In British Columbia (BC), employers are subject to a new tax called the Employer Health Tax (EHT), which was introduced on January 1, 2019. The EHT is a payroll tax that applies to employers who have a payroll of over $500,000 in British Columbia. In this blog post, we’ll go over what the EHT is, how it works, and how it can impact your business.
What is the Employer Health Tax?
The Employer Health Tax is a payroll tax that is used to fund healthcare services in British Columbia. It is designed to replace the previous Medical Services Plan (MSP) premiums, which were a monthly fee paid by individuals to access healthcare services in BC. The EHT is calculated based on an employer’s total payroll, and the rate at which it is taxed increases as the payroll amount increases.
Who is required to pay the EHT?
Employers who have a payroll of over $500,000 in British Columbia are required to pay the EHT. This includes employers who are based outside of BC but have employees who work in the province. Employers who have a payroll of $500,000 or less are not required to pay the tax.
How does Employer Health Tax work?
The EHT is calculated based on an employer’s total payroll for the calendar year. The tax rate is determined by the total annual payroll, and it is subject to change each year. In 2023, the EHT rate is 2.925% x (payroll – $500,000) when the payroll is under $1.5 million or 1.95% on payroll over $1.5 million. The tax is paid quarterly throughout the year, and it is due on the 15th day of the month at the end of each quarter.
Read more about how Employer Health Tax is calculated on the Government of British Columbia’s website here.
Read more about how to file and pay Employer Health tax on the Government of British Columbia’s website here.
How can the EHT impact your business?
The EHT can impact your business in several ways. First, it is an additional expense that you need to budget for, and it can impact your overall profitability. Second, it can be challenging to calculate and administer, especially if you have a large payroll. Finally, it can impact your ability to attract and retain employees, as they may be less likely to work for a company that has to pay the EHT.
Tips for managing the EHT
Here are some tips for managing the EHT:
- Review your payroll to determine if you are subject to the EHT.
- Calculate the EHT accurately and make sure you are paying the correct amount each quarter.
- Include the cost of the EHT in your budget and plan accordingly.
- Consider working with a payroll provider or accountant to manage the EHT.
- Communicate with your employees about the EHT and how it impacts your business.
In conclusion, the Employer Health Tax is an additional expense that employers in British Columbia need to be aware of. It can impact your business in several ways, so it is important to manage it carefully. By reviewing your payroll, calculating the EHT accurately, and including the cost in your budget, you can minimize the impact of the tax on your business.
Get Personalized HR Advice
At Magenta HR, we understand that managing payroll taxes like the Employer Health Tax can be complex and time-consuming. That’s why we offer professional HR services to help businesses navigate these challenges. Our team of experts can provide customized solutions and advice to ensure that your business remains compliant with all relevant regulations while minimizing the impact of payroll taxes on your bottom line. Contact us today to learn more about how we can help your business thrive.