Payroll services in Toronto

The Ontario employer health tax rate is chosen before the exemption, not after

Ontario's employer health tax is graduated rather than flat, and the order of operations is where employers lose money. You select your rate from the band table using total Ontario remuneration before any exemption is deducted. Only then do you subtract the exemption and apply the chosen rate to what remains. Reading the table the intuitive way — deducting the exemption first, then finding your band — puts you in a lower band than you belong in and understates the tax.

The bands run from 0.98% on Ontario payroll up to $200,000, through eight further steps between $200,000.01 and $400,000, to 1.95% on payroll over $400,000. The exemption is $1,000,000. Two further rules matter for a Toronto business of any complexity: no exemption at all is available where the employer or its associated group has more than $5,000,000 of annual Ontario payroll, and associated employers must file an allocation agreement to share the single exemption between them. All of it is tabled with its source on the Ontario tax facts page.

Group structures are where the exemption disappears

Toronto has a higher density of multi-entity businesses than anywhere else in the country, an operating company and a management company, a professional corporation alongside a services entity, a holding structure with staff in two places. Each of those arrangements is ordinary and each of them collides with the employer health tax rules, because the exemption belongs to the associated group rather than to each corporation. A group that has not filed an allocation agreement can find each entity claiming a full exemption it is not entitled to, and a group that crosses $5,000,000 of combined Ontario payroll loses the exemption outright rather than having it tapered.

The practical consequence is that the calculation has to be done at group level and then allocated, in that order. Doing it entity by entity and summing the results produces a number that is wrong in a predictable direction. Where corporate structure is being considered for other reasons, this is one of the payroll costs worth putting into the comparison — the associated corporations note covers the parallel issue on the corporate tax side.

WSIB, and the federal deductions underneath

Workplace coverage in Ontario runs through the Workplace Safety and Insurance Board, which is entirely separate from the Ministry of Finance and carries its own registration, classification and clearance obligations. It is driven by the same payroll data as everything else but reported to a different body on a different schedule, which is exactly the sort of split that gets missed when payroll is run informally.

Beneath both provincial layers, the federal obligations are the same everywhere in Canada: income tax, CPP and EI withheld from each pay run, plus the employer's contributions, remitted to the CRA on the schedule assigned from your average monthly withholding amount. Ontario also recognises nine public holidays, with public holiday pay calculated from regular wages and vacation pay in the four work weeks before the holiday week, divided by twenty, a formula that looks nothing like British Columbia's average day's pay and cannot be substituted for it.

What is covered

• Pay runs with Ontario tax tables applied to Ontario employees
• Income tax, CPP and EI withheld and remitted on your CRA schedule
• Employer health tax calculated at group level, with the band selected correctly
• Allocation of the exemption across associated employers where one applies
• WSIB registration support and payroll reporting
• Public holiday and vacation pay calculated under Ontario employment standards
• T4 and T4A slips and summaries filed by the last day of February

Remote, from a single office in British Columbia

EverStone is a sole practitioner CPA firm based in Abbotsford, British Columbia. There is no Toronto office, no Ontario branch, and no plan for either — Toronto employers are served entirely online through video calls, secure document exchange and e-signature. Payroll is well suited to that arrangement because none of the inputs or outputs are physical. Time zones are the only practical difference, and in practice they help: an Ontario pay run approved at the end of your day is processed at the start of ours. The payroll hub collects the underlying guides and calculators.

What a lender or a shareholder actually reads is year-end statements in Toronto.

The year end this all feeds into is corporate tax in Toronto.

Payroll and its remittances are the largest recurring obligation most businesses carry, and they belong on a thirteen-week cash forecast.