Employer Health Tax Ontario: EHT Guide

The Employer Health Tax is a payroll tax that Ontario employers pay on total Ontario remuneration. It is levied by the Ontario Ministry of Finance, paid entirely by the employer, and is separate from CRA source deductions. Eligible private-sector employers receive an annual exemption of $1,000,000 in total Ontario payroll, below which no EHT is owed. This guide covers who pays EHT, the current rates and exemption, registration, filing deadlines, and penalties for non-compliance. Quebec employers are not covered here; Quebec operates its own health services contribution (FSS) under separate provincial rules.

What the Employer Health Tax is

The Employer Health Tax is a provincial payroll tax that applies to all employers who pay remuneration to employees who work in Ontario or report to an Ontario establishment. EHT is entirely an employer cost. It is never deducted from employee pay. The tax is calculated on total Ontario remuneration, which includes salaries, wages, bonuses, taxable benefits, stock option benefits, directors' fees, and most other forms of compensation that would be included on a T4 slip.

EHT is not a federal tax and is not remitted to CRA. It is administered by the Ontario Ministry of Finance through ONT-TAXS online, the province's tax filing portal. Employers register for EHT directly with the Ministry of Finance, file their annual return through ONT-TAXS, and make instalment payments through the same system.

The distinction between EHT and other payroll obligations matters for employers managing compliance across multiple systems. CPP contributions, EI premiums, and income tax withholdings are federal obligations remitted to CRA. WSIB premiums are paid to the Workplace Safety and Insurance Board. The Ontario Health Premium is an employee-side tax withheld by the employer and remitted to CRA. EHT is a separate employer-side obligation paid directly to the Ontario Ministry of Finance. A full breakdown of the other Ontario payroll obligations is available in the Ontario payroll compliance guide.

Who pays EHT and the exemption threshold

Every employer with employees in Ontario is subject to EHT, but the exemption means many smaller employers owe nothing. The annual exemption for eligible employers is $1,000,000 in total Ontario remuneration. If your total Ontario payroll is at or below $1,000,000, you owe no EHT. If your payroll exceeds the exemption, you pay EHT only on the amount above $1,000,000.

Eligibility for the exemption is limited to private-sector employers. Public-sector employers, including municipalities, universities, school boards, hospitals, and Ontario government agencies, do not qualify for the exemption and pay EHT on total Ontario remuneration from the first dollar.

Associated employers must share the single $1,000,000 exemption. If two or more corporations are associated under the rules in the Employer Health Tax Act, they must allocate the $1,000,000 exemption among themselves. A group of five associated companies each with $400,000 in Ontario payroll would need to allocate the exemption and some of those companies would owe EHT on their payroll above their allocated share. The allocation is agreed upon by the associated group and reported to the Ministry of Finance. If no allocation agreement is filed, the Ministry assigns the exemption equally among the associated employers.

Charities and not-for-profit organizations that are eligible employers also qualify for the $1,000,000 exemption, provided they are not public-sector employers.

EHT rate calculation

The EHT rate structure depends on whether the employer qualifies for the exemption.

Employers eligible for the exemption pay a flat rate of 0.98 percent on total Ontario remuneration exceeding the $1,000,000 exemption. An eligible employer with $1,500,000 in Ontario payroll pays EHT on $500,000 at 0.98 percent, producing an annual EHT of $4,900.

Employers not eligible for the exemption (public-sector employers) pay on a graduated rate scale. The rate starts at 0.98 percent on the first $200,000 of Ontario remuneration and increases through eight brackets to a maximum of 1.95 percent on remuneration above $400,000. The graduated scale means larger public-sector employers pay a higher effective rate.

For most private-sector businesses reading this guide, the relevant calculation is the flat 0.98 percent rate on payroll above $1,000,000. An employer with a $2,000,000 Ontario payroll and full access to the exemption pays 0.98 percent on $1,000,000, which is $9,800 annually. An employer with $5,000,000 in Ontario payroll pays 0.98 percent on $4,000,000, producing $39,200 annually.

EHT is calculated on a calendar-year basis. Employers who start or cease operations during the year prorate the exemption based on the number of days they had employees in Ontario during the year.

What counts as Ontario remuneration

Ontario remuneration includes all amounts that constitute employment income for Ontario income tax purposes. The main components are gross wages and salaries, overtime pay, vacation pay, bonuses and commissions, taxable benefits (including employer-paid group life insurance premiums above the $25,000 threshold, automobile standby charges, and housing benefits), stock option benefits, directors' fees, and retiring allowances.

Amounts not included in Ontario remuneration are employer contributions to registered pension plans, employer CPP and EI premiums, non-taxable benefits such as employer contributions to group health and dental plans, and workers' compensation payments from WSIB. These exclusions matter for employers calculating their EHT base accurately, because overstating remuneration leads to overpayment.

For multi-province employers, remuneration must be allocated to Ontario based on where employees report to work. An employee who works remotely from Ontario for an employer headquartered in British Columbia generates Ontario remuneration subject to EHT. The allocation rules follow the employee's province of employment, not the employer's head office location.

Registration and filing requirements

Registration. Every employer that pays remuneration to Ontario employees and is not already registered must register for EHT with the Ontario Ministry of Finance. Registration is done through ONT-TAXS online. There is no automatic registration through CRA's business number system. EHT registration is a separate step that employers, particularly new businesses and out-of-province employers hiring their first Ontario workers, must complete independently. The WSIB registration process is covered separately in the WSIB Ontario employer guide.

Annual return. Every registered employer must file an EHT annual return by March 15 of the year following the tax year. The return reports total Ontario remuneration, the exemption claimed, and the EHT payable. Filing is done through ONT-TAXS online. Even if an employer's payroll is below the exemption and no EHT is owed, a return must still be filed if the employer is registered.

Instalment payments. The instalment schedule depends on the employer's estimated annual EHT liability:

Employers with annual EHT of $1,200 or less make no instalment payments. They pay the full amount with their annual return by March 15.

Employers with annual EHT between $1,200 and $600,000 make quarterly instalment payments. Instalments are due by the 15th of the month following each quarter-end: April 15, July 15, October 15, and January 15.

Employers with annual EHT exceeding $600,000 make monthly instalment payments, due by the 15th of the month following each remuneration month.

The instalment schedule is based on estimated annual EHT. If actual remuneration differs materially from the estimate during the year, employers should adjust their instalment amounts to avoid underpayment penalties or unnecessary overpayment.

Penalties and interest for non-compliance

The Ontario Ministry of Finance applies penalties for late filing, late payment, and failure to register.

Late filing penalty. A penalty of 5 percent of the EHT owing is assessed for filing the annual return after March 15. An additional 1 percent per month penalty applies for each full month the return remains outstanding, up to a maximum of 12 months. This structure mirrors the federal late-filing penalty on income tax returns.

Late payment interest. Interest accrues daily on any unpaid EHT balance, including unpaid instalment amounts. The interest rate is set quarterly by the Ontario Ministry of Finance based on the federal prescribed rate.

Failure to register. Employers that fail to register and are later discovered through audit or cross-referencing with CRA payroll data face retroactive assessment of EHT for all years they should have been paying, plus applicable penalties and interest. The Ministry of Finance cross-references employer data from CRA's payroll records, which means employers who are remitting CPP and EI to CRA but have not registered for EHT are identifiable.

Underreporting. Employers who underreport Ontario remuneration on their annual return are subject to reassessment with interest from the original due date. Intentional underreporting can trigger gross negligence penalties. Common underreporting errors include failing to include taxable benefits, omitting stock option benefits, and not allocating remote-worker remuneration to Ontario when the employee works from an Ontario location.

How EHT interacts with payroll processing

EHT is calculated after payroll is processed, not during it. Unlike CPP and EI, which require per-employee, per-pay-period calculations that affect the employee's net pay, EHT is a lump employer cost based on total Ontario remuneration. It does not appear on employee pay stubs and is not deducted from wages.

For payroll processing purposes, EHT affects the employer's cost of labour but not the employee's pay calculation. A payroll system that correctly calculates gross pay, taxable benefits, and T4-reportable income for each Ontario employee is producing the data needed to calculate EHT. The EHT calculation is then applied to the aggregate Ontario remuneration across all employees.

Employers who process payroll in-house need to track their cumulative Ontario remuneration throughout the year to determine instalment amounts and avoid an unexpected EHT balance at year-end. Employers using a payroll service should confirm that the service tracks EHT liability and either remits instalments on the employer's behalf or provides quarterly EHT liability reports so the employer can remit on time.

The relationship between EHT and other Ontario payroll obligations is worth understanding in full context. The payroll deductions Canada guide covers the federal source deduction framework that runs alongside provincial obligations like EHT. The Ontario payroll compliance guide covers the broader set of Ontario-specific requirements including ESA 2000 standards, WSIB, and the Ontario Health Premium.

Quick Answers

What is EHT? A payroll tax paid by Ontario employers on total Ontario remuneration, administered by the Ontario Ministry of Finance.

What is the exemption? Eligible private-sector employers receive a $1,000,000 annual exemption. No EHT is owed on payroll at or below this threshold.

What is the rate? 0.98 percent on remuneration above the exemption for eligible employers. Public-sector employers pay graduated rates from 0.98 percent to 1.95 percent.

When is the return due? March 15 of the following year. Instalment payments are quarterly or monthly depending on annual EHT liability.

Does Quebec have EHT? No. Ontario's EHT is specific to Ontario. Quebec operates its own health services contribution (FSS), which has a different rate structure and exemption rules. This guide covers Ontario only.

Who qualifies for the exemption? Private-sector employers, charities, and eligible not-for-profit organizations. Associated employers share one $1,000,000 exemption. Public-sector employers receive no exemption.

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