Employer Health Tax (EHT) may not be the most exciting topic, but it's a crucial part of running a business in Canada. Each province has its own rules and regulations when it comes to this tax, so it's important for employers to stay on top of things. While not every province enforces a payroll health tax, understanding the specific requirements of each province that does, can help businesses manage their workforce efficiently and stay compliant with provincial legislation. In this blog post, we'll dive into the details of EHT, including which provinces enforce it and how to manage payments in conjunction with running payroll. We'll cover the following:
EHT is an annual payroll tax imposed on Canadian businesses based on remuneration paid to employees. Although tax rates vary by province, a percentage of the total remuneration paid is calculated, deducted and remitted to the provincial body that oversees payroll tax. The purpose of this tax is to assist in providing provincial governments with revenue to fund things like health care and post-secondary education.
*IMPORTANT: Businesses with employees in the Northwest Territories or Nunavut are also subject to a payroll tax. This is not considered employer health tax, rather a deduction from the gross remuneration of employees. More information on this unique payroll tax below.
There are 5 provinces that impose an employer payroll health tax, including Ontario, Quebec, British Columbia, Manitoba and Newfoundland & Labrador.
Additionally, the Northwest Territories and Nunavut also impose a payroll tax, however this tax is levied as a deduction from the gross pay of employees (meaning employees pay the payroll tax in these regions, not employers). While employees in these regions have both Federal and Territorial Tax deducted from their income, it's important to note that the payroll taxes deducted in the Northwest Territories and Nunavut are not remitted to the CRA as part of their territorial tax obligations.
| Province/Territory | Payroll Tax Description | General Parameters |
| Northwest Territories & Nunavut | Employee pays: A 2% payroll tax taken from employees' total compensation. |
These payroll taxes are applicable to all employees who engage in work, fulfill responsibilities, or deliver services in NT or NU, irrespective of the province or territory where the employee or employer resides, or the age of the employee. An exemption is provided for employees who typically work outside the territory. |
| British Columbia | Employer pays: Employer Health Tax on the total remuneration paid by employers to their employees and former employees within a calendar year. It is important to note that the employer health tax is separate from the process of remitting source deductions or MSP premiums. |
Starting from the employer health tax return for 2024, employers with B.C. remuneration:
For information on employer health tax returns for calendar years before 2024, visit Employer health tax overview for 2023 and prior years.
You can use the employer health tax calculator to help you. You must register for the employer health tax if you qualify. |
| Manitoba | Employer pays: The Health and Post Secondary Education Tax Levy (HE Levy) is a mandatory tax on employee remuneration in Manitoba. Employers with a permanent establishment in the province are responsible for paying this levy, contributing to healthcare and education funding. |
Associated groups (associated corporations/certain corporate partnerships) must share the $2.25 million exemption based on the total of their combined yearly payroll.
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| Ontario |
Employer pays: Employer Health Tax on remuneration that employers in Ontario provide to current and former employees. The purpose of this tax is to assist in providing the government with revenue to fund health care in Ontario. |
Employers are required to pay EHT on remuneration paid to employees who either:
If your Ontario payroll is more than your allowable exemption amount, you will have to pay EHT .
You do not have to pay EHT if you are eligible to claim the exemption and your company’s annual Ontario payroll is below your exemption amount. For detailed information, please visit the dedicated EHT webpages for Remuneration, Permanent Establishments, and Employer-Employee Relationship.
The exemption amount is currently $ 1 million.
You can claim the tax exemption if:
Eligible employers who are members of an associated group are required to enter into an agreement to share the tax exemption for the year using the Associated Employer Exemption Allocation form. |
| Quebec | Employer pays: Employers must pay a contribution to the health services fund corresponding to the total salaries or wages subject to the contribution that they pay to their employees in the year multiplied by the applicable contribution rate. The rate is based on your total payroll for the year and your sector of activity. |
You have to use an estimated contribution rate to calculate the periodic remittances you have to make in the year because the actual contribution rate for the year will only be determined when you file the RL-1 summary.
You can use any of the following to calculate the contribution:
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| Newfoundland & Labrador | Employer pays: Payroll tax, at a rate of 2%, is payable by employers whose annual remuneration in this province exceeds a predetermined exemption threshold. |
Effective January 1, 2023, the exemption threshold has been increased from $1.3 million to $2 million for all employers.
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To accurately calculate the Employer Health Tax (EHT), it is crucial for employers to delve deeper into the resources provided below. While we have given a brief overview in this blog, taking the time to enhance your understanding of EHT will ensure compliance with the specific requirements of the province where your business is registered. By exploring these resources, you can gain a comprehensive grasp of how EHT is calculated and paid, helping you manage your payroll taxes effectively. Don't hesitate to explore these materials to clarify any nuances related to EHT in your province of operation, ultimately optimizing your tax management processes and staying on top of your financial obligations.
Similarly, making payments for Employer Health Tax and other payroll taxes in Canada is contingent upon your business location and the specific provincial/territorial guidelines. These payments often coincide with your regular remittance schedule for other deductions, so it's crucial to understand the exact timing and process for submitting Employer Health Tax payments.
If you're seeking assistance in navigating the complexities of managing and paying Employer Health Tax (EHT) alongside other payroll source deductions, look no further than PayTrak's comprehensive and fully managed payroll services. Say goodbye to the stress of tracking third-party payments because we've got you covered. Our team can handle every aspect of EHT calculation, deduction, and remittance on your behalf, ensuring that your payroll tax obligations are met efficiently and accurately. Trust PayTrak to streamline your payroll processes and provide expert support in managing EHT and other payroll deductions seamlessly.