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Alert: Construction Business Owners – Mandatory WSIB Coverage

March 19, 2013

As of January 1, 2013, there are two important and expanding changes under the Workplace Safety and Insurance Act, 1997 (“WSIB”):

  1. All business owners must pay WSIB premiums on their earnings (subject to 2 exceptions – see chart below). Prior to January 1, 2013, business owners generally had the option of exempting themselves from paying WSIB premiums.
  2. Clearance Certificates must be obtained by all WSIB registrants and provided to the person or company hiring you for each construction project.

How Does This Affect You?

The following table shows how the recent change to the WSIB affects you as a business owner:



*Independent Operator

Sole Proprietor
With Workers

Partner in a Partnership

Executive Officer in a Corporation

Before Jan 1/13 You were not required to register under WSIB and were granted independent operator status. You were not required to register with WSIB if you did not employ any workers. If you did have workers, you had the option of registering for optional WSIB insurance for yourself as owner or officer of the business.
What’s new? You must register with WSIB by January 1, 2013, report your earnings, and pay premiums unless you qualify for one of the 2 exemptions (however, see grace period below).
Exemption for partners and corporation executives and     Whether the corporation/partnership employs workers or not, you may select one executive officer/partner to apply for exemption but that officer/partner must not perform any construction work.
Exemption for Home Renovators May continue to elect not to have WSIB coverage if they work exclusively in home renovation work and meet all of the following requirements: 
  1. do all work directly for the homeowner
  2. the homeowner or his/her family occupies, or will occupy, the premises
  3. work is for an existing private residence
  4. receive payment directly from the homeowner

However, if you have workers, you must still have WSIB coverage for your workers. If you hire a subcontractor, you must request a Clearance Certificate from your subcontractor.

Insurable Earnings Report actual insurable earnings. 
  • Labour portion of invoices is insurable earnings that must be reported
  • If invoice does not show any major materials or heavy construction equipment, then report100% of the value of the invoice
Report based on an estimated annual amount of insurable earnings OR use last year’s net business income. 
  • If you just started up a business, then you can use the Minimum amount as an estimate  (i.e. $27,456)**
  • At the end of the year, you must report the difference between actual and estimated amounts in the last reporting period of the current year.
Report earnings of each partner based on an estimated annual amount of insurable earnings. 
  • Can use previous year’s T2125 Statement of Business for Professional Activities as a guideline for the estimate
  • If partnership just started up,  then you can use the Minimum amount as an estimate  (i.e. $27,456) for each partner** and then report the difference at the end of the year.
Report the regular income for each officer throughout the year 
  • If no regular income is paid to Officers, then corporation estimates the income.
  • Only pay up to the Maximum for each of the Officers (i..e. $83,200)**
  • At the end of the year, you must report the difference between actual and estimated amounts in the last reporting period of the current year.
  • Officer declared Exempt (one only) may pay a special rate of $0.21 per $100.

*Independent Operator is an individual sole business owner, incorporated or not, who does not have any employees (other than yourself) and works for more than 1 person/company in an 18 month period.

**2013 Maximum amount is $83,200; Minimum is 1/3 of Maximum so is $27,456.

Why the Changes?

These changes ensure that every construction owner and worker who is performing construction work (other than 2 exemptions) have WSIB coverage and that all persons hiring a contractor or subcontractor have an obligation to request a WSIB Clearance Certificate or risk liability for a non-complying person’s unpaid premiums.

Principals – Those That Pay Contractors & Subcontractors

You are considered a “Principal” if you hire a contractor or subcontractor. For example, if you are a manufacturing company and hire a contractor or subcontractor in the construction industry to provide work to your company, you are required to request a Clearance Certificate from all persons with whom you contract directly. If that person cannot provide a Clearance Certificate (meaning that they are not considered an Independent Operator), then you must report that person’s earnings as the total labour portion of the person’s invoice to WSIB up to the Maximum amount and pay premiums on those earnings.

Clearance Certificates

All persons who retain a contractor or subcontractor to perform construction work, are required to obtain from those persons before construction work commences, a WSIB Clearance Certificate showing that the contractor has registered with WSIB and has complied with all obligations under the WSIB Act. Failure to obtain Clearance Certificates can result in costly fines and result in the risk of liability to pay the unpaid WSIB premiums of the non-complying contractor or subcontractor. For clarity, if you are a contractor hiring a subcontractor, you must request from that subcontractor a WSIB Clearance Certificate. If you are a manufacturing company hiring a contractor, you must request from that contractor a WSIB Clearance Certificate.

Penalties For Non-Compliance

Penalties for non compliance of the WSIB requirements can result in fines for individuals of a maximum of $25,000 and/or 6 months in jail. For a corporation, fines are a maximum of $100,000. In addition to these fines, unpaid premiums will need to be paid together with interest on the unpaid amounts.

Grace Period

The WSIB has issued a policy to ease the introduction of the new mandatory coverage requirements. From January 1, 2013, up to and including December 31, 2013, the WSIB will waive penalties and/or refrain from investigation and/or laying charges for non-compliance of:

  1. independent operators, sole proprietors without workers, and partners without workers carrying on business in construction to register with the WSIB by January 1, 2013, or within 10 days of becoming such an independent operator, sole proprietor or partner; and
  2. meeting the Clearance Certificate requirements.

You should be aware that while WSIB will not prosecute during this grace period, it will contact parties to create awareness and educate regarding obligations under WSIB. WSIB will pursue employers and individuals who knowingly make false or misleading statements or representations to WSIB. As well, WSIB may during this grace period make adjustments to your WSIB account requiring you to pay all premiums and charge interest for non-compliance.

Tags: Employment


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