Employer Health Tax (EHT) Ontario: A Complete Employer Guide (2026)

Table of Contents

1. What Is the Employer Health Tax
2. Who Must Pay EHT
3. EHT Rates and Thresholds (2026)
4. What Counts as Ontario Remuneration
5. The $1 Million Annual Exemption
6. Associated Employers and the Group Exemption
7. EHT Instalments and Annual Return
8. EHT for Remote Workers and Multi-Province Employers
9. Special Cases: Charities and Private Schools
10. EHT Registration and Filing
11. Common Employer Mistakes
12. Frequently Asked Questions

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What Is the Employer Health Tax

The Employer Health Tax is an Ontario-specific payroll tax established under the Employer Health Tax Act, RSO 1990, c E.11. It is collected and administered by the Ontario Ministry of Finance — not the Canada Revenue Agency. There is no federal equivalent to Ontario EHT, though several other Canadian provinces have similar payroll-based health levies.

EHT was introduced in 1990 to replace the individual OHIP premiums that Ontarians previously paid. By shifting the health funding burden to employers, the province created a more stable revenue base for the provincial health care system. In 2026, EHT generates approximately $8 billion annually for Ontario’s health care budget.

Critical distinction: EHT is separate from all federal payroll remittances. It is not CPP, EI, or income tax withholding. It requires separate registration with Ontario’s Ministry of Finance and a separate annual return. Employers who handle federal payroll through CRA but neglect Ontario EHT are non-compliant with provincial law.

Who Must Pay EHT

Any person or entity that pays remuneration to employees who report for work at a permanent establishment in Ontario is required to register for and pay EHT — subject to the $1 million exemption. This includes:

• Corporations of all sizes, including owner-managed small businesses
• Sole proprietors and partnerships that employ staff (the owner’s own draw is not included)
• Non-profit organizations (with limited charity-specific provisions discussed below)
• Professional corporations (PCs) that employ support or administrative staff
• Public sector bodies, municipalities, and government agencies
• Employers with employees working from home offices in Ontario in certain circumstances

Who is generally not subject to EHT:

• Employers whose total Ontario remuneration falls below the $1 million annual exemption
• Federally regulated employers for their federal employees (though this is a narrow exemption)
• Sole proprietors with no employees (only their own income)

Note: If you use independent contractors rather than employees, their fees are not Ontario remuneration for EHT purposes. However, given the risk of contractor misclassification in Ontario (see the contractor vs. employee guide), employers who rely heavily on contractors should be aware that a misclassification finding could retroactively create an EHT obligation.

EHT Rates and Thresholds (2026)

EHT is calculated on a graduated scale. The rate applied depends on the employer’s total Ontario payroll for the calendar year above the exemption amount:

Taxable Ontario Remuneration (Above Exemption)	EHT Rate
$1 to $200,000	0.98%
$200,001 to $400,000	1.101%
$400,001 to $600,000	1.223%
$600,001 to $800,000	1.344%
$800,001 to $1,000,000	1.465%
$1,000,001 to $1,200,000	1.586%
$1,200,001 to $1,400,000	1.708%
$1,400,001 to $1,600,000	1.829%
Over $1,600,000	1.95%

Worked Examples

Example A — Employer with $1.5 million Ontario payroll:

• Total Ontario payroll: $1,500,000
• Less exemption: −$1,000,000
• Taxable remuneration: $500,000
• First $200,000 at 0.98% = $1,960
• Next $200,000 at 1.101% = $2,202
• Next $100,000 at 1.223% = $1,223
• Total EHT: $5,385

Example B — Employer with $3 million Ontario payroll:

• Total Ontario payroll: $3,000,000
• Less exemption: −$1,000,000
• Taxable remuneration: $2,000,000
• At maximum rate 1.95% (all taxable remuneration above $1.6M flat rate threshold): calculated on graduated brackets through $1.6M, then 1.95% on remaining
• Approximate total: ~$35,000–$39,000 (use the Ministry EHT calculator for precise amounts)

What Counts as Ontario Remuneration

EHT applies to remuneration paid to employees who report for work at a permanent establishment in Ontario. The definition of remuneration is broad and includes more than just salary:

Included in Ontario Remuneration	Excluded from Ontario Remuneration
Regular wages and salary	HST and other tax remittances
Commissions	Genuine expense reimbursements
Bonuses tied to employment performance or formula	Employer contributions to registered pension plans (RPP)
Overtime pay	Employer contributions to group health/dental benefit premiums
Taxable benefits (company vehicle standby charge, low-interest loan benefit)	Retiring allowances
Public holiday pay	Severance pay (where it qualifies as retiring allowance — specific conditions apply)
Vacation pay	Death benefits (within exemption limits)
Director’s fees (where the director is also an employee)	Genuinely discretionary gifts with no employment commitment

Taxable benefits — a frequently missed EHT component: If you provide a company vehicle and report a standby charge as a taxable benefit on T4 Box 14, that amount is included in Ontario remuneration for EHT purposes. T4 Box 14 (employment income, which includes taxable benefits) is the correct basis for your EHT calculation — not just cash wages on the payroll register. Ensure your payroll system captures all T4-reportable amounts when calculating EHT remuneration.

The $1 Million Annual Exemption

The EHT exemption is the feature that keeps most small Ontario employers out of the EHT system:

• Annual exemption amount: $1,000,000 of Ontario remuneration (unchanged as of 2026)
• Who gets the full exemption: All eligible employers — one exemption per employer, not per employee and not per payroll run
• Partial-year proration: If you begin paying Ontario remuneration mid-year, the exemption is prorated based on the number of days in the calendar year during which you had Ontario remuneration

Example — Partial year exemption calculation:
An employer who first hires an Ontario employee on April 1 (day 91 of 365) gets:
$1,000,000 × (275 remaining days ÷ 365) = approximately $753,425 prorated exemption for that first year

Associated Employers and the Group Exemption

This is the most commonly misunderstood aspect of EHT — and the area where growing businesses, multi-location operations, and family-owned companies most often find themselves non-compliant.

When two or more employers are “associated” under the EHT Act (generally meaning common ownership, control, or related-party relationships), they must share a single group EHT exemption rather than each claiming a separate $1 million:

Number of Associated Employers in Group	Total Group EHT Exemption
1 employer (no associated employers)	$1,000,000
2 associated employers	$1,000,000 shared between them
3 associated employers	$1,000,000 shared between all three
4 associated employers	$1,000,000 shared between all four
5 or more associated employers	$5,000,000 shared between all members

Each associated employer files its own EHT return annually and claims its allocated share of the group exemption. The allocation is agreed between the associated employers. The total allocation across all members cannot exceed the group exemption ceiling.

Common real-world scenario: A family owns an operating company, a management company that employs shared administrative staff, and a real estate holding company. If these corporations are “associated” under the EHT Act, they share a single $1 million exemption. If the combined Ontario payroll across all entities is $2.2 million, EHT is owing on $1.2 million — not zero. Employers in this situation who have each been claiming a separate $1 million exemption are non-compliant and may face Ministry assessments with interest.

EHT Instalments and Annual Return

Monthly Instalment Requirements

Employers with annual Ontario payroll exceeding $600,000 above the applicable exemption must make monthly EHT instalment payments throughout the year. Monthly instalments are due by the 15th of the month following the payroll period.

Employers with Ontario payroll between $0 and $600,000 above their exemption may pay their entire EHT obligation in a single annual remittance with the annual return.

Annual Return Requirements

Obligation	Due Date	Notes
Annual EHT return	March 15 of the following year	If March 15 falls on a weekend or holiday, due date shifts to the next business day
Balance owing (true-up)	March 15 with the annual return	For monthly installers, this is the reconciliation payment after final payroll is known
Final return (employer ceasing Ontario operations)	40 days after the date operations ceased	Must notify Ministry of Finance within 20 days of ceasing to have Ontario employees

Zero-return filing: If your Ontario remuneration is below the exemption threshold and no EHT is owing, you are still generally required to file an annual return if you have registered for EHT. Filing a zero-owing return confirms your status and protects you from non-filing penalties. If your payroll is consistently well below $1 million, you may qualify to cancel your EHT registration rather than filing annually.

EHT for Remote Workers and Multi-Province Employers

The growth of remote and hybrid work has complicated the question of which province’s payroll taxes apply. For Ontario EHT purposes, the key question is whether the employee “reports for work” at a permanent establishment of the employer in Ontario:

• Employee normally reports to an Ontario office but occasionally works remotely: EHT applies to all remuneration paid to that employee — their Ontario office location determines EHT applicability.
• Employee works 100% remotely from a home in Ontario: Whether the home office constitutes a permanent establishment of the employer in Ontario depends on the specific arrangement. If the employer controls, pays for, or provides the home office equipment and infrastructure, it may qualify as a permanent establishment. The Ministry of Finance has issued guidance on this — and the analysis is fact-specific.
• Employee works remotely from another province: Ontario EHT generally does not apply to remuneration paid to employees working from another province. That province’s payroll taxes (if any) may apply instead — B.C., Manitoba, Quebec, and Newfoundland and Labrador all have their own employer health/payroll levies.

For multi-province employers near the $1 million Ontario threshold, accurate payroll allocation by province is essential. Only Ontario-sited remuneration counts toward the Ontario EHT calculation — employees in B.C. or Alberta should not be included.

Special Cases: Charities and Private Schools

Registered Charities

Registered charities under the Income Tax Act are eligible for the standard $1 million EHT exemption. If a registered charity’s Ontario remuneration exceeds $1 million, EHT applies to the excess at standard rates. Charity registration alone does not create an unlimited EHT exemption — it only establishes the right to claim the standard $1 million threshold.

Important: A non-profit organization that is not a registered charity does not receive any different treatment than a for-profit employer for EHT purposes. The exemption threshold applies equally.

Private Schools

Private schools that meet the definition under Ontario’s Education Act may claim a partial exemption for teachers’ remuneration above the standard threshold, under specific conditions established in the EHT Act. This partial exemption applies only to the teaching component of compensation paid to certified teachers in their teaching role — non-teaching staff (administrative, support, custodial) are not eligible and their remuneration is subject to EHT on the standard basis.

EHT Registration and Filing

When to Register

Employers must register for EHT as soon as they begin paying Ontario remuneration and have reasonable grounds to believe their annual Ontario payroll will exceed the $1 million exemption. Registration is not optional once this threshold is expected to be reached — waiting until year-end to register after the threshold was already exceeded results in non-registration penalties and interest on unpaid instalments.

How to Register

1. Go to the Ontario Ministry of Finance EHT page
2. Access the Ontario Business Programs portal (formerly ONT-TAXS online)
3. Create or access your business profile using your Business Number (BN)
4. Complete the EHT registration form — you will need your expected annual Ontario payroll
5. Upon registration, you will receive an EHT account number used for all remittances and filings

Filing Methods

• Online: Through the Ontario Business Programs portal — the recommended method; fastest processing and immediate confirmation
• Paper: Paper returns are accepted but increasingly discouraged; allow significant additional processing time for refunds or credits

Common Employer Mistakes

Mistake	Consequence
Not registering because each individual entity appears under $1 million — but combined associated group payroll exceeds the shared exemption	Non-registration penalty; interest on unpaid EHT from the date registration was required; Ministry assessment
Each associated corporation claiming a full separate $1 million exemption instead of sharing the group exemption	Ministry assessment for underpaid EHT; interest on the underassessment; potential penalties for repeated non-compliance
Missing the March 15 annual return deadline	Late-filing penalty (5% of unpaid balance for the first month; 1% per month thereafter) plus interest
Excluding taxable benefits from the EHT remuneration calculation	Systematic underassessment; Ministry audit adjustment with interest retroactive to the underpayment date
Not filing a final return when the business closes or payroll drops below the threshold permanently	Non-filing penalties; EHT account remains active generating ongoing compliance notices
Applying the full $1 million exemption in a partial year when the employer started paying Ontario remuneration mid-year	Overstatement of exemption; underpayment of EHT for the first year
Deducting EHT from employee wages or pay stubs	EHT is entirely an employer cost — deducting it from employee wages violates the ESA; Ministry can order full repayment to employees
Missing monthly instalment payments (for employers above the $600K threshold above exemption)	Interest at the Ministry rate (approximately 9% per annum compounded monthly as of 2026) accrues on every late instalment

If you are unsure whether your Ontario payroll structure is EHT-compliant — particularly if you have associated corporations, remote workers, or recently crossed the $1 million threshold — the HR consulting team at HRX Connect can assist with a payroll compliance review. Contact us for a confidential consultation.

Frequently Asked Questions

What is the EHT exemption amount in Ontario for 2026?

The standard EHT exemption is $1,000,000 of Ontario remuneration per eligible employer. Employers whose total Ontario remuneration for the year falls below $1 million pay no EHT. Employers with payroll above $1 million pay EHT only on the amount that exceeds the exemption threshold. Associated employers must share a single $1 million exemption (with a maximum group exemption of $5 million for groups of 5 or more associated employers).

When is the Ontario EHT annual return due?

The EHT annual return is due March 15 of the following calendar year. For example, the return for the 2025 calendar year was due March 15, 2026. If March 15 falls on a weekend or statutory holiday, the due date shifts to the next business day. Employers with Ontario payroll exceeding $600,000 above the exemption also make monthly instalment payments due by the 15th of the following month throughout the year.

Do Ontario remote workers trigger EHT obligations?

It depends on the arrangement. Employees who normally report to an Ontario office trigger EHT even if they work remotely on some days. Employees working exclusively from a home office in Ontario may trigger EHT if the home office functions as a permanent establishment of the employer in Ontario — a fact-specific analysis. Employees working from home in another province generally do not trigger Ontario EHT; that province’s payroll taxes (if any) would apply instead.

Is the Employer Health Tax deducted from employee wages?

No — EHT is entirely an employer-funded tax. It must not be deducted from employee wages, withheld from paycheques, or itemized on pay stubs as an employee cost. EHT is a business expense funded by the employer and remitted directly to the Ontario Ministry of Finance. Deducting EHT from employee wages would constitute an unauthorized deduction under Ontario’s ESA.

What counts as Ontario remuneration for EHT purposes?

Ontario remuneration includes regular wages, salary, commissions, performance bonuses tied to employment, overtime pay, taxable benefits reported on T4 (such as company vehicle standby charges), vacation pay, and public holiday pay. It excludes genuine expense reimbursements, employer contributions to registered pension plans and group benefit premiums, retiring allowances, and death benefits within defined limits. T4 Box 14 (total employment income) is the appropriate starting point for the EHT remuneration calculation.

What is the maximum EHT rate in Ontario?

The maximum EHT rate is 1.95%, which applies to the portion of Ontario remuneration above $1.6 million over the exemption threshold. This means an employer with total Ontario payroll of $2.6 million (which is $1.6 million above the $1 million exemption) reaches the 1.95% maximum rate on all remuneration above that point. EHT is graduated — not all taxable remuneration is taxed at the maximum rate.

Can I claim EHT as a business expense for income tax purposes?

Yes. EHT is a deductible business expense for income tax purposes. It is recorded as a payroll or employer tax expense on your corporate income tax return (or personal return for unincorporated businesses). EHT is not a personal tax and is not deductible on personal T1 returns — it is a business operating cost of the employing entity.