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B.C. Employer Health Tax – The Latest News for B.C. Employers

employer health taxAs part of their budget announcement in February 2018, B.C.’s NDP government introduced an Employer Health Tax (“EHT”) on employers to replace Medical Services Plan premiums for individual taxpayers.

Earlier in July, more details were released by the Ministry of Finance on how the Employer Health Tax will be implemented.

Key highlights include:

  • The EHT will apply to B.C. employers beginning January 1, 2019.
  • The EHT will apply to employers with a B.C. payroll of over $500,000 and to each B.C. location of a charity or non-profit employer with a payroll of over $1,500,000.
  • Payroll includes all employment income and taxable benefits under the Income Tax Act, essentially any employment income included in Box 14 of a T4 slip.
  • Employers with B.C. payroll will pay the following EHT:
    • $500,000 or less: no EHT
    • Between $500,001 and $1,500,000: 2.925% x (Payroll – $500,000)
    • Greater than $1,500,000: 1.95% x Payroll
  • Charity and non-profit employers with B.C. payroll will calculate the EHT for each of their B.C. locations and pay the total of each location’s EHT. Each location with B.C. payroll will pay the following EHT:
    • $1,500,000 or less: no EHT
    • Between $1,500,001 and $4,500,000 – 2.925% x (Payroll for the location – $1,500,000)
    • Greater than $4,500,000: 1.95% x Payroll for the location
  • Registration for filing and paying the employer health tax will start in January 2019.
    • The EHT will be paid via quarterly instalments:
      • June 15,
      • September 15,
      • December 15,
      • March 31 – final payment with return.

Specific details are still being worked out by the B.C. provincial government. It is expected that the Employer Health Tax legislation will be enacted in the fall of 2018, at which time, further information should become available.

In preparation for the new legislation, B.C. employers should plan for the following:

  • If your payroll exceeds the EHT exemption amounts, ensure your 2019 budget takes the EHT into consideration. Up to an additional 1.95% of your payroll will need to be added to your total compensation costs.
  • Keep in mind that EHT will apply to bonuses, signing bonuses, non-compete payments, commissions, gratuities paid to employees through their employer, advances, vacation pay, EI top-up payments, employer-paid RRSP contributions and a number of other taxable benefits.
  • For employers who pay for employees’ MSP premiums, MSP premiums will continue until January 1, 2020. For these employers, should your payroll exceed the EHT exemption limit, you will be required to pay both EHT and the MSP premiums in 2019.

To receive information about the Employer Health Tax as it becomes available from the B.C. provincial government, subscribe to their email notifications.

 

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