Right now there is a lot of talk about the changes coming to the Workplace Safety and Insurance Board (WSIB), but many construction businesses are unaware of the WSIB rules that could impact them today.
Generally, WSIB premiums are paid on the total insurable earnings of the company each year which equals the total gross pay as reported on the T4 slips issued. But this may not be the case for a small contractor, whether incorporated or not!
If you are an independent operator (“IO”) in construction, you must pay WSIB premiums on the labour portion of your invoices, not wages or dividends paid.
An independent operator is an individual who reports as self-employed or Executive Officer (sole shareholder) of a corporation that:
- Does not employ any workers, and
- Does contractor or subcontractor work for more than one person during an 18 month period
If the owner of a construction company is the only worker, the business likely falls under the IO rules.
In order to determine the base for WSIB premiums as an IO, you need to be able to break out the labour portion of your revenue. This can be done easily if labour is quantified specifically in your contracts. Alternatively, WSIB prescribed allowable percentages can be used to estimate the labour portion throughout the year and then adjusted at year-end based on the tax return filed. WSIB auditors will be looking for you to have paid premiums on the gross profit reported on the business’s annual tax filing (total revenue less eligible material and heavy equipment costs, which will be equivalent to the labour portion of revenue).
Is anyone exempt? Yes!
Here are a few exemptions from the IO rules.
- Those engaged exclusively in home renovation work. To get this exemption, the IO must be renovating existing homes for which they were hired directly by the home owner.
- An individual elected for the partner/EO exemption. To get this exemption, the individual must not do any construction work (other than periodic site visits) and a declaration must be filed with WSIB.
- Hire an employee. As soon as you hire a worker, other than the business owner, you are no longer an IO and will pay WSIB based on insurable earnings reported on the T4s issued to employees and T5 slips or net income for corporations and sole proprietorships, respectively.
WSIB changes are coming, but the IO rules are not going away. Taking some time to understand your WSIB liabilities now can save on unexpected costs down the road.
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