for the year. Line 135 of Raymond’s T1 General shows his previous year’s net business income as $2,000. Raymond knows that his net business income will be larger for the year ahead and estimates it to be $40,000.

Take the estimated annual insurable earnings for 2019 of the sole proprietor	$40,000(X)
Divide X by the reporting frequency (quarterly, i.e., divide by 4) (40,000 ÷ 4 = 10,000)	$10,000(Y)
Add Y to the actual insurable earnings of the workers for the quarter ($28,887) to get the insurable earnings amount for the quarter (10,000 + 28,887 = 38,887)	$38,887(Z)
Multiply the insurable earnings amount (Z) by the premium rate ($8 per $100 of insurable earnings) to get the premium amount for the quarter (38,887 X 8 ÷ 100 = 3,110.96)	$3,110.96
Raymond’s premium is $3,110.96 this quarter

Example 4: use of minimum insurable earnings (one-third of the annual maximum amount) (reporting quarterly)

Scenario: Joanne has just opened a construction business as a sole proprietor with two employees. Because this is her first year in business, she does not have anything on which to base an estimate of insurable earnings. Joanne uses the minimum insurable earnings amount, which is one-third of the annual maximum of $90,000 (for the purposes of this example, see Calculating your premiums for the current year’s annual maximum), as her annual estimated insurable earnings.

Joanne follows these steps to calculate her premium:

Take the estimated annual insurable earnings for the sole proprietor (1/3 of the maximum amount): (90,000 ÷ 3 = 30,000)	$30,000 (X)
Divide X by the reporting frequency (quarterly, i.e., divide by 4): (30,000 ÷ 4 = 7,500)	$7,500 (Y)
Add Y to the actual insurable earnings of workers ($20,800) to get the insurable earnings amount for this quarter: (7,500 + 20,800 = 28,300)	$28,300 (Z)
Multiply the insurable earnings amount (Z) by the premium rate ($8 per $100 of insurable earnings) to get the premium amount for this quarter: (28,300 X 8 ÷ 100 = 2,264)	$2,264
Joanne’s premium is $2,264 this quarter.

Partnerships with or without employees

Partnerships report a portion of each non-exempt partner’s estimated insurable earnings for each reporting period. If they have employees, they must also report their actual earnings as well, up to the annual maximum amount. The partnership can use a T2125 Statement of Business for Professional Activities from the previous year as a guideline for the estimate. If the partnership has just started and has no previous information on which to base an estimate, they can use the minimum amount (one-third of maximum insurable earnings) as an estimate for each partner.

The partnership must report the difference between the actual and the estimated amount in the last reporting period of the current year if it reports quarterly or monthly. If the partnership reports annually and its reported estimated annual insurable earnings do not accurately reflect its actual insurable earnings, the partnership must contact the WSIB within 10 days after the change has occurred to revise the estimated insurable earnings. Changes can be made as many times as necessary throughout the year. A partnership may revise its estimated insurable earnings if the actual insurable earnings are less than the estimated.

Examples: Partnerships with or without employees

Example 1: estimate using T2125 (reporting quarterly)

Scenario A: Evan and Sophia are non-exempt partners without employees in the construction industry, and report quarterly. To estimate the annual insurable earnings amount for the partners, the partnership uses the net business income from T2125 Statement of Business for Professional Activities for the previous year which was $130,000. For the purposes of this example, the annual maximum is $92,000 see Calculating your premiums for the current year’s annual maximum.

Partner name	Percentage of partnership (A)	Partner’s share (partnership’s net business income x A) (B)	Annual maximum amount	Partner’s estimated insurable earnings (C)
Evan	40%	$130,000 40% = $52,000	$92,000	$52,000 / 4= $13,000 per quarter
Sophia	60%	$130,000 60% = $78,000	$92,000	$78,000/4=$19,500 per quarter
Total estimated annual insurable earnings (total of column C)				$130,000

Scenario B: in November, the partners determine that their actual insurable earnings to date are higher than their revised estimate insurable earnings. Evan has earned $135,000 and Sophia has earned $140,000 for a total of $275,000 to date. Sophia advises us that their estimated insurable earnings are $184,000 for the calendar year and pays the premium difference. Both partner’s earnings were subject to the annual maximum insurable earnings amount therefore their estimated insurable earnings were revised to $184,000 ($92,000 + $92,000).

Partner name	Percentage of partnership (A)	Partner’s share (partnership’s net business income x A) (B)	Annual maximum amount	Partner’s estimated insurable earnings (subject to annual maximum or minimum, if applicable) (C)
Evan	40%	$275,000 40% = $110,000	$92,000	$92,000/4=$23,000 per quarter
Sophia	60%	$275,000 60% = $165,000	$92,000	$92,000/4=$23,000 per quarter
Total estimated annual insurable earnings (total of column C)				$184,000

Executive officers in a corporation

If a corporation pays its executive officers regular employment income throughout the year, you must estimate insurable earnings of executive officers if reporting annually,or use the actual insurable earnings reporting quarterly or monthly.

If the corporation has employees, you report the executive officers’ insurable earnings in addition to the estimated earnings of employees if reporting annually, or the actual earnings of employees if reporting quarterly or monthly.

If executive officers do not get regular employment income throughout the year, the corporation estimates its annual insurable earnings and reports on this estimate in each reporting period.

Examples: Executive officers in a corporation

Example 1: executive officers receiving dividends (T5) (reporting annually)

Scenario:Jazmin Electrical Inc. has three non-exempt executive officers and no employees and reports annually. None of the executive officers are getting a regular salary throughout the year.

At the end of each year, the executive officers receive a dividend reported by the corporation on a T5. Last year, two executive officers received a dividend of $65,000 each and one received a dividend of $105,000. To estimate the annual insurable earnings in April, the corporation used the previous year’s T5 amounts, up to the annual maximum for each individual (which was $90,000 for the purposes of this example) and reported $220,000.

Example 2: executive officers with regular employment income (reporting monthly)

ABC Roofing Ltd. has four non-exempt executive officers without employees and reports to the WSIB monthly. All executive officers get a regular salary and all of them earn more than the annual maximum amount.

When reporting to the WSIB, the corporation reports the actual earnings for all four executive officers each month until the amount reported for each officer reaches the annual maximum amount.

If you have more than one North American Industry Classification System (NAICS) code

If a business has been assigned more than one NAICS code (NC), the insurable earnings may be considered either ‘common’ or ‘direct.’ Insurable earnings of sole proprietors, partners and executive officers are considered common earnings if segregated payroll records cannot be maintained for them. The payroll is considered segregated if, payroll records directly applicable to each business activity, are maintained and can be verified and supported by acceptable documentation as outlined in our policy on Determining Insurable Earnings (14-02-08).

The earnings reported for non-exempt partners and executive officers are not considered common earnings.

Example 1: corporation with multiple NAICS codes and premium rates including non- exempt partners and executive officers

Scenario: Riel Construction Inc. has two executive officers. The corporation takes roofing contracts and trucking contracts and has dedicated workers for each business activity. The multi-rating criteria has been met and as a result there are separate premium rates for the roofing and trucking business activities. For more information on the multi-rating criteria, please see the Single and Multiple Premium Rates policy (14-01-07).

One executive officer attends job sites with the workers. The other executive officer does not perform any construction work, but has chosen not to be exempt from WSIB coverage. Instead, they requested the non-exempt partners and executive officers classification for reporting the insurable earnings of the non-exempt executive officer who does not perform any construction work. The executive officers receive regular salary throughout the year, so the corporation reports its actual insurable earnings along with those of its workers each quarter.

For this example, the premium rate for roofing (NAICS 238160 Roofing contractors, Subclass G3) is $8 per $100 of insurable earnings, the premium rate for trucking (NAICS 484110 General freight trucking, local, Subclass F1) is $10 per $100 of insurable earnings, and the premium rate for the non-exempt partners and executive officers classification (Classification Code 007030 Non-Exempt Partners and Executive Officers in Construction - G3) is $0.25 per $100 of insurable earnings.

The direct insurable earnings for the roofing employees this quarter is $45,000 and $15,000 for the trucking workers. The insurable earnings for the executive officer in the non-exempt partners and executive officers classification are $16,000 (box 2A – separate earnings) this quarter and $18,000 (box 2 - common earnings) for the executive officer performing construction work.

Completing your premium remittance form

Step	Example
1. Determine the direct earnings for each NC, excluding non-exempt reduced premium rate for the reporting period. Write the amounts in column 1 beside the NC description.	NAICS 238160 = $45,000 NAICS 484110 = $15,000
2. Total the direct earnings from all NCs for the reporting period. Write the total in box 1.	The corporation's total direct earnings are $60,000.
3. Determine the total common earnings (insurable earnings of the executive officer working in construction as segregated payroll records cannot be maintained for him). Write the total in box 2.	Total common earnings are $18,000 for this quarter.
4. Determine the total insurable earnings for the executive officer eligible for the non-exempt partners and executive officers classification. Write the total in box 2A and in column 4, opposite the classification code description for this rate.	The total insurable earnings for the executive officer are $16,000 for non-exempt reduced premium rate. Classification Code 007030 = $16,000
5. Excluding the earnings in the classification code for non-exempt partners and executive officers, divide the direct earnings for each of the other classification codes, by the total direct earnings of these other classification codes. This results in the proportion of common earnings to use for each classification code. Then multiply each amount by 100 to get the percentage. Write the percentages in column 2 beside the applicable classification code description. (Do this calculation for each classification code.)	For NAICS 238160, the direct earnings ($45,000) in column 1 is divided by the total direct earnings ($60,000) in box 1 and multiplied by 100. This gives the percentage (75%) in column 2, which is used to determine the amount of common earnings to assign to NAICS 238160 . For NAICS 484110, the direct earnings ($15,000) in column 1 is divided by the total direct earnings ($60,000) in box 1 and multiplied by 100. This gives the percentage (25%) in column 2, which is used to determine the amount of common earnings to assign to NAICS 4841100.
6. Multiply the percentage for each classification code by the total common earnings box 2. This gives the amount of common earnings to assign to each classification code. Write the amounts in column 3 beside the applicable classification code description. (Do this calculation for each classification code.)	For NAICS 238160: (75 X 18,000 ÷ 100 = 13,500) For NAICS 484110: (25 X 18,000 ÷ 100 = 4,500)
7. Total the common earnings entered in column 3. Write the total in box 3.	The total prorated common earnings for the corporation are $18,000.
8. Add the common earnings amount in column 3 plus the direct earnings in column 1 for each classification code, excluding non-exempt partners and executive officers premium rate. Write the totals in column 4 beside the applicable classification code. (Do this calculation for each classification code.)	For NAICS 238160, the common earnings ($13,500) in column 3 plus direct earnings ($45,000) in column 1 equals insurable earnings of $58,500 in column 4. (13,500 + 45,000 = 58,500) For NAICS 484110, the common earnings ($4,500) in column 3 plus direct earnings ($15,000) in column 1 equals insurable earnings of $19,500 in column 4. (4,500 + 15,000 = 19,500)
9. Total the insurable earnings in column 4 for all NCs. Write the total in box 4. This total equals the total direct box 1, plus common earnings box 2, plus the insurable earnings for non- exempt reduced premium rate box 2A.	Total insurable earnings are $94,000. This total equals the direct earnings ($60,000) in box 1, plus the common earnings ($18,000) in box 3, plus the earnings in non- exempt reduced premium rate ($16,000) in box 2A.
10. Calculate the total premium due.	For NAICS 238160: (58,500 X 8 ÷ 100 = 4,680) For NAICS 238320: (19,500 X 10 ÷ 100 = 1,950) For Classification Code 007030: (16,000 X .25 ÷ 100 = 40) For the total premium due: (4,680 + 1,950 + 40 = 6,670)
Riel Construction Inc.'s premium is $6,670.00 this quarter.

		Column 1	Column 2	Column 3	Column 4
Classification		Direct earnings	% of total direct earnings	Prorated common earnings	Insurable earnings
Classification code	Classification code description		Column 1 ÷ box 1 x 100	Box 2 x column 2 ÷ 100	Column 1 + column 3
NAICS 238160	Roofing Contractors	$45,000	75	$13,500	$58,500
NAICS 484110	General freight trucking, local	$15,000	25	$4,500	$19,500
Classification code 007030	Non- exempt Partners and Executive Officers in Construction - G3				$16,000
TOTAL		Box 1: $60,000	100	Box 3: $18,000	Box 4: $94,000
Total Common earnings	Box 2: $18,000
Total separate earnings	Box 2A: $16,000

Example: Completing your remittance form

Example 2: executive officers receiving dividends – T5 (reporting quarterly)

Tom’s Aluminum Siding Inc. has two executive officers and employees, and reports quarterly to the WSIB. Neither executive officer is getting a regular salary throughout the year. At the end of each year, the executive officers receive a dividend reported by the corporation on a T5. Last year, each officer received a dividend of $50,000. The corporation uses the T5 amounts from the year before to estimate its annual insurable earnings for this year.

The corporation follows these steps to calculate its first quarterly premium:

Take the estimated annual insurable earnings for the two executive officers (50,000 + 50,000 = 100,000)	$100,000 (X)
Divide X by the reporting frequency (quarterly, i.e., divide by 4) (100,000 ÷ 4 = 25,000)	$25,000 (Y)
Add Y to the actual insurable earnings of workers ($14,812) to get the insurable earnings amount for the quarter (25,000 + 14,812 = 39,812)	$39,812 (Z)
Multiply the insurable earnings amount (Z) by the premium rate ($8 per $100 of insurable earnings) to get the premium amount for the quarter (39,812 X 8 ÷ 100 = 3,184.96)	$3,184.96
The premium for the corporation is $3,184.96 this quarter

Working for more than one construction business

When an independent operator, sole proprietor, partner of a partnership or an executive officer of a corporation works for more than one business and they earn more than the annual maximum, contact us to let us know.

Material change in circumstances

You are responsible for reporting any material change in circumstances within 10 days. Examples include:

if an independent operator no longer qualifies for independent operator status
if an independent operator no longer takes on commercial contracts
change in exemption status

See our policy on Material change in circumstances - Employer (22-01-01) for more information.

Verifying information

To verify reported annual amounts, we may request to review documentation like:

Ownership documentation (e.g., Corporate Minute Book, Business or Partnership Registration)
Payroll records, such as T4's, T4A's, and payroll journal(s)
T5 Information Returns
T5018, Statement of Contract Payments
Clearances obtained for all retained contractors
Prepared financial statements, including statement of business activities or profit and loss statement
Contractors' invoices/contracts
Sales invoices/contracts
Purchase receipts
Cheque registers or cash disbursement journals

Any inaccurate information provided to the WSIB may be considered a lack of full disclosure or making a false statement and can impact the period of premium adjustments made to your account. To learn more see our Employer Premium Adjustments policy (14-02-06).

The WSIB and the Canada Revenue Agency (CRA) exchange information to maintain the integrity of their systems and ensure a level playing field for Ontario businesses.

Example: Working for more than one construction business

Example 1: labour portion included in principal’s insurable earnings

Scenario: Bruno is a carpenter that doesn’t have workers. He has contracted with TBS Inc. exclusively since January 1 of the previous year.

When TBS Inc. is audited, the auditor determines that insurable earnings for Bruno have not been reported to the WSIB. The auditor confirms Bruno is not registered as an independent operator with the WSIB and finds no evidence that Bruno is an independent operator in construction. Therefore, the auditor confirms that TBS Inc. should have been reporting Bruno’s insurable earnings under their WSIB account. The WSIB considers Bruno to be an employee (worker) for TBS Inc.

The WSIB holds TBS Inc. liable for the premiums on the unreported labour portion of Bruno's contracts with TBS Inc. and includes the labour portion in the business’ audited insurable earnings for the previous and current year. TBS Inc. must continue to report and pay the premiums on Bruno’s insurable earnings for the time Bruno is working for them.