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Earlier this year, the B.C. government announced the new Employer Health Tax (EHT). Effective January 2019, employers with a payroll over $500K will be asked to pay the EHT and rates will vary on a sliding scale up to 1.5%. This new tax is expected to replace the medical services plan (MSP) premiums, “returning up to $1,800 each year to families across our province,” explained Finance Minister Carole James. The province is also expecting to save over $50 million a year in MSP program administrative costs.
If you haven't gotten a chance to review the EHT and how it may affect your business yet, have a look at our EHT summary below
85% of business are likely exempt from the EHT. That’s because firms with $500K in payroll or below, will not be subject to the EHT tax. Businesses with a payroll of between $500,000 and $1.5 million will be asked to pay 2.925% on the payroll amount exceeding the initial $500K. Employers with a payroll of more than $1.5 million will be asked to pay a 1.95% tax rate on their total payroll. Below is a calculation chart for further clarification.
As of January 2019, employers with a over $600,000 will be required to make quarterly payments for the new EHT tax.
This new annual payroll tax covers salaries, bonuses, commissions, vacation pay, tips paid through an employer, taxable allowances and benefits, director’s fees paid to directors of corporations, top up made by employer on benefits such as maternity and parental leave, stock option benefits, employer contributions to registered retirement savings plans, and employer-paid group life insurance premiums, amongst other things.
Possible exclusions include contributions to registered pension, deferred profit-sharing plans, extended health benefits and retirement compensation arrangements.
The government announced that during the transition period of 2018 and 2019, the MSP premiums will be reduced by 50%. organizations that have voluntarily decided to pay MSP premiums on behalf of their employees may be hit twice, covering both the reduced MSP premiums and the EHT as of 2019. However, during this period, some organizations may decide to reduce or eliminate their coverage of MSP premiums, while others might not want to upset employees.
With EHT coming into effect next year, now is the time to sort everything out internally. If you have any specific questions or would like to know how or whether your employee benefits affect your EHT tax rate, please reach out to our specialists. We’ll do our best to walk you through the details, so you feel confident moving forward under this new government reform.
Whether you are with a business, association, or owner operator, we have the solution for your needs.