21 Mar B.C.’s Employer Health Tax is Here. Is your Business Ready?
Effective January 1, 2019, the Employer Health Tax (EHT) is an annual tax that will be levied on an employer’s payroll as part of the government’s plan to eliminate the Medical Service Plan (MSP) premium.
Under the current system of MSP, employers are able to choose whether or not they want to pay their employee’s MSP premiums. In contrast, the EHT will be mandatory for businesses unless they meet the new program’s exemptions. MSP premiums (typically paid by individuals) will be phased out by January 1, 2020.
Note that the Employer Health Tax is separate and distinct from remitting source deductions.
Will your business be affected?
The B.C. EHT will apply to the following employers with B.C. payroll:
- Employers in B.C. with payroll greater than $500,000 in a calendar year; this includes corporations, trusts, partnerships and sole proprietorships.
- Associated Employers with a combined payroll of $500,000.
- Charitable and Non-Profit Employers with payroll greater than $1,500,000.
All total payroll amounts that fall below the EHT thresholds are exempt from filing and paying EHT.
Remember, as soon as the payroll exceeds the exemption thresholds, you are required to register for EHT. So, if you are an employer or associated employer, and your payroll reaches $500,001 or more, you will need to register. If you are a charitable or non-profit employer you will need to register as soon as your payroll reaches $1,500,001.
Do you need to register? May 15, 2019 is the deadline. Click here for details on how to register your business, or contact our team at Clearline for help.
What payroll (remuneration) is subject to the EHT?
Examples of a few items included in payroll (remuneration) that are subject to EHT:
- Salaries and wages
- Vacation pay
- Taxable allowances and benefits
- Stock option benefits
- Employer-paid contributions to RRSP
- Employer-paid group life insurance premiums
There are many factors to consider when determining payroll items that count towards EHT thresholds. Please contact Clearline for a full listing of items to include or exclude from your EHT calculations.
How much will your business be required to pay?
The amount of tax your business will have to pay depends on the size of the payroll and type of business.
For-profit businesses will be subject to EHT rates ranging from 0.98% to 1.95%. The rate of 1.95% will apply to all payroll amounts greater than $1,500,000. For example:
|Annual B.C. Payroll||Calculation||Amount Owing||Rate|
|$500,000 or less||$0||$0||0%|
|$750,000||2.925% x ($750,000 – $500,000)||$7,313||0.98%|
|$1,000,000||2.925% x ($1,000,000 – $500,000)||$14,625||1.46%|
|$1,500,000||2.925% x ($1,500,000 – $500,000)||$29,250||1.95%|
|$1,500,100||1.95% x ($1,500,100)||$29,252||1.95%|
|$2,000,000||1.95% x ($2,000,000)||$39,000||1.95%|
The EHT for charities and non-profit organizations range from 0.42% to 1.95%. These types of employers do not pay the rate of 1.95% until the payroll is greater than $4,500,000. For example:
|Annual B.C. Payroll at each location||Calculation separate for each location||Amount Owing||Rate|
|$1,500,000 or less||$0||$0||0%|
|$1,750,000||2.925% x ($1,750,000 – $1,500,000)||$7,313||0.42%|
|$2,000,000||2.925% x ($2,000,000 – $1,500,000)||$14,625||0.73%|
|$2,500,000||2.925% x ($2,500,000 – $1,500,000)||$29,250||1.17%|
|$4,500,100||1.95% x ($4,500,100)||$87,752||1.95%|
|$5,000,000||1.95% x ($5,000,000)||$97,500||1.95%|
Need help calculating your EHT?
This is a brand new tax and your payroll software may not be able to calculate this tax yet. Remember that this is an employer expense, not an employee deduction. We recommend keeping these calculations separate from your payroll module.
To calculate the EHT, you can use the online EHT calculator provided by the B.C government website or call us for help.
Planning for the EHT
Since MSP will not be eliminated until January 1, 2020, some larger corporations will be hit with a double expense of EHT and MSP while they are going through this transition period.
Planning for this change and possibly making adjustments to your business’s remuneration structure can help with navigating the effects of this transition.
Please contact us at Clearline for more information or assistance with EHT planning, registration, calculation, and payments.