Profit Clue: WSIB & Independent Operators in Construction

Posted on November 14, 2014 by djb | Posted in Construction

As many are aware, the rules related to WSIB in the construction industry changed significantly in January 2013. Major changes included the calculation of premiums with respect to executive officers and the type of remuneration (ie: dividends) that were included in the calculation of insurable earnings.

Due to the significant changes impacting the industry, WSIB generally did not enforce penalties under the WSIB act for the 2013 calendar year. However, many construction companies have been notified of WSIB audits and subjected to penalties in 2014. It is important to ensure you are aware of the new rules that may impact your company.

One area that has been overlooked is the impact on independent operators in construction. What is the definition of an independent operator in construction?  WSIB defines an independent operator as:

“self-employed individuals, incorporated or not, who do not employ workers, and who are retained as a contractor by more than one person during an eighteen (18) month period. This includes sole proprietors without workers and single officer corporations without workers who are retained as a contractor by more than one principal during an eighteen (18) month period.”

A key component of that definition is that it applies to individuals whether they are incorporated or not. The calculation of WSIB premiums for independent operators in construction can be a complicated process.

As an independent contractor, the calculation of insurable earnings is based on the labour portion of the contract(s). For independent contractors this can be difficult to determine and, if adequate records are not available to accurately determine the labour portion, WSIB provides guidelines to assist with the calculation of insurable earnings.

The determination of insurable earnings is based on the type of materials and equipment used by the independent contractor:

  • Where a contractor provides labour and major materials, the principal is to use 60% of the contract value as the contractor’s gross insurable earnings.
  • Where a contractor provides labour and heavy construction equipment, with or without major materials, the principal is to use 33 1/3% of the contract value as the contractor’s gross insurable earnings.

The WSIB provides an appendix of major materials and heavy construction equipment that assists independent contractors in determining which category applies to them. (http://www.wsib.on.ca/)

Please contact a member of our Construction Services team to confirm you are fully compliant with the WSIB legislation impacting the construction industry.

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