Accounting &tax

Understanding Payroll Employer Health Tax (EHT) in British Columbia

British Columbia introduced the Employer Health Tax (EHT) as part of its commitment to fund healthcare services. The EHT is a payroll tax that employers must pay based on their total BC remuneration (i.e., wages, salaries, bonuses, taxable benefits, and certain other compensation) paid to employees.

Who Must Pay EHT?
Employers with total annual BC payroll exceeding $500,000 are required to register for and pay EHT. Small businesses with payroll below this threshold are exempt, providing relief to smaller employers.

Tax Rates and Thresholds

• Employers with payroll between $500,000 and $1.5 million pay EHT at a reduced rate of 2.925%.
• Employers with payroll above $1.5 million pay the full rate of 1.95% on the entire payroll amount.
  (Note: The BC government made changes to the rates and thresholds over time, so always check the latest rates from the official BC government resources.)

How is EHT Calculated?
EHT is calculated annually on the total BC remuneration paid to employees during the calendar year. Employers are responsible for remitting the tax to the BC Ministry of Finance, usually through monthly or quarterly instalments based on their estimated payroll.

Impact on Employers and Employees
EHT is an employer-paid tax and does not directly affect employee net pay. However, it represents an additional payroll cost that employers must consider in budgeting and compensation planning.

Why EHT?
The revenue from EHT helps fund BC’s publicly funded healthcare system, ensuring that employers contribute fairly toward health services used by the workforce and their families.

For BC employers, understanding EHT obligations is essential for compliance and financial planning. If your payroll approaches or exceeds the $500,000 threshold, it’s important to register for EHT and account for this tax in your payroll expenses.