Ontario Employer Health Tax (EHT) explained for employers

If you’re an employer in Ontario, understanding your responsibilities under the Ontario Employer Health Tax (EHT) is critical. This provincial payroll tax helps fund Ontario’s health-care system and applies to most businesses with employees in the province. The size of your payroll determines whether your business qualifies for the Ontario EHT exemption, how much you owe and when you need to remit. Let’s break down the essentials to help you meet your compliance obligations and avoid costly mistakes. 

What is a health tax?

A health tax is a payroll tax some provinces impose on employers to help fund public health care. Instead of charging people directly, governments use this payroll-based tax to ensure employers contribute to health-care funding in proportion to their payroll size.   

What is the Employer Health Tax (EHT)?

The Employer Health Tax, or EHT, is a payroll tax that some provinces in Canada require employers to pay. Instead of deducting money directly from employees’ wages, the tax is levied on employers and is calculated based on total payroll. Its purpose is to ensure that employers contribute to the funding of provincial health-care systems in proportion to the size of their workforce.

What is the Ontario EHT?

Ontario has its own version of the EHT tax, governed by the Ontario Employer Health Tax Act (EHTA). The Ontario EHT requires most employers with staff in Ontario to pay a tax based on the total amount of remuneration they provide to employees, including wages, salaries, bonuses and taxable benefits.

The Ontario EHT funds the province’s health-care system and ensures that employers contribute in proportion to their payroll size. The tax is calculated annually, but larger employers may need to remit payments monthly or quarterly. Unlike other employer contributions, EHT is separate, provincially regulated and entirely employer paid. Whether you need to pay and how much depends on your total annual Ontario payroll.

Ontario EHT exemption and rates

Annual Ontario payroll	EHT rate
Up to $1 million	Exempt (for eligible employers)
$1 million - $5 million	Graduated rates up to 1.95%
Over $5 million	1.95% flat rate

For full details on rates and exemption eligibility, visit the Ontario Ministry of Finance’s Employer Health Tax page.

Who is not eligible for the exemption

Some employers are not eligible for exemption, including:

• Public-sector employers, such as municipalities, schools and hospitals
• Professional corporations
• Charitable organizations with total associated payrolls above the exemption
• Employers with associated or related corporations whose combined payroll exceeds $5 million

Associated employers and shared payroll limits

Eligible employers who are members of an associated group must enter into an agreement to share the tax exemption for the year. Associated employers are connected by ownership or by a combination of ownership and relationships between individuals.

One employer in the group must complete an Associated Employers Exemption Allocation form on behalf of the whole group and submit it to the ministry with its annual return. If any associated employer is missing from this form or if the form is not submitted, all the employers in the associated group will be denied the tax exemption. For 2014 and later years, no exemption can be claimed if the associated group’s combined annual Ontario remuneration (payroll) is over $5 million. Employers are required to complete an annual return for each account that has taxable Ontario remuneration.

Visit the Ministry of Finance’s Online Services page to file and submit your Associated Employers Exemption Allocation form online. For detailed information about associated employers and filing rules, visit the Associated Employers web page and related scenarios.

Multiple accounts

An employer may set up separate payrolls for each payroll center or payroll type and can report them separately by establishing multiple EHT accounts under a single business number (BN). A different extension number (for example, TE0001, TE0002) will be assigned to each account.

A multiple-accounts employer must file separate instalments and annual returns for each account. Eligible employers with multiple accounts must allocate the exemption between their accounts. The tax rate for a multiple-accounts employer is based on the combined Ontario payroll of all the employer’s accounts.

How to calculate and pay Ontario EHT

Calculating and paying your EHT involves several key steps:

1. Determine your total annual Ontario payroll: Include all remuneration paid to employees who report for work in Ontario or who are paid from an Ontario permanent establishment. Remuneration includes salaries, wages, bonuses and certain taxable benefits.
2. Check your exemption eligibility: If your total payroll is $1 million or less, you may qualify for the Ontario EHT exemption. Ensure your business type and associated payroll are qualified.
3. Register for an EHT account: Before remitting, employers must register with the Ontario Ministry of Finance to obtain an EHT account number. Register for an EHT account.
4. Apply the correct EHT rate: Use the official EHT rate table from the Ontario Ministry of Finance to determine how much tax you owe based on your total payroll. Access current EHT rates and brackets on Ontario.ca.
5. Calculate your EHT owing: Subtract any applicable exemption and multiply the remainder by your rate. For example, an employer with a $1.5 million payroll would pay EHT on $500,000 at the applicable rate.
6. Remit your payment to the Ontario Ministry of Finance: You can pay your EHT through the following methods:
   • Online: Via ONT-TAXS online
   • Financial institution: Through your bank’s online business banking platform
   • By mail: Send a cheque payable to the minister of finance with your remittance form to:
     Ministry of Finance
     33 King Street West
     PO Box 620
     Oshawa, ON L1H 8E9
     Canada
7. Keep accurate records and file your annual return: Even if you are exempt, you must file an annual return by March 15 of the following year. This confirms your exemption or reports any balance owing.

Employers remit EHT monthly, quarterly or annually, depending on their payroll size. Larger employers (over $600,000 in annual payroll) generally remit monthly. Starting in the 2021 tax year, the EHTA requires Ontario businesses with payroll over $1,200,000 to pay monthly instalments.

For more information on payroll and remittance obligations, explore the ADP Compliance and Legislation Resource Center for guidance on employer responsibilities in every province. 

Penalties, interest and fines

Failing to comply with the Ontario EHTA can result in financial penalties, interest charges, fines or prosecution, depending on the severity of the violation. The Ontario Ministry of Finance enforces these rules to ensure accurate filing, payment and recordkeeping from all employers.

Late-filing penalty

If you fail to file your annual EHT return by March 15, the ministry may impose a 5% penalty on the amount of tax assessed, plus an additional 1% for each full month the return remains unfiled (up to 12 months)

This penalty applies even if you owe no tax. Employers that qualify for the EHT exemption must still file an annual return to confirm their eligibility.

Late-payment penalty

If you file your return but do not pay the full amount by the due date, you may face a 5% penalty on the unpaid balance, plus 1% each month the amount remains outstanding (to a maximum of 12 months).

Both late-filing and late-payment penalties can apply if you miss both obligations.

Interest on overdue balances

The Ministry of Finance charges daily compound interest on overdue balances beginning the day after payment is due. The rate is adjusted quarterly and continues to accrue until the full amount is paid.

Administrative compliance penalties

Under the EHTA, the ministry can also impose administrative penalties for noncompliance, such as:

• Failure to deliver a return or statement when required
• Repeated failure to file returns on time
• Failure to complete information or provide required details
• Failure to register for an EHT account when payroll thresholds are met

Each of these may result in additional fines or reassessments.

Fines and offences

More serious violations of the EHTA may result in prosecution and fines imposed by the court. The following actions are considered offences under the act:

• Making false or misleading statements: Knowingly submitting false information on a return, statement or during an audit.
• Obtaining or attempting to obtain a benefit by fraudulent means: Any act of deceit or misrepresentation to reduce or avoid EHT liability.
• Failure to deliver a return or statement: Not providing required forms, schedules or documents when requested by the ministry.
• Failure to keep adequate records: Employers must maintain accurate payroll and employment records for at least seven years.
• Obstructing or hindering an auditor: Refusing to provide access to records or interfering with a ministry audit or investigation.
• Failure to comply with the act or its regulations: Ignoring any statutory duty under the EHTA may result in penalties or legal action.
• Offence by a director, officer or agent: Corporate directors and officers can be held personally liable if the offence occurs with their knowledge, consent or neglect.

Potential fines

If convicted of an offence under the act, an employer or officer may be fined up to $2,000 for a first offence, or $10,000 and/or imprisonment of up to six months for subsequent offences.

The ministry may also reassess taxes owed and apply interest in addition to any court-imposed fine.

Understanding your EHT statement and notice of assessment

Once you begin remitting the Ontario EHT, you’ll receive official documents from the Ontario Ministry of Finance that summarize your account activity and confirm how your payments are applied. These statements serve as your ongoing record of compliance.

Monthly account summary

Employers who remit regularly (monthly or quarterly) will receive a monthly account summary showing:

• Total payments received and the period they apply to
• Balance owed or any credit carried forward
• Adjustments, penalties or interest charged on your account
• Any discrepancies between reported payroll and payments received

Reviewing these statements each month helps ensure your remittances are being applied correctly and that you remain up to date with the Ministry of Finance. If you notice an error or a missing payment, contact the ministry immediately to avoid additional penalties or interest.

Notice of assessment

After you file your annual EHT return, the Ministry of Finance issues a notice of assessment. This document confirms:

• The total EHT payable for the year
• The exemption amount applied (if eligible)
• Payments received and any outstanding balance or refund
• Any interest or penalty adjustments applied

Your notice of assessment acts as the ministry’s official confirmation of your EHT status for the year. Keep this document for at least seven years as part of your business’s financial and payroll records.

How to register for an EHT account

Before remitting the Ontario EHT, you must register for an EHT account through the Ontario Ministry of Finance. Registration ensures your business is properly identified, payments are tracked and filings are associated with the correct account.

Step by step: How to register

1. Gather your business information: You’ll need your BN issued by the Canada Revenue Agency (CRA), business legal name, trade name, business address, mailing address, telephone and tax numbers, name of a contact person, payroll start date, payroll frequency and employer type.
2. Visit the Ontario Ministry of Finance EHT registration page: You can register online using the ministry’s secure platform.
3. Submit your application: Once completed, you’ll receive an EHT account number (usually within a few business days). Keep this on file. It must appear on all payments, returns and correspondence.

How to file an EHT return

Employers must file an EHT return each year, even if they qualify for the exemption. Filing confirms your payroll totals and determines whether you owe tax or qualify for a refund.

The EHT annual return is due by March 15 of the year following the tax year. Returns can be filed electronically through ONT-TAXS online or by mail to:

Ministry of Finance

33 King Street West, PO Box 620

Oshawa, ON L1H 8E9

You’ll need to report total Ontario payroll, the exemption claimed (if applicable) and any installments made throughout the year. If you discover an error after filing, you can submit an amended return or contact the ministry through ONT-TAXS online to request a correction.

How an employer of record can help

Managing EHT compliance can be complex, especially for growing businesses, employers with remote staff or companies hiring across multiple provinces. That’s where an employer of record (EOR) can help.

An EOR is a third-party organization that becomes the official employer for your workforce in administrative terms. They manage payroll, remittances and compliance on your behalf, helping your business meet all federal and provincial obligations, including the Ontario EHTA.

How ADP Canada can support you

Understanding your EHT obligations is only part of the challenge. Staying compliant as your business grows is another. An EOR, like ADP Canada, provides the tools and expertise to help employers stay ahead of evolving tax requirements.

• Automated calculations: Payroll software automatically applies the correct EHT rates and exemptions based on your payroll data.
• Timely remittance: ADP Canada facilitates accurate, on-time EHT payments and returns through integrated payroll systems.
• Audit-ready reporting: Access detailed payroll summaries, notices of assessment and proof of remittance in one secure platform.
• Regulatory updates: ADP Canada monitors ongoing legislative changes, such as rate adjustments and exemption thresholds, to help you remain compliant year-round.
• Scalability: As your workforce expands, ADP Canada’s solutions scale with you, making multiprovince payroll management possible.

By partnering with a trusted EOR like ADP, employers can reduce administrative stress, mitigate compliance risks and focus on running their business with confidence. Download the ADP compliance buyer’s guide to learn more.

FAQs

This guide is intended to be used as a starting point in analyzing EHT and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not providing legal or tax advice or other professional services.