Calculating Insurable Earnings
* IE is insurable earnings
This guide is NOT for account closures for individuals and companies carrying on business in construction in 2013.
The WSIB sets an annual maximum for insurable earnings. For 2012, the annual maximum was $81,700. For 2013, the annual maximum is $83,200.
For WSIB purposes, it is suggested that you keep payroll and other records for a period of 7 years.
The WSIB bases the premium charged to each classification unit (CU) in an account on the insurable earnings of each worker. The amounts for each individual with optional insurance are also included in the premium calculation.
To calculate insurable earnings:
- For workers who are not contractors/subcontractors, deduct the non-insurable gross earnings from the gross earnings (see below for details)
- For workers who are contractors/subcontractors, determine the labour portion of the contract. This amount is the insurable gross earnings (details)
- Apply the annual maximum insurable earnings to eliminate any possible excess earnings ($81,700 for 2012, $83,200 for 2013).
Once the insurable earnings for each worker and individual with optional insurance are determined, they must be assigned to the appropriate CU(s). The premium for the CU is calculated by multiplying the total insurable earnings for the CU by your premium rate and dividing by 100.
Earnings records
Earnings records confirm the total gross earnings of your workers for the calendar year. These records should include:
- The names of your workers
- Their positions
- Their earnings
- The hours and days they were paid
- The dates on which they were employed.
Record keeping when hiring contractors/subcontractors
Keep business records, including written contracts and contractors’/subcontractors’ invoices, that show
- Dates worked, days and hours paid
- Amounts earned
- Amounts paid for labour and costs of material/equipment supplied by the contractor/subcontractor.
Gross earnings
For workers who are not contractors/subcontractors, gross earnings are the total earnings from any source. For WSIB purposes, gross earnings are of two kinds: insurable and non-insurable. Only insurable gross earnings are included in the premium calculation, subject to the maximum earnings ceiling.
If you have workers who work outside of Ontario and do not know how to report their earnings, contact a WSIB account representative.
For more examples of insurable gross earnings and the complete list of non-insurable gross earnings, check the Operational Policy Manual, document number 14-02-08, Determining Insurable Earnings or contact a WSIB account representative.
Insurable gross earnings
- Regular gross earnings includes such items as wages (hourly, daily, etc.), annual salary, and payment for piecework. These are usually reported on pay or earnings stubs and on T4 slips and include any amounts reported on a T4 as deductions for:
- Income tax
- Employment Insurance (EI)
- Canada Pension Plan (CPP)
- Extended health care
- Dental plan
- Group insurance
- Superannuation
- Loss or use of equipment or tools
- Union dues
- Loan payments.
- Bonuses, commissions and gratuities
or tips - Honorariums greater than $500
- Merchandise awards
- Most allowances and taxable benefits
- Pay in lieu of notice as required under the Employment Standards Act
- Profit sharing
- Overtime earnings
- Room and board that forms part of earnings; report room and board at the actual value
- Salary continuance payments paid during the remainder of the calendar year the person left employment
- Sick pay
- Stand-by pay
- Top-up amounts paid by the employer for absences due to non-work related injuries, which are included on the worker’s T4
- Vacation pay.
Non-insurable gross earnings
- Adoption: payments made by the employer to help a worker with legal fees that result from an adoption process
- Book or ledger credits recorded by the employer representing a portion of a worker’s wages but not paid in that year
- Honorariums up to $500
- Maternity benefits: any amount paid in addition to EI benefits
- Payments by an employer to a worker who is receiving full WSIB benefits
- Retiring allowance such as wages in lieu of notice in excess of the Employment Standards Act minimum
- Salary continuance payments paid in the year following the calendar year the person left employment
- Severance pay as required under the Employment Standards Act and the Canada Labour Code
- Sick benefits paid directly to the worker by a private insurance company
- Sick pay credits (accumulated unused) whether paid as a lump sum payment, or in installments upon ending employment
- Worker benefits payable by contractual agreement throughout a strike.
How to determine gross earnings of contractors/subcontractors
If you contract work to a contractor/subcontractor who is considered your worker, include the worker’s insurable gross earnings as part of the premium calculation, in the same way as the earnings of workers who are not contractors/subcontractors. The insurable gross earnings are based on the labour portion of the contract for work performed during the reconciliation period.
Labour only
If the contractor’s/subcontractor’s service to you involves only labour, without money spent by the contractor/subcontractor on materials, equipment and/or installation supplies or any other expenses, then the total price of the contract counts as insurable gross earnings. This is true no matter what the contractor/subcontractor does - construction, transportation or any other kind of activity.
Labour, materials and equipment
The simplest way to determine the labour portion of the contract is for the contractor/subcontractor to keep adequate records of all expenses on materials or equipment. Once these acceptable expenses are deducted from the total contract price, the remainder is the labour portion of the contract.
For the above, apply the annual maximum insurable earnings ceiling to eliminate any possible excess earnings ($81,700 for 2012, $83,200 for 2013).
What are adequate records?
The WSIB considers records adequate if they can verify and separately show amounts paid for labour, from materials, equipment and/or installation supplies. The most common adequate record is a receipt of purchase. The WSIB may verify accuracy through an audit.
What happens if records are inadequate?
The WSIB considers records inadequate if they do not accurately verify the labour portion of the contract.
If the records are inadequate, then the WSIB considers that the contract relates 100% to labour and the total contract price becomes the insurable gross earnings.
Certain exceptions apply for the construction, logging and transportation industries. For details about rules in the transportation industry contact an account representative. For the construction and logging industries use the Labour Portion of Contract Table if:
- There is evidence that the contractor/subcontractor supplies major building materials, construction equipment or logging equipment, and
- The business activity is listed in the Labour Portion of Contract Table. See Labour Portion of Contract Table.
Materials/Equipment
Major building materials means major structural, mechanical and electrical components, such as:
- Asphalt
- Bricks, blocks
- Cabinets
- Concrete and cement
- Doors
- Electrical wiring, boxes and supplies
- Fill and sand
- Flooring (wood, tile, carpet)
- Glass
- Gravel
- Insulation and vapour barriers
- Lumber and steel
- Pipes
- Plumbing, heating, and cooling fixtures and equipment
- Rebar
- Road culverts
- Septic tanks
- Sewer pipes and elements
- Sheet metal ducts
- Shingles, tarpaper, valleys, and all other roof covering material
- Siding, soffit, facia
- Wallboard
- Windows.
Major building materials do not include items such as:
- Installation supplies (e.g. adhesive, caulking, fasteners, nails, screws)
- Small wood and metal items (e.g. molding, trim).
Installation supplies and small items can only be used to reduce the total contract price to arrive at the labour portion of the contract if their purchase is supported by adequate records verifiable upon audit.
Construction equipment means any large item of capital equipment designed to be used in the construction industry, such as:
- Backhoe
- Bobcat
- Bulldozer
- Cement mixer (truck or pumper)
- Compressors, excluding portable
- Crane
- Dump truck
- Front-end loader
- Gas powered tamper
- Grader, or other excavating equipment
- Jackhammer, excluding portable
- Scaffolding (multi-storey)
- Scissor lift generator
- Welding unit (truck mounted).
Logging equipment includes items such as:
- Chipper (mobile)
- Delimber
- Feller buncher
- Grapple loader
- Skidder
- Slasher.
Under no circumstances can the following expenses be used to reduce the total contract price to arrive at the labour portion of a contract:
- Personal truck/vehicle expenses, or contracts where the truck/vehicle is not specified by the principal to be used in the direct performance of the construction/logging job by the contractor/subcontractor
- Small installation tools (e.g. hammers, ladders, nailers, power tools, paint brushes or rollers, saws, chainsaws).
These are general lists. For more insurable gross earnings and a complete list of non-insurable gross earnings, contact a WSIB account representative or check the Operational Policy Manual, document number 14-02-08, Determining Insurable Earnings.
Labour Portion of Contract Table
The following table determines the labour portion to be reported for individuals (contractors/subcontractors) in the construction and logging industries. Use this table if:
- They are considered or ruled your workers, and
- There is evidence they supply major building materials and/or construction equipment or logging equipment, and
- Records are inadequate to verify the labour portion of the contract
Please note, the WSIB may use different percentages to determine the labour portion of contracts you have entered into with non-compliant contractors/subcontractors who employ help and are not in good standing, or who have not registered as employers with the WSIB. For additional information, contact a WSIB account representative.
| Construction | Labour PLUS major building materials and/or construction equipment | |
|---|---|---|
| Excavating | (including related trucking) |
33 1/3% |
| Paving | ||
| Landscaping | ||
| Acoustic | 50% | |
| Air conditioning | ||
| Cabinet work | ||
| Carpet laying* | ||
| Ceramic tile | ||
| Concrete | ||
| Electrical | ||
| Elevators | ||
| Escalators | ||
| Flooring - wood | ||
| Glazing | ||
| Heating | ||
| Insulation | ||
| Masonry | ||
| Mastic floor | ||
| Plumbing | ||
| Roofing | ||
| Sheet metal | ||
| Siding | ||
| Steel & iron work | ||
| Stone | ||
| Weatherproofing | ||
| Carpentry | 66 2/3% | |
| Cement finishing | ||
| Drywall | ||
| Floor sanding | ||
| Form work | ||
| Lathing | ||
| Painting | ||
| Plastering | ||
| Terrazzo | ||
| * Carpet laying: When carpet installers provide installation supplies only and no major construction materials, the labour portion of the contract is 80%. | ||
| Logging | Labour PLUS logging equipment | |
|---|---|---|
| Skidding** Cut & skid Cut, skid & haul Cut & haul Haul, by truck/trailer |
33 1/3% | |
| ** Skidding: This percentage applies to all skidding operations with contractors, whether or not the principal is a sole proprietor, a partner, or an employer with workers. | ||
Excess earnings
Excess earnings are any earnings above the annual maximum insurable earnings set by the WSIB. These earnings are not insurable and premiums are not paid on them.
Do not prorate the annual maximum for workers who are employed less than a year, regardless of the period of employment.
If a person works for more than one employer during the year, the annual maximum insurable earnings applies to the insurable gross earnings with each employer. Employers need not worry about tracking a worker’s earnings with other employers.
- For 2012 year-end reconciliation, use the 2012 annual maximum of $81,700 to calculate each worker’s annual insurable earnings.
- When closing an account in 2013, or when completing a reconciliation upon request, use the 2013 annual maximum of $83,200 to calculate each worker’s annual insurable earnings.
Assigning insurable earnings
For accounts with only one CU, all earnings are direct earnings.
To assign insurable earnings when the account has more than one CU, you must maintain segregated earnings records for each CU (see details below).
Direct earnings
Direct earnings are earnings that can be assigned to a CU directly from records that clearly show the earnings by business activity. There are two types of direct earnings:
- Those that relate only to the business activity of the CU, and
- Those from ancillary operations (defined below) or optional insurance amounts that can be directly assigned to a CU.
If a CU preprinted on your Form has no direct earnings, please contact a WSIB account representative for assistance.
To assign insurable earnings when the account has more than one CU, you must maintain segregated earnings records for each CU (see details below). The segregation of earnings must be based on the direct labour time spent on each business activity and must be verifiable through adequate records.
Multiple classification units (CUs)
The WSIB may assign more than one classification unit to your account. This happens if you:
- Carry on two or more distinct business activities listed in different CUs, and
- Keep segregated earnings records for each CU.
If the classification units are in different rate groups then each activity is assigned the appropriate premium rate.
For a list of acceptable earnings records for segregation, please contact a WSIB account representative.
When you have multiple CUs you have to report earnings in a more detailed way to assign the earnings properly.
An ancillary operation supports one or more business activities but is not itself classified separately: for example, administration related to the employer’s business activity, such as administrative staff, payroll and human resources. For more details contact a WSIB account representative.
If you have optional insurance, and no workers, your optional insurance amount is considered direct earnings. For more details contact a WSIB account representative.
Earnings that relate only to the business activity of the CU
Example 1
An employer carries on four different business activities and is classified in four different CUs. Some workers do work only related to one CU. Others do work related to more than one CU. The employer keeps segregated records that show how much direct earnings each worker has for each CU. Therefore, the employer is able to directly assign the insurable earnings of each worker to the appropriate CU.
- For workers who work solely in one business activity, all earnings are assigned to the CU for that business activity.
- For workers who divide their time among two or more CUs, the employer uses their segregated records to assign the earnings to the appropriate CUs according to the direct labour time spent in each CU.
Optional insurance amounts or earnings from ancillary operations that can be directly assigned to a CU
Assign these earnings directly to the appropriate CU if:
- They support more than one CU, and
- Their earnings records are segregated by CU.
Example 2
The employer in the previous example has three office staff whose work supports all four business activities. The employer keeps segregated earnings records for each office worker. The employer allocates their earnings to all the CUs according to the direct labour time spent supporting the business activity in each CU. All the earnings of the ancillary operation in this case are direct earnings and can be directly assigned to a CU.
If you have earnings (including optional insurance) that you cannot assign directly to a CU, continue with the common earnings information that follows.
Common earnings
For accounts with more than one CU, common earnings are any earnings from ancillary operations or optional insurance amounts that cannot be directly assigned to a single CU and supported by segregated earnings records. These are called common earnings as they support more than one business activity and must be assigned to the relevant CUs on a prorated basis.
If the employer in Example 2 had the same three office staff performing work supporting the four business activities but did not keep segregated earnings records that show their time spent performing the work supporting each CU, then the insurable earnings for all three office workers are considered common earnings. The employer must prorate the common earnings then assign the appropriate prorated amount to each CU.
Prorating common earnings
For firms with multiple CUs and common earnings, the total insurable earnings for a CU equals the CU’s direct earnings plus the prorated common earnings for the CU.
Here is how to determine how much to assign to each CU. Use the blank worksheet below to calculate and assign common earnings. For each step, the corresponding calculation in the example is explained in the chart below.
In the example account, there are four CUs with both direct and common earnings: 1921-000, 1931-000, 1993-000, and 1999-000.
| Step | Example |
|---|---|
|
See column 1. |
|
Total direct earnings is $500,000 (see box 1). |
|
Total common earnings is $48,000 (see box 2). |
|
For CU 1921-000, 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 CU. |
|
For CU 1921-000, 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. |
|
Total prorated common earnings is $48,000 (see box 3). The amounts in box 2 and 3 should match. |
|
For CU 1921-000, 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. |
|
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. |
|
CHART: Calculating and Assigning Common Earnings
| Column 1 | Column 2 | Column 3 | Column 4 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Classification | Direct Earnings | % of Total Direct Earnings |
Prorated Common Earnings |
Insurable Earnings |
|||||||
| CU Code |
CU Description | Column 1 ÷ Box 1 x 100 |
Box 2 x Column 2 ÷ 100 |
Column 1 + Column 3 | |||||||
| 1921-000 | Carpet, Mat, and Rug Operations | $100,000 | 20 | $9,600 | $109,600 | ||||||
| 1931-000 | Canvas and Related Products | $250,000 | 50 | $24,000 | $274,000 | ||||||
| 1993-000 | Household Products of textile Materials | $60,000 | 12 | $5,760 | $65,760 | ||||||
| 1999-000 | Other Processed Textile Products | $90,000 | 18 | $8,640 | $98,640 | ||||||
| Total |
|
100 |
|
|
|||||||
| Total Common Earnings |
|
||||||||||
Worksheets used in preparing the Reconciliation Form must be kept for audit purposes.
WORKSHEET: Calculating and Assigning Common Earnings
blank worksheet (108.0kb, PDF)
