CORY REDEKOP
LANGLEY – In a major win for businesses and employers, the provincial government announced in its recent budget a long-awaited change to the Employer Health Tax. The change does bring major savings to some small businesses that are currently paying the tax, but will not bring down costs for larger employers.
The Employer Health Tax (EHT) was implemented in 2019 and is a payroll tax on employers. The tax applies to businesses with payrolls over a $500,000 threshold and is charged on everything they paid to employees in a calendar year. The EHT has grown to where it now collects $3 billion in taxes from businesses each year.
With businesses facing the same inflation challenges as everyone else, they are seeing their profitability eroded. In terms of wages specifically, labour costs have been increasing significantly, driven both by market forces but also through government policy around the minimum wage. As a result, payrolls are inflating and businesses are either finding themselves subject to the tax for the first time, or seeing their EHT obligations increase.
That’s why business groups like the Langley Chamber have been pushing so hard for this EHT change. The thousands leaving local businesses in EHT payments would be better spent by those businesses to market themselves, invest in tools or tech, retain staff, or pursue training and development.
In the new provincial budget, the Province announced it will be increasing the exemption threshold for the EHT from $500,000 to $1 million in payroll, meaning businesses with less than that would be fully exempt from paying the tax. This change will remove 90% of businesses from paying the tax entirely, and will save small businesses with up to $1 million in payroll up to $14,628.
These changes are in effect starting January 1, 2024, so businesses will see the savings when they go to file their Employer Health Tax next year. (See Table for Examples of Savings)
| Annual Payroll | Current EHT Owed | EHT Owed Under
New Rules |
| $500,000 | $0 | $0 |
| $700,000 | $2,925 | $0 |
| $1,000,000 | $14,625 | $0 |
| $1,200,000 | $20,475 | $11,700 |
| $1,500,000 | $29,250 | $29,250 (no savings) |
| $2,000,000 | $39,000 | $39,000 (no savings) |
| $3,000,000 | $58,500 | $58,500 (no savings) |
However, as shown in the table, the benefit for businesses with between $1 million and $1.5 million is limited, and there are in fact no savings for businesses with over $1.5 million in payroll.
For these businesses, their EHT payments will remain the same, with the tax charged on their full payroll because in BC, the $1 million exemption is not deducted from the tax calculations.
While this payroll may sound like a lot, given the average hourly wage for workers in BC this amounts to only about 20 full-time employees – still a small business by most accounts, and deserving of help with this tax.
So while the EHT changes in the new budget are a win for small businesses and mean savings for those paying the EHT, for many other employers the change won’t do anything to mitigate the rising costs of doing business in BC.
Cory Redekop is the CEO for the Greater Langley Chamber of Commerce
