When BC replaced MSP premiums with the Employer Health Tax, most small businesses saw they were under the threshold and stopped reading. Two features catch growing Fraser Valley companies: a steep notch above the exemption, and association rules that combine related payrolls.
Quick answer: BC employers with $1,000,000 or less of BC payroll in a calendar year pay no Employer Health Tax. Between $1,000,000 and $1,500,000, EHT is 5.85% of payroll above the $1M line. Above $1,500,000, it is 1.95% of the entire payroll. Associated employers share one exemption. Registration is due December 31 of your first taxable year, the return and payment by March 31 following, with instalments (June 15 / September 15 / December 15) for larger payers.
| BC payroll | Rate | Applied to | Worked example |
|---|---|---|---|
| $1,000,000 or less | Nil | Exempt | — |
| $1,000,000 – $1,500,000 | 5.85% | Payroll above the $1M line | $1.2M payroll → $11,700 |
| Above $1,500,000 | 1.95% | Entire payroll, from the first dollar | $1.6M payroll → $31,200 |
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How the math works
EHT is calculated on BC remuneration — broadly, the payroll amounts you report for employees at or reporting to a BC establishment: salary, wages, bonuses, most taxable benefits.
- $1,000,000 or less: exempt. No tax, and no return required if you are under the threshold.
- $1,000,000 to $1,500,000: tax is 5.85% × (payroll − $1,000,000). At $1.2M payroll that is 5.85% of $200,000 = $11,700.
- Above $1,500,000: tax is 1.95% × total payroll, from the first dollar. At $1.6M that is $31,200.
The 5.85% notch makes the formulas meet at $1.5M (5.85% of $500,000 = 1.95% of $1.5M = $29,250). In it, every additional payroll dollar costs an extra 5.85 cents of EHT — triple the headline rate. Time raises, hires and bonuses on a $1.4M payroll with the bonus-vs-dividend decision.
The association trap
Related employers, such as corporations under common control, share a single $1,000,000 exemption. As with the associated-corporation rules for the small business deduction, more companies do not mean more thresholds. Two related companies with $700,000 of payroll each are $400,000 over, and above $1.5M combined no exemption is available to any of them. Construction and farming families with two businesses should check this.
Where EHT fits in your payroll stack
EHT sits alongside other payroll obligations: CRA source deductions (income tax, CPP, EI — via your RP account), WorkSafeBC premiums (registration generally required when you hire), T4 filing by the end of February, and EHT only above the threshold. It is entirely employer-paid. Most small businesses just confirm they are under $1M; the mistake is not re-checking as payroll grows or a second company appears.
Deadlines that matter
- Registration: by December 31 of the first calendar year you owe EHT.
- Annual return and final payment: March 31 of the following year.
- Instalments: June 15, September 15 and December 15 for employers above the instalment threshold — missing them accrues interest just like CRA instalments.
Planning around the threshold honestly
Legitimate planning includes timing a discretionary bonus across calendar years, weighing salary against dividends (not remuneration for EHT) and properly structuring genuinely separate businesses. Calling employees contractors creates a worker-classification problem costlier than the tax. Start planning when payroll passes about $800,000 and is climbing, when the notch, association rules and compensation design begin to interact.
This article is general information for Canadian business owners and is current as of July 2026. EHT thresholds, rates and filing rules are as published for 2024 onward and may change with provincial budgets. It is not tax advice; please speak with a CPA before acting on anything here.
Prepared and reviewed by a CPA at EverStone CPA, serving businesses in BC, Alberta, Ontario and Manitoba. About the firm → · Send an enquiry →
The employer health tax applies once your BC payroll crosses the threshold. We manage it for employers in Abbotsford, Chilliwack, Langley, Mission, CPA for Maple Ridge owners and Surrey.
The tax is calculated from the same payroll records as source deductions; payroll services track the threshold through the year.
Frequently asked questions about employer Health Tax
Who pays BC Employer Health Tax?+
Is EHT the same as CPP and EI?+
What is the associated employer trap?+
When do I have to register and file?+
Do dividends paid to an owner count toward BC payroll for EHT?+
Do I have to file an EHT return if my payroll is below the exemption?+
Why does a small payroll increase cost so much just above the exemption?+
The employer health tax is not the only BC-specific payroll obligation. Employers hiring workers or unregistered subcontractors also need coverage. See WorkSafeBC registration for BC employers.
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