Updated Checked by the Tax-Services.ca editorial team How we check
The employer health tax in Ontario is a payroll tax that you pay, not your staff. If your total Ontario payroll is $1 million or less, you owe nothing. Above that, the rate depends on how large your whole payroll is, from 0.98% up to 1.95%, and it’s charged on the amount over the exemption.
Who has to pay Ontario’s employer health tax?
Any employer that pays people who work at, are attached to, or are paid through an Ontario permanent establishment. The tax is charged on the remuneration you pay, and employees don’t see a line for it on their stubs.
Payroll here means more than salary. Ontario’s page describes the tax as one on remuneration, with salaries, wages, bonuses, taxable benefits and stock options as examples, so check what your bookkeeping counts before you set it against the exemption. We couldn’t confirm the full list of what is included.
If you run a one-person corporation and pay yourself a salary, that salary counts too, but it will sit nowhere near the exemption. The same goes for the typical corner restaurant or dental office. The tax is really aimed at mid-sized and large payrolls, which is why most owners can relax once they’ve checked the number once and written it down for their records.
What does the $1 million exemption do?
It wipes out the tax on the first $1 million of Ontario payroll each year. Ontario raised it from $490,000 to $1 million. A small firm with, say, 12 employees will usually sit far below the line and never write a cheque. Ontario’s page says you don’t have to pay if you’re eligible and your payroll is below the exemption amount, but it also lists cases where a return is still required, so read the province’s list.
Two limits catch people out. First, related companies share one exemption, so a group of associated employers gets a single $1 million between them. Second, an employer whose Ontario payroll passes $5 million can’t claim the exemption at all. Registered charities are the exception and keep it.
The exemption is also due for an inflation adjustment on January 1, 2029. Until then it stays where it is.
Which employer health tax rate applies to your payroll?
The rate steps up in bands as total Ontario payroll grows. Here is the schedule on the Ontario page, last updated in July 2026.
| Total Ontario payroll | Rate |
|---|---|
| Up to $200,000 | 0.98% |
| $200,000 to $230,000 | 1.101% |
| $230,000 to $260,000 | 1.223% |
| $260,000 to $290,000 | 1.344% |
| $290,000 to $320,000 | 1.465% |
| $320,000 to $350,000 | 1.586% |
| $350,000 to $380,000 | 1.708% |
| $380,000 to $400,000 | 1.829% |
| Over $400,000 | 1.95% |
The tax rate you use is based on the level of your Ontario payroll before you have deducted any exemption.
Employer Health Tax (EHT), Government of Ontario, ontario.ca
That sentence is why any employer who actually owes tax is already past $1 million in payroll and sits in the top row. The lower rows matter only to firms under the exemption, which owe nothing anyway.
A worked example on a $1.5 million payroll
Say your Ontario payroll is $1,500,000. The exemption covers the first $1,000,000, which leaves $500,000. At 1.95% the tax is $9,750 for the year. Raise the payroll to $1,100,000 and the bill drops to $1,950. Drop it to $950,000 and it’s zero.
We worked those out by hand from the published rate and exemption. None of our calculators handles this tax, so treat the figures as a check on your own return, not a substitute for it.
When do you pay, and what do people get wrong?
Annual returns are due on March 15 of the following year. Once your annual Ontario payroll is over $1.2 million, you pay monthly instalments instead, by the 15th of the month after each payroll month. Missing that switch is the common slip, since a payroll that grew during the year can push you over.
Other mistakes are easier to avoid. Don’t forget staff who are paid through Ontario but work elsewhere. Don’t assume the tax is a deduction from wages. And don’t mix it up with the payroll deductions you do withhold. Those are handled through the payroll remittance calculator, and the payroll deductions calculator shows what comes off one employee’s pay for CPP, EI and income tax.
Weighing a hire? Add the tax to the cost only once your payroll is near or over the line, since below it the tax is zero. Turn a wage into a yearly figure with the hourly to salary calculator and add those up. For a corporation, our corporate tax calculator covers income tax, which is a separate bill.
What if your payroll sits right near $1 million?
That’s where a small gap decides everything. Picture a Hamilton contractor with $980,000 of payroll who adds a $30,000 hire in October. The extra staff cost is $30,000, but the tax goes from nothing to 1.95% of $10,000, or $195, because the payroll reaches $1,010,000. It’s a few bucks next to the wages, so plan for it rather than avoiding the hire.
Where this information comes from
The rates, the $1 million exemption, the $5 million limit, the $1.2 million instalment threshold and the deadlines all come from the Government of Ontario’s employer health tax pages, read in September 2026. The 2029 adjustment date is from the same source. Rules on what counts as remuneration and on filing below the exemption are in the province’s guide, and we didn’t reproduce them here.
Frequently asked questions
Do small businesses pay the employer health tax in Ontario?
Most don't. The first $1 million of total Ontario payroll is exempt, so a firm under that line owes no tax.
What is the top rate?
1.95% on total Ontario payroll over $400,000. Lower bands start at 0.98% up to $200,000.
Do employees pay any of it?
No. It is a tax on the employer, charged on the remuneration paid to people who work at or are paid through an Ontario permanent establishment.
When is the return due?
March 15 of the following year. Employers with more than $1.2 million of annual payroll pay monthly instalments by the 15th of the next month.
Can related companies each claim the exemption?
No. Only one exemption is available to a group of associated employers, and the group can't claim it once combined Ontario payroll passes $5 million.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST
- Ontario income tax and sales tax in 2026
How Ontario income tax works in 2026: the five brackets, the surtax and health premium, the 13% HST, and the calculators that switch to Ontario