No, Ontario employers do not pay WSIB premiums on the Loss of Earnings (LOE) benefits that injured workers receive. These WSIB benefit payments are legally exempt and must be strictly excluded from your calculation of gross insurable earnings when remitting your payroll reports.
Calculating payroll for an injured worker who is off the job can be incredibly confusing for employers. When an employee in Ontario is receiving compensation for a workplace injury, their income sources change. Many business owners mistakenly assume that because money is flowing to the worker, WSIB premiums must be paid on those amounts. This is a costly misconception.
Whether your business is headquartered in Toronto, London, or Kingston, it is vital to distinguish between regular employment wages and WSIB benefits. 📍 The Workplace Safety and Insurance Board (WSIB) clearly defines what constitutes “insurable earnings.” If you accidentally include an injured worker’s WSIB compensation in your premium calculations, you are actively overpaying the government. Many employers consult with an employment law firm or a specialized accountant to ensure their payroll software is properly configured.
Step-by-Step Process for Excluding WSIB Benefits from Premium Calculations
To avoid overpaying, Ontario employers must establish a clear payroll process when an employee transitions from active work to a WSIB claim. Proper categorization of earnings ensures strict compliance without giving away unnecessary funds.
Step 1: Identifying Gross Insurable Earnings
First, you must understand what the WSIB actually taxes. Insurable earnings include standard salaries, hourly wages, overtime pay, vacation pay, commissions, and bonuses. 💵 You must pay WSIB premiums on all these amounts up to the annual maximum ceiling per worker (approximately $116,000 CAD for 2026).
Step 2: Identifying Exempt WSIB Benefit Payments
When a worker is approved for WSIB Loss of Earnings (LOE) benefits, the WSIB pays them directly (usually 85% of their net pre-injury earnings). These specific payments, funded by the WSIB, are entirely exempt from premium calculations. You do not declare them as part of your company’s gross insurable payroll.
Step 3: Handling Employer Benefit Advances
Sometimes, employers choose to advance a worker their regular pay while waiting for the WSIB claim to be approved, to ensure the worker can pay rent and buy groceries. 💰 If the WSIB later approves the claim and reimburses the employer for this advance, the amount reimbursed is re-classified as a WSIB benefit and is not subject to WSIB premiums. You may need to adjust your previously filed premium reports to get a credit.
Step 4: Managing Employer Top-Ups
Some generous employers, or those bound by a union collective agreement, “top up” the WSIB benefit so the worker receives 100% of their pre-injury wage. In Ontario, the WSIB policy explicitly states that employer top-ups to WSIB benefits are also exempt from premium calculations. You do not pay WSIB premiums on the top-up amount.
Step 5: Updating Your Payroll Software
The most common reason employers overpay is due to automated payroll systems. 💻 You must ensure your HR department creates a specific earning code for “WSIB Advances” or “WSIB Top-Ups” that is deliberately flagged as exempt from WSIB premium deductions. This prevents the software from automatically applying your premium rate to these funds.
Step 6: The Annual CRA Reconciliation
At year-end, you must reconcile your WSIB insurable earnings with your Canada Revenue Agency (CRA) T4 summaries. Because WSIB benefits are non-taxable and reported differently on tax slips (often requiring a T5007 slip issued by the WSIB, not the employer), your total CRA payroll will not perfectly match your WSIB insurable earnings. Keep clear documentation to explain this variance to auditors.
How Much Does This Save Employers in Ontario?
Understanding these exemptions can save businesses significant money, especially if a worker is off for an extended period. Below is a breakdown of the financial implications related to premium exclusions in Canadian Dollars (CAD).
| Payment Type | Subject to WSIB Premiums? |
|---|---|
| Regular Wages & Overtime | Yes. You pay premiums based on your specific industry rate. |
| WSIB LOE Benefit Payments | No. Excluded entirely from insurable earnings. |
| Employer Top-Up to WSIB | No. Excluded from insurable earnings by WSIB policy. |
| Severance Pay | No. Retiring allowances and severance pay are generally exempt from WSIB premiums. |
How Long Does the Process Take?
Adjusting your payroll to exclude WSIB benefits should be done immediately upon the worker going off duty. 🕑 If you realize you have been mistakenly paying premiums on WSIB benefits or top-ups, you generally have a limitation period of up to three years to submit revised premium reports to the WSIB and request a financial credit or refund to your employer account.
Frequently Asked Questions (FAQ)
Do I pay premiums on the day of the injury?
Yes. By law in Ontario, employers must pay the worker their full regular wages for the day the injury occurred. Because this is considered regular wages, it is subject to standard WSIB premium calculations.
Are WSIB benefits subject to CRA income tax deductions?
No. WSIB benefits are non-taxable. If you are advancing the worker money pending claim approval, you should not be deducting standard income tax, CPP, or EI from the estimated WSIB benefit portion.
What if a worker returns on modified duties part-time?
If a worker returns part-time, you must pay WSIB premiums on the wages you pay them for the hours they actually work. You do not pay premiums on any partial Loss of Earnings (LOE) benefits WSIB pays to make up the difference.
Can a law firm help me recover overpaid WSIB premiums?
Yes. Employment lawyers or specialized WSIB paralegals can conduct an employer account audit and formally petition the WSIB to refund premiums that were incorrectly remitted on exempt benefit payments.
Leave a Reply