Employer health tax (payroll tax)

An employer health tax is a provincial tax on total payroll, paid by the employer rather than the employee. Only some provinces charge one.

Also called: EHT, payroll tax, health and education levy, health services fund contribution, provincial payroll tax

What employer health tax (payroll tax) means

An employer health tax is a tax some provinces charge employers based on the total payroll they pay to employees in that province. The money generally goes toward provincial health care and, in some cases, education. Depending on the province, it may be called an employer health tax, a levy, a contribution or a payroll tax.

It is a cost to the employer. Unlike CPP, EI or income tax, nothing is deducted from the employee's pay for it, and it does not appear on their pay statement.

Many small businesses never pay it, because a province with this tax may exempt payroll up to a set amount each year. But if your business is growing, or you are part of a group of related companies that may have to share an exemption, it is worth knowing where the line is.

How it works

Find out whether the province where your employees work has an employer payroll tax. It is run by the provincial finance ministry or revenue agency, not by the CRA, so you register, file and pay with the province.

If it does, check three things: whether there is an annual exemption (payroll below it is not taxed), the rate or rates, and what counts as payroll. Payroll for this purpose may include more than base salary, such as bonuses or taxable benefits, so read the province's definition.

Then check the filing rules: whether you must register once your payroll passes a certain amount, whether you pay in instalments during the year, and when the annual return is due. Related businesses (for example, two companies with the same owner) may have to share one exemption.

Common mistakes: assuming a small business is always exempt without checking the current exemption, forgetting to include benefits and bonuses in payroll, and treating it as a deduction from employees' pay. Budget for it as part of the total cost of each hire if your payroll is near the exemption.

Employer health tax (payroll tax) by province

There is no federal employer health tax. Each province decides whether to have one, and those that do set their own exemption, rates and filing rules.

Where the work is done	The rule
British Columbia	Employer health tax is charged on British Columbia remuneration above a $1 million exemption (for 2024 and later years; it was $500,000 before). Between $1 million and $1.5 million, tax is 5.85% of the amount over the exemption; above $1.5 million there is no exemption and the tax is 1.95% of all British Columbia remuneration. Associated employers share one exemption.
Ontario	Employer Health Tax is charged on Ontario payroll. An eligible employer, with total Ontario payroll (including associated employers) under $5 million, can deduct an exemption of $1 million a year, which associated employers must share by agreement. The rate rises with payroll, up to 1.95% on payroll over $400,000. The exemption is set to be adjusted for inflation on 1 January 2029.

We have not yet confirmed the payroll taxes in Manitoba, Newfoundland and Labrador, Quebec or the territories, or which provinces have none. Check with your provincial finance ministry or revenue agency.

Example: Checking before a growth year

Ravi owns a growing 40-person commercial cleaning company and plans to hire 10 more people next year. His provincial finance ministry runs an employer health tax with an annual exemption.

Before he budgets for the new hires, Ravi asks his bookkeeper to total this year's payroll the way the province defines it, including bonuses and taxable benefits, and to compare next year's forecast with the exemption. If the forecast passes the exemption, he will register and add the tax to the cost of each new position.

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Questions about employer health tax (payroll tax)

Is employer health tax deducted from employees' pay?

No. It is paid entirely by the employer, based on total payroll. Nothing comes off the employee's cheque.

Do small businesses pay employer health tax?

Often not, if the province exempts payroll up to a set annual amount. Check whether your province has the tax and what its current exemption is.

Is employer health tax paid to the CRA?

No. It is a provincial tax, registered, filed and paid with the province, separate from your CRA payroll account.

Official sources

General information for Canadian employers, not legal advice. Rules differ by province and territory and change over time, so check with your provincial employment standards office (or the federal Labour Program if you are federally regulated) before you rely on it. See employment standards by province.

Checked against official sources on 5 November 2026.