Beginning January 1, 2013, big changes will apply to any business involved in the construction industry. At this date, all companies involved in construction will have increased responsibilities under the WSIB legislation, in regards to both their own employees and to contractors that they hire. There are some classes of employees in the construction industry that were exempt from WSIB under prior legislation but will now be included. Also, the remuneration used to calculate the premiums for some of these groups has changed. Principal contractors are also now responsible for ensuring that sub-contractors have proper coverage before beginning work
These changes have resulted in a number of questions from affected businesses which are discussed below.
How do I determine if my business falls under the construction industry definition?
WSIB defines a construction employer as any employer whose predominant business activity is classified with Class G – Construction. A complete list of classes can be found at the WSIB Website . The new rules apply to any business that has at least one listed construction rate in the business.
What groups of people in the construction industry are included for compulsory coverage under WSIB?
The following groups in the construction industry must obtain WSIB coverage:
- Workers in receipt of wages – this group includes regular employees who are in the employ of the construction company.
- Contractors who are workers of the principal contractor – this includes people hired by the principal contractor to complete work, but who are not independent operators (self reporting WSIB). The principal contractor is required to pay WSIB premiums based on the labour portion of the contract.
- Deemed workers – these are people who were not previously required to be covered under WSIB (and continue to be exempt from coverage in industries other than construction). This class includes executive officers, independent contractors, sole proprietors and partners.
What does WSIB consider remuneration?
For employees, remuneration is considered to be any wages that are captured on a T4 at year end.
For deemed workers, executive officers, independent contractors, sole proprietor and partners in the construction industry, the definition of remuneration is extended to include:
- Normal insurable earnings as reported for employees;
- Other insurable employment income included on a T4A, such as management/director’s fees, certain retirement and annuity payments and other income;
- Any dividends reported on a T5.
How do I calculate the labour portion of a contract?
This calculation relates to the WSIB premiums to be remitted by a principal contractor on remuneration paid to people hired by the principal where those people hired are not independent operators already paying WSIB.
The simplest way is to have sub-contractors submit detailed records of all expenses related to materials and equipment. These expenses are then deducted from the total contract price to determine the labour portion. When detailed records are not kept, WSIB does set out a formula based on what was supplied as follows:
When no evidence exists that the contractor supplied major materials or heavy equipment, 100% of the contract value in included in insurable earnings.
Where evidence exists that major materials were supplied, the principal contractor is to use 60% of the contract value as insurable earnings.
Where evidence exists that heavy equipment was supplied, the principal contractor is to use 33.3% of the contract value as insurable earnings.
How are premiums calculated?
WSIB premiums are calculated as a set rate percentage of based on the rate class assigned by WSIB. At periodic intervals, based on annual insurable earnings (monthly reporting for annual insurable earnings in excess of $300,000, quarterly for $20,000-$29,999, and annually for all others), WSIB will request you file a return that details the insurable earnings for the period. These reported earnings are multiplied by the applicable rate to determine the periodic premium.
Are there minimum and maximum insurance premiums?
For 2013, the maximum insurable earnings for WSIB premiums is $83,200 per employee. For regular employees there is no minimum. However, any sole proprietor, independent contractor or executive officer must pay WSIB insurance premiums on a minimum of 1/3 of the annual maximum ($27,733.33 for 2013).
On occasion, the WSIB may accept a lower amount than the minimum where business records provide sufficient evidence that the lower amount is more accurate.
What are the WSIB rates?
WSIB rates vary depending on the type of construction the business is involved in. A complete list of premiums can be found at http://www.wsib.on.ca/en/community/WSIB/ArticleDetail?vgnextoid=002c768461e8a310VgnVCM100000469c710aRCRD.
Are there any exemptions available under the new legislation?
The new construction WSIB legislation allows for an exemption in either of the following cases:
Home Renovators will be able to continue to elect not to carry WSIB coverage if they work exclusively in home renovation and meet all of the following requirements:
- Do not employ any workers.
- Do all work directly for the homeowner.
- Receive payment directly from the homeowner.
Executive Officer/Partner – corporations or partnerships, whether they employ workers or not, may select one executive officer or partner to apply for an exemption. In order to qualify for the exemption, the individual must not perform any construction work at all.
How do I know who my executive officers are?
For corporations that are legally incorporated with share capital, WSIB considers the executive officers to include any of the following people: members of the board of directors; chair/vice chair of the board; president; CEO; CFO; COO; vice-president; corporate secretary; treasurer; and general manager. WSIB will also consider as an executive officer anyone who in fact performs the duties and responsibilities associated with these roles.
What if I have multiple executive officers who are not physically involved in construction?
Beginning January 1, 2013, WSIB will institute a new rate class, 755, for non-exempt executives who are not involved in construction activities at all. These executives will have to pay WSIB premiums at a rate of $0.21 per $100 of insurable earnings.
Do these changes affect other companies I own or am involved with?
If you own, or are a major shareholder, in multiple corporations, WSIB may determine that these companies are associated. This association can also occur if one company is owned by another, or separate companies are controlled by related people.
For WSIB to classify employers as associated, the business activities of one must be considered as ancillary to the other.
If the employers are deemed to be associated, WSIB will classify all the businesses into the same classification unit. This will apply the new construction rules to all associated employers, including the ancillary business.