Who Has to Pay Ontario Employer Health Tax, and How Much?
Short answer: As of 2026, an employer with a permanent establishment in Ontario pays Ontario Employer Health Tax (EHT) on its Ontario payroll. Eligible private-sector employers get a $1 million exemption, so most small businesses pay nothing. Above the exemption, the rate is 1.95% for payroll over $400,000. The annual return is due March 15.
Ontario Employer Health Tax is a payroll tax that the employer pays to the Ontario Ministry of Finance on the remuneration it gives to current and former employees. It is separate from the CPP, EI and income tax you remit to the CRA, and it has its own account, return and due dates.
What is the Ontario Employer Health Tax?
EHT is a provincial payroll tax on what you pay your employees. Ontario describes it as a tax on remuneration such as salaries, wages, bonuses, taxable benefits and stock options.
Who collects it. The Ontario Ministry of Finance, not the CRA.
Who pays it. The employer. It is a cost of the business, like the employer share of CPP and EI.
What it is based on. Total Ontario remuneration for the calendar year.
For how the federal side works, see our guide to payroll for a small business in Canada.
Who has to pay EHT in Ontario?
You pay EHT if you have a permanent establishment in Ontario and you pay remuneration to employees. Ontario counts employees who:
physically report for work at your permanent establishment in Ontario
are attached to your permanent establishment in Ontario
do not report to work at any of your permanent establishments, but are paid from or through your Ontario permanent establishment
You do not have to pay EHT if you are eligible for the exemption and your annual Ontario payroll is below your exemption amount. You must register for an EHT account if you are not eligible for the exemption, or if you are eligible but your payroll is more than your exemption.
How much is the EHT, and what is the $1 million exemption?
The rate runs from 0.98% to 1.95%, and eligible employers do not pay on the first $1 million of Ontario payroll. The rate is based on your total Ontario payroll before the exemption is deducted.
Total Ontario remuneration | Rate |
Up to $200,000 | 0.98% |
$200,000.01 - $230,000 | 1.101% |
$230,000.01 - $260,000 | 1.223% |
$260,000.01 - $290,000 | 1.344% |
$290,000.01 - $320,000 | 1.465% |
$320,000.01 - $350,000 | 1.586% |
$350,000.01 - $380,000 | 1.708% |
$380,000.01 - $400,000 | 1.829% |
Over $400,000 | 1.95% |
The exemption. It has been $1 million since 2020. Ontario plans to adjust it for inflation on January 1, 2029.
Who is eligible. Generally, private-sector employers that pay income taxes and are not under the control of any level of government. Public-sector employers such as governments, universities, colleges, school boards and hospitals are generally not eligible.
The $5 million limit. An employer with more than $5 million in annual Ontario payroll cannot claim the exemption. Registered charities are the exception.
Part-year employers. If you were an employer for only part of the year, the $1 million exemption and the $5 million limit are prorated by the number of days.
Example (from the Ontario guide). Payroll of $1,300,000 minus the $1,000,000 exemption leaves $300,000. At 1.95%, the EHT owing is $5,850.
In practice. An eligible employer that owes EHT has payroll over $1 million, so its rate is 1.95% on the amount above the exemption. The lower rates matter mostly to employers that cannot claim the exemption.
What counts as payroll for EHT?
Payroll for EHT means employment income: all payments, benefits and allowances that the Income Tax Act requires the employee to include in income from an office or employment.
Included:
salaries, wages and bonuses
taxable benefits and allowances
stock option benefits
directors' fees
Not included:
commissions paid to independent contractors under a contract for service
tips a customer gives directly to an employee
a pension paid to a retired employee
A worker you call a contractor can still be an employee in fact. If so, the pay counts for EHT.
Do related companies share one exemption?
Yes. Associated employers share a single $1 million exemption for the year.
One exemption per group. The members must sign an agreement that divides the exemption among them.
One form. One member files the Associated Employers Exemption Allocation form and lists every member, even those with no payroll.
Deadline. The form must reach the Ministry of Finance by the return due date, March 15. If it is late, the exemption is denied.
Combined payroll over $5 million. No member of the group can claim the exemption.
The federal election that lets related corporations be treated as not associated does not apply for EHT.
When is the EHT return due, and do I pay instalments?
The EHT annual return and payment are due on or before March 15 of the following year. Employers with payroll over $1.2 million also pay monthly instalments.
You file an annual return if:
your annual Ontario payroll is more than your exemption amount
you are not eligible for the exemption and have an Ontario payroll
you received a personalized return
you paid EHT instalments for the year
you are in an associated group whose combined Ontario payroll is more than the exemption
Instalments. Track your cumulative payroll each month. Once it passes $1.2 million, remit the tax on the portion above your exemption by the 15th of the following month.
How to file. Online through ONT-TAXS online, through the EHT Annual Return Portal, or by mail.
Closing a business. The final return is due within 40 days of the closure date.
What happens if I file or pay EHT late?
You pay a penalty on the amount owing, plus interest.
Situation | Penalty |
Late return | 5% of the amount owing if it is $1,000 or more, plus 1% of the amount owing for each complete month late, up to 12 months |
Repeated late return | 10% of the amount owing if it is $1,000 or more, plus 2% of the amount owing for each complete month late, up to 20 months |
Late monthly instalment statement | 5% of the instalment owing, if the amount owing is $1,000 or more |
The repeat penalty applies to an employer that received a demand for the return and was charged a late-filing penalty in any of the previous three years.
Interest is charged on any unpaid balance at a rate set by the Ministry of Finance. The rate can change every three months. If you find an error, the figures on a return can be corrected within four years of its due date.
How does Remote Bookkeeping handle EHT?
For employers subject to EHT, we prepare and file the EHT returns. It is an optional add-on within our payroll module, so you select it only if it applies to you.
Our pricing is published, you build your own plan and pay only for what you need, and the price is the same for small businesses across Canada. See the pricing calculator and the full list of bookkeeping and payroll services.
Frequently asked questions
Do I have to register for EHT if my payroll is under $1 million?
No, if you are eligible for the exemption and your annual Ontario payroll is below your exemption amount. Members of an associated group should check the combined payroll first.
Is EHT deducted from employees' pay?
No. EHT is a tax on the employer, calculated on total payroll. It does not appear as a deduction on a pay stub.
Does a new business get the full $1 million exemption in its first year?
Not always. If you were an employer for only part of the year, the exemption is prorated by the number of days.
Sources
About Remote Bookkeeping
Remote Bookkeeping is a Canadian-owned firm that provides monthly bookkeeping, financial reporting, payroll, HST/GST filing, year-end preparation and QuickBooks Online setup for small businesses across Canada. Founded by Lia and George, with more than 30 years of combined experience. Call (289) 867-0808 or 1-800-880-9141, or contact us. Related: How much does bookkeeping cost for a small business in Canada?
This article is general information for Canadian small business owners. It is not tax, legal or accounting advice for your particular situation. Rates and thresholds change - always confirm against the source linked above or ask us.
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