The WSIB maintains an insurance fund that is made up of annual premiums paid by Schedule 1 employers. An employer’s premium payments are based on the WSIB’s classification of the employer’s business activity (which determines the premium rate) and the employer’s total insurable payroll. The annual premium paid by an employer is equal to its annual insurable earnings (payroll costs), multiplied by the premium rate, and divided by 100.
Each fall, the WSIB sets the premium rate for each rate group, and announces the maximum insurable amount of workers’ earnings, for the following calendar year. Employers pay premiums only up to the maximum insurable amount.
Premiums for Non-Exempt Partners and Executive Officers in Construction
Executive officers in a corporation in construction must pay premiums on their earnings. Insurable earnings of executive officers include employment income reported to the CRA on Forms T4, T4A, T5, and director fees.
Premiums for IOs
IOs in the construction industry who are engaged in both commercial work and home renovations must report all construction earnings to the WSIB as insurable earnings.
For IOs, insurable earnings will be calculated in one of three ways:
- If the business records, invoices, or written contracts accurately identify the labour portion of the contract, the WSIB considers the labour portion to be the IO’s gross insurable earnings.
- If the business records do not accurately identify the labour portion of the contract and there is no evidence that the contractor provided major materials and/or heavy construction equipment, the WSIB considers 100% of the value of the contract to be the IO’s gross insurable earnings for reporting purposes.
- If the business records do not accurately identify the labour portion of the contract and it can be shown that the IO supplied major materials and/or heavy construction equipment, the WSIB will allow the principal to identify the labour portion of the contract as follows.
- If the IO provides labour and major materials, the IO reports 60% of the contract value as gross insurable earnings.
- If the IO provides labour and heavy construction equipment, either with or without major materials, the IO reports 33⅓% of the contract value as gross insurable earnings.
Additional costs and penalties you could incur
The WSIB may levy penalties for various offences, including,
- failing to comply with the requirement to register for mandatory coverage in construction
- failing to register your business within 10 days of hiring your first worker
- failing to get a clearance number, and keeping all clearance numbers for three years
- failing to report an accident
- discouraging or preventing a worker from filing a claim for WSIB benefits
- influencing or inducing a worker to withdraw or abandon a claim for WSIB benefits
- not reporting, or incorrectly reporting, your premium information
- underestimating your earnings
- knowingly making a false or misleading statement to the WSIB
- wilfully failing to inform the WSIB of a material change in circumstances, and
- contravening rules regarding the disclosure of confidential information.
If found guilty under the WSIA, individuals may be fined up to $25,000 and/or imprisoned for up to six months for each offence. Corporations are liable to a fine of up to $500,000 for each offence.
Employers who are determined by the WSIB to have engaged in claim suppression may be charged an administrative penalty of $5,000 for each of the first three occurrences, $7,500 for each of the next three occurrences, and $10,000 for each occurrence after that.
Employers who are found in breach of their work reintegration (WR) and/or re-employment obligations are also subject to financial penalties that are outlined in the WR and re-employment sections of this website. These penalties can equal an amount up to the worker’s actual annual earnings.
The WSIB also charges interest for non-compliance regarding any/all WSIA obligations.
Experience rating programs
Experience rating programs are primarily intended to achieve greater insurance equity in premium pricing for construction employers based on their accident and claim cost experience in comparison to the industry rate group average. Experience rating also plays a role in reducing accidents and occupational diseases.
There are two experience rating programs for the construction industry:
- Council Amendment to Draft #7 (CAD-7), and
- Merit Adjusted Premium Program (MAP).
All experience rating programs automatically exclude the costs of claims arising from the following occupational diseases from their calculations: Acquired Immune Deficiency Syndrome (AIDS); carcinoma; chest diseases due to aluminum and cadmium exposure; chronic noise exposure; chronic obstructive lung disease; pneumoconiosis due to asbestos, silica, talc, hard metal (cobalt) and other mineral dust; and scleroderma. The rate group shares the costs of these claims.
CAD-7 is the experience rating program for construction employers that have annual premiums over $25,000. CAD-7 compares the employer’s actual number (frequency) of claims over two years, and claim costs over five years, to the expected frequency of the rate group and costs associated with the size of the workforce. The factors included in the calculation are as follows:
- a “rating factor,” ranging from 0.3 to 2.0
- the “average expected accident costs,” which are expressed as a percentage of the average amount of premiums the employer paid over the rating period
- the “employer cost index,” using the employer’s actual accident costs for the two-year period being considered, compared to what the WSIB expects those costs to be, based on the employer’s premiums and taking into consideration any cost relief the employer has requested that has been approved; the cost index ranges from 1.00 (the best) to -4.00 (the worst)
- the “employer frequency index,” comparing the actual number of lost-time injuries the employer has to the expected number of injuries over a two-year period, with an index ranging from 1.0 (the best) to -4.0 (the worst); be aware that a new claim under CAD-7 does not count as a frequency until there is full or partial loss of earnings (LOE) for eight days (the WSIB is responsible for the costs of a claim from the date of accident), or if non-economic loss (NEL) benefits are paid and LOE benefits are not paid, and
- the “employer performance index,” which is a weighted average of the employer’s cost index and frequency index, at two thirds and one third respectively.
If the actual frequency (lost-time claims) and costs are lower than expected, the employer may receive a refund. If the actual frequency and costs are higher than expected, the employer will receive a surcharge.
In the year a traumatic fatality occurs, a premium increase equivalent to the CAD-7 refund an employer is entitled to receive is applied to the employer of the deceased worker which, in effect, eliminates the CAD-7 rebate for that year.
MAP is the merit incentive program for all employers, including construction employers, with annual premiums between $1,000 and $25,000 excluding any adjustment by any of the WSIB’s experience rating programs. Once you qualify for MAP you will remain in MAP for at least three years, despite premium fluctuations below $1,000 and over $25,000.
MAP reviews the number of claims with more than $500 in costs over a three-year period. Claims over $500 are included in your accident record, while claims under $500 are not included. Employers who have no claims with costs over $500 during the period in review will receive a 5-10% discount on their premiums. Employers who have one or more claims with costs over $500 during the period in review will receive a premium increase of up to 50%. Any claim costing over $5,000 will result in an automatic 10% surcharge on the employer’s premium rate, plus any other MAP adjustment.
A fatality claim will automatically result in a 25% surcharge on the employer’s premium rate, plus any other MAP adjustment.
A MAP adjustment for a claim involving a third party is determined by pro-rating the claim costs and any special adjustments according to the percentage of liability of the parties involved.
How to control the size of your rebate or surcharge
The best way to control the size of your rebate or surcharge is to reduce claim frequency and claim costs through prevention, WR, and cost relief measures. The most effective way to reduce claim frequency is through prevention, which can be as simple as complying with employer obligations under the Occupational Health and Safety Act (OHSA). Once an injury has occurred it is important to return the injured worker to work as quickly and safely as possible. More prevention assistance can be obtained from the Infrastructure Health & Safety Association.
Second Injury and Enhancement Fund (SIEF), cost transfer, and third party cost relief are three cost relief methods that Schedule 1 employers may use to reduce the cost of a claim. The WSIB either grants or denies cost relief based on the merits of each request.
SIEF transfers loss of earnings (LOE) benefits and health care costs from a Schedule 1 employer to the employer’s rate group. Employers may receive SIEF relief when a worker’s pre-existing condition or prior disability contributed to the work-related injury, or prolongs or enhances the period of the work-related disability. You can apply for SIEF relief by sending a written request to the WSIB Case Manager that includes the claim number and an outline of the worker’s pre-existing condition(s). The WSIB may grant relief based on the supporting information in the claim file. The amount of relief granted depends upon the severity of the injured worker’s pre-existing condition and the severity of the injury. The amount granted could be between 25% and 100%.
Cost transfers allow employers in Schedule 1 to apply to have the claim costs transferred to another Schedule 1 employer due to negligence on the part of the other Schedule 1 employer or worker. A request for a cost transfer should be made in writing to the Case Manager.
Third party cost relief allows a Schedule 1 employer to ask the WSIB to recover the accident costs for the employer’s injured worker if the injury is caused by a third party who is neither another Schedule 1 employer, nor a Schedule 1 worker. Any money recovered from the third party will be used to offset the injury employer’s costs. The OEA can assist an employer with its SIEF request.
Other possible adjustments to an employer’s account
The WSIB may also make an adjustment to a principal’s/employer’s account if, following an audit, the WSIB discovers that the principal/employer failed to get a clearance for a contractor or IO.
The WSIB also charges interest for non-compliance regarding any/all WSIA obligations.
Get a valid clearance number
Construction contractors and IOs are required to have WSIB coverage, and a valid clearance confirms that a contractor or IO has registered with the WSIB and reports and pays their WSIB premiums on time. The WSIB issues clearances at no cost. As of September 2019, each contractor or IO whose WSIB account remains in good standing will have one generic clearance certificate that will be valid for all of its contracts.
A principal/employer who hires a contractor or IO to do construction work must get a clearance that proves the contractor’s or IO’s WSIB account is in good standing before allowing the contractor or IO to do any work. If a clearance expires or is revoked the work must stop, and you must receive a valid clearance before allowing the non-compliant contractor or IO to resume work. Failure to do so is an offence under the WSIA, putting you at risk of incurring the penalties stated above. Without a clearance, the principal/employer will also be held financially responsible for any unpaid premiums that are charged to the contractor’s or IO’s WSIB account, up to the value of the labour portion of the contract. A clearance protects the principal/employer from that liability, during the time the clearance is valid.
You may deduct from money payable to the contractor or IO the amount for which he/she is liable
An employer must keep all clearances for at least three years and will be asked to provide them to the WSIB if an audit takes place.
Using the WSIB’s eClearance program
The WSIB’s eClearance program is a free online service available through the WSIB’s website. It allows contractors to obtain a generic clearance that can be used for all of their contracts. It allows employers to easily check the validity of a potential contractor’s clearance and manage their list of contractors.
A clearance is valid for up to 90 days, and will be automatically renewed as long as the contractor’s account remains in good standing.