The Employer Health Tax (EHT) is a deductible payroll tax in Ontario that provides partial funding for the Ontario Health Insurance Plan. The EHT is applied where there is an employer-employee relationship and the employer pays the employee. Therefore, the EHT does not apply to any self-employed individuals. The EHT rate is .98% when an employer’s total annual payroll is $200,000 or less, the rate varies between 1.101% to 1.829% when total annual payroll ranges between $200,001 to $400,000 and is 1.95% for employers whose total annual payroll is above $400,000.
The EHT is applied to employees who work at or are paid from or though a permanent establishment of the employer in Ontario. An employee is considered to report for work at a permanent establishment if they may reasonably be regarded as attached to the permanent establishment. Therefore, if employees are working out of province, and do not have a permanent establishment in their region (province or country), their payroll is included in the total annual payroll.
Effective January 1, 2019, private sector employers with a payroll of less than $5 million are entitled to an EHT exemption on the first $490,000 (increased from $450,000) of total Ontario payroll each year. Members of an associated group of employers must share the tax exemption. Public and private employers are not entitled to the EHT exemption if their payroll is above $5 million, but a registered charity can claim the exemption even if their payroll exceeds $5 million.
The EHT exemption is adjusted every five years according to inflation and is based on Ontario’s consumer price index. If you have any questions about the Employer Health Tax or any other Tax and how they may impact your business, contact your Bateman MacKay account manager.