Ontario Payroll Compliance: ESA 2000, WSIB, and OHP Guide

Ontario payroll compliance requires employers to follow the Employment Standards Act, 2000, register with WSIB, withhold the Ontario Health Premium, and remit source deductions on a schedule tied to payroll volume. These rules apply to all Ontario employers except those under federal jurisdiction. Businesses in Quebec operate under different provincial employment standards and are not covered here.

This guide covers the four main compliance areas for Ontario employers: ESA 2000 minimum standards, WSIB registration and premium obligations, Ontario Health Premium withholding, and CRA source deduction remittance schedules. Gaps in any of these areas can result in back assessments, penalties, and liability that the business cannot recover from workers.

ESA 2000 requirements for Ontario employers

The Ontario Employment Standards Act, 2000 sets the floor for employment conditions in the province. For payroll purposes, the four most operationally significant requirements are minimum wage, overtime, vacation pay, and termination obligations.

Minimum wage. Ontario's general minimum wage changes annually on October 1. Employers must track the current rate and ensure no hourly-equivalent falls below it. This applies to salaried employees as well — if a salaried employee works enough hours that their hourly equivalent falls below minimum wage, the employer must compensate the difference.

Overtime. Ontario sets the overtime threshold at 44 hours per week, not the 40-hour federal standard. Any employee who is not exempt from the overtime provisions under the ESA 2000 earns 1.5 times their regular rate for each hour worked beyond 44 in a week. Overtime exemptions apply to certain professionals, managers above defined thresholds, and some specific industries. Getting the threshold wrong — applying 40 hours instead of 44 — results in overpaying overtime. Getting it wrong the other way and treating an hour between 40 and 44 as overtime for an exempt employee may also create problems in a later ESA audit.

Vacation pay. Employees earn a minimum of 4 percent of wages (equivalent to 2 weeks) during each vacation entitlement year for their first five years with the employer. Once an employee crosses the five-year mark with the same employer, the entitlement rises to 6 percent (3 weeks). The five-year threshold is based on continuous service with the same employer, not just time in the industry. Payroll systems must track service length and apply the correct rate automatically at the anniversary.

Termination and severance. Ontario employers must provide minimum notice (or pay in lieu) on termination of employment. Notice minimums range from one week for employees with less than one year of service to eight weeks for employees with eight or more years. Severance pay — a separate and additional obligation — applies when the employer has a payroll of $2.5 million or more and the employee has five or more years of service. Severance is calculated at one week per year of service up to a maximum of 26 weeks, and it stacks on top of termination notice. Payroll must track these thresholds because the calculation changes as headcount and tenure grow.

For the broader Ontario commercial payroll context, see our Ontario payroll services page.

WSIB registration and premium obligations

The Workplace Safety and Insurance Board (WSIB) is Ontario's workplace injury and illness insurance system. Most Ontario employers with employees in industries covered by the Workplace Safety and Insurance Act are required to register and pay premiums.

Who must register. Registration is mandatory for employers in Schedule 1 industries (construction, manufacturing, hospitality, retail, and most service industries among them) and Schedule 2 industries (certain public-sector employers that self-insure through WSIB administration). Employers must register within 10 days of hiring their first worker. The exemptions are narrow: certain licensed professionals operating their own practices, some agricultural employers, and some domestic workers.

Premium calculation. WSIB premiums are assessed on insurable earnings up to the annual maximum insurable earnings ceiling, which WSIB adjusts each year. The premium rate depends on the employer's rate group, which is assigned based on industry classification. Construction employers typically face higher rates than office employers because the injury frequency and severity data for the industry drives the rate-setting. Rates are applied per $100 of insurable earnings.

Annual reconciliation. WSIB operates on estimated premiums paid throughout the year with an annual reconciliation at year-end. If actual insurable earnings exceed the estimates paid on, the employer owes an adjustment. If they fall short, WSIB refunds the difference. Employers must submit the annual payroll reconciliation on time; late submissions carry their own penalties. Missing the reconciliation is a consistent finding in WSIB compliance reviews of businesses that have recently grown or experienced turnover.

Interaction with other provinces. Businesses in construction and service industries that send Ontario workers to job sites in other provinces must determine which province's workers' compensation board covers those workers. The rule generally follows the province where the work is performed, not where the employer is registered. For a practical illustration of how this applies in construction, see our construction payroll page.

Ontario Health Premium withholding

The Ontario Health Premium (OHP) is collected from employees through payroll and remitted to CRA, which passes it to Ontario. It is distinct from federal and Ontario income tax, but it flows through the same remittance process.

The OHP applies to Ontario taxable income on a graduated scale. Employees earning below $20,000 in Ontario taxable income pay nothing. The annual maximum of $900 applies to incomes above $200,600. The intermediate steps produce fractional amounts that a properly configured payroll system calculates automatically based on the employee's year-to-date earnings.

The employer's obligation is to calculate the correct OHP withholding on each pay cheque, accumulate it with the other source deductions, and remit the combined amount to CRA on the employer's regular remittance schedule. Employees who work part of the year in Ontario and part in another province require tracking of Ontario-sourced income specifically to apply the OHP correctly.

The OHP does not generate an employer matching contribution. Unlike CPP (which the employer matches dollar for dollar) and EI (which the employer pays at 1.4 times the employee rate), the OHP is entirely employee-side. The employer has no additional cost from OHP — only the administrative obligation to calculate and withhold it correctly.

Source deduction remittances in Ontario

Ontario source deductions — CPP, EI, federal income tax, Ontario income tax, and the Ontario Health Premium — are all remitted to CRA as a combined amount. Ontario employers do not remit to a provincial government directly for these obligations. CRA acts as the collection agent for both federal and Ontario income tax and the OHP.

The remittance frequency that applies to an Ontario employer is determined by average monthly withholdings from the second preceding calendar year. An employer that started payroll recently or has not remitted for two full years is treated as a regular remitter until a longer history exists.

New employers in particular need to get the initial remittance category right. A business that hires 20 employees at once may immediately fall into the accelerated or large-employer remittance category even in its first payroll period if the scale of withholdings puts it there. The obligation attaches to the withholding amount, not to how long the employer has been operating.

For a detailed breakdown of how source deductions are calculated across all categories, including CPP contributions and EI premiums, see our payroll deductions Canada guide.

Common compliance mistakes for Ontario employers

Using 40 hours as the overtime threshold. Employers familiar with US payroll or federal Canadian rules sometimes apply a 40-hour overtime trigger in Ontario. The provincial standard is 44 hours. Applying 40 hours overpays overtime; applying 44 hours to an employee who has a written overtime averaging agreement (an ESA instrument) may underpay. The correct threshold depends on whether an averaging agreement exists.

Missing the five-year vacation pay step-up. The increase from 4 percent to 6 percent vacation pay at five years of service requires an active update in payroll records at the employee's anniversary date. Businesses with manual or semi-manual payroll processes frequently miss this, leaving employees shortchanged on accruals.

Not registering with WSIB when required. New businesses sometimes delay WSIB registration because they are not aware of the 10-day rule. WSIB audits employers in high-risk industries regularly. When an unregistered employer is found, WSIB back-assesses premiums from the date the obligation began, adds a non-compliance penalty, and may place the employer in a higher risk category for ongoing premium purposes.

Ignoring the employee side of workers' compensation for new hires in other provinces. Ontario employers who expand into British Columbia or Alberta must register with WorkSafeBC or WCB-Alberta for those workers — WSIB registration does not cover workers in other provinces.

Late WSIB annual reconciliation. The year-end reconciliation submission is a separate compliance step from the remittance of premiums throughout the year. Businesses that complete payroll year-end but forget the WSIB reconciliation deadline create a separate exposure.

How a payroll partner handles Ontario compliance

Ontario payroll compliance is operationally intensive because it runs four distinct systems in parallel: ESA entitlement tracking (vacation accruals, overtime thresholds, termination calculations), WSIB (monthly reporting and annual reconciliation), OHP withholding (separate calculation on each pay run), and CRA remittances (on a frequency that may change year to year as payroll volume changes).

A payroll partner who specialises in Canadian employers outside Quebec handles these obligations as part of the standard service. ESA anniversaries are tracked at the employee level so vacation entitlement step-ups happen automatically. WSIB premiums are calculated and reconciled against actual insurable earnings without requiring a separate manual process at year-end. OHP is included in the remittance calculation on every pay run without the employer needing to remember it exists. And the remittance schedule is monitored so that the employer's category is reviewed each January and adjusted if average withholdings have moved between thresholds.

For businesses operating in Ontario with 10 or more employees, a single missed WSIB reconciliation, an overlooked vacation entitlement step-up, or an incorrect overtime calculation repeated across a workforce over a full year can produce a material liability. The scale of Ontario's workforce and the province's active Employment Standards enforcement environment mean these are not theoretical risks.

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If your Ontario business has 10 or more employees and you are managing payroll internally, a free assessment can identify whether your current processes cover the ESA, WSIB, OHP, and remittance obligations correctly. We serve Canadian businesses in all provinces and territories except Quebec. Use the form below or visit our contact page to get started.