In Ontario, employers do not have to pay WSIB premiums on Supplemental Unemployment Benefit (SUB) plan payments. If your company tops up a worker’s Employment Insurance (EI) benefits during a temporary layoff or maternity leave, those specific top-up funds are not considered “insurable earnings” by the WSIB, provided the plan is officially registered with Service Canada.
Offering a Supplemental Unemployment Benefit (SUB) plan is a fantastic way for Ontario employers to retain top talent. 📍 Whether you run a manufacturing plant in Windsor facing a temporary retooling shutdown, or a tech firm in Waterloo offering generous maternity leave top-ups, these plans ensure your workers can pay their bills while relying on federal Employment Insurance (EI). A SUB plan covers the gap between what Service Canada pays and the employee’s regular salary. However, managing the payroll deductions for these benefits can cause major headaches for human resources and accounting departments.
A common source of confusion is how the Workplace Safety and Insurance Board (WSIB) views these top-up payments. Under the Workplace Safety and Insurance Act (WSIA), employers must pay premiums based on the “insurable earnings” of their workforce. The good news is that WSIB policy strictly excludes properly registered SUB plan payments from premium calculations. Because the worker is not actively performing labour for the company while receiving the top-up, the risk of a workplace injury is effectively zero. Ensuring your payroll software accurately separates these payments is critical; otherwise, you could be overpaying thousands of dollars in WSIB premiums.
Step-by-Step Process for Handling SUB Plans and WSIB Premiums
To benefit from these WSIB premium exemptions, your company must follow strict federal and provincial administrative procedures. 📋 Failing to formalize your SUB plan can lead to audits and heavy retroactive premium charges.
Step 1: Register the SUB Plan with Service Canada
Before you pay a single dollar in EI top-ups, you must formally register your SUB plan with Service Canada. The federal government must approve the plan to ensure it meets the requirements of the Employment Insurance Act. If you skip this step, the top-up payments will be considered regular employment income. If they are regular income, WSIB will categorize them as insurable earnings, meaning you will owe mandatory premiums on the entire amount.
Step 2: Adjust Your Payroll Software Codes
Once Service Canada approves the plan, your payroll department must configure the accounting software correctly. You must create a distinct earning code for “SUB Plan Top-Up.” This code must be programmed to be exempt from WSIB premium calculations. If your payroll system lumps the top-up together with regular vacation pay or bonuses, your automated quarterly WSIB remittance reports will artificially inflate your total insurable payroll.
Step 3: Exclude SUB Payments on WSIB Remittances
When filing your monthly or quarterly premium remittances with WSIB, you report your gross payroll. You must manually or systematically deduct the total amount paid out through the SUB plan before applying your assigned WSIB premium rate. Remember, while SUB payments are exempt from WSIB, they are generally still subject to standard income tax deductions, so your accounting must be highly precise.
Step 4: Maintain Documentation for WSIB Audits
WSIB routinely conducts payroll audits on Ontario employers to ensure premiums are being calculated accurately. If an auditor sees that an employee received payments while supposedly on leave, they will flag it as unreported insurable earnings. You must keep a copy of your Service Canada SUB plan approval letter and clear payroll ledgers showing that the payments were strictly EI top-ups. Providing this paper trail immediately resolves the auditor’s concerns.
How Much Does it Cost in Ontario?
Setting up a compliant SUB plan is an administrative task that ultimately saves your company money on premiums. 💰 Here are the typical financial metrics for an Ontario employer in 2026:
- Service Canada Registration Fee: There is a $0 CAD government fee to register a SUB plan federally.
- WSIB Premium Savings: Varies by industry rate. If your premium rate is $2.00 per $100 of payroll, and you pay $10,000 in top-ups, properly excluding it saves your company $200 CAD per employee.
- Accountant / HR Consultant Fees: Hiring an expert to draft and register the SUB plan typically costs between $1,000 and $2,500 CAD.
- WSIB Audit Penalties: If you misclassify regular wages as SUB payments to avoid premiums, WSIB can apply retroactive charges plus administrative penalties of up to 10% of the unpaid amount.
How Long Does the Process Take?
Getting your systems aligned requires some advance planning before the layoffs or maternity leaves begin. ⏱ Drafting the plan and submitting it to Service Canada typically takes a few days, but you must wait roughly 3 to 6 weeks for federal approval. Configuring your payroll software and training your HR staff takes about 1 to 2 weeks. If you are subjected to a routine WSIB payroll audit, providing the SUB plan documentation usually clears the inquiry within 14 to 30 days.
Insurable vs. Non-Insurable Earnings at WSIB
It is vital for payroll administrators to know exactly what WSIB taxes. 🧲 Here is a comparison of common employer payouts:
| Payment Type | WSIB Premium Status | Reasoning |
|---|---|---|
| Registered SUB Plan (EI Top-Up) | Exempt (No Premiums). | Worker is not performing labour; it is an approved federal benefit top-up. |
| Severance / Termination Pay | Exempt (No Premiums). | Paid after the employment relationship and risk of injury has ended. |
| Vacation Pay & Bonuses | Insurable (Premiums Owed). | Considered direct compensation for active labour performed. |
| Unregistered Top-Ups | Insurable (Premiums Owed). | Viewed by WSIB as regular salary continuation due to lack of Service Canada approval. |
Frequently Asked Questions (FAQ)
What happens if we forget to register the plan with Service Canada?
If the plan is not registered, the Canada Revenue Agency (CRA) treats the payments as standard employment income, meaning it will deduct EI premiums from the top-up. Consequently, WSIB will also classify the top-up as insurable earnings, and you will owe WSIB premiums on the entire amount.
Does this exemption apply to maternity and parental leave top-ups?
Yes. Maternity, parental, and compassionate care top-ups fall under the SUB plan umbrella. As long as the employee is receiving EI and your registered plan is merely topping up that amount, the payments are entirely exempt from WSIB premiums.
Do SUB payments count toward the WSIB maximum insurable earnings ceiling?
No. Because SUB payments are exempt from premiums entirely, they are not added to the employee’s cumulative yearly earnings when determining if they have hit the WSIB annual maximum insurable earnings ceiling.
Can we just pay the employee their full salary during a layoff?
If you choose to implement a “salary continuation” plan instead of a registered SUB plan, the employee generally cannot collect EI. Furthermore, salary continuation is viewed by WSIB as standard insurable earnings, meaning you must continue paying WSIB premiums on those wages.
What if a WSIB auditor disagrees with our payroll codes?
If an auditor mistakenly includes your SUB payments in an assessment, you have the right to formally object to the audit findings. Providing your Service Canada approval letter and appealing through the WSIB Appeals Services Division will generally reverse the charge.
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