The Ontario Employer Health Tax (EHT) is a payroll tax that every Ontario employer with an annual payroll above $1,000,000 must pay — and even smaller employers with payrolls below the exemption threshold must register once they exceed it. Failing to register, file, or remit EHT on time results in penalties, interest, and Ontario Ministry of Finance audit exposure. Pathak Professional Corporation manages EHT compliance for Mississauga employers. Call 437-872-7399.

What Is the Ontario Employer Health Tax (EHT)?

The Employer Health Tax is a provincial payroll tax levied by Ontario on the total Ontario remuneration paid by an employer to its employees. The revenue funds Ontario’s healthcare system. EHT is payable by the employer — it cannot be deducted from employee wages (unlike CPP or EI). EHT applies to ALL Ontario employers: corporations, sole proprietors, partnerships, charities, not-for-profits, hospitals, and governments — unless fully exempt.

2025 EHT Exemption Threshold and Tax Rates

Ontario provides an annual exemption on the first portion of payroll. As of 2025:

Example: A Mississauga manufacturing company has $2,000,000 in Ontario payroll. No exemption applies (over $1.5M). EHT = 1.95% × $2,000,000 = $39,000/year. Monthly instalments = $3,250/month due to Ontario.

Who Must Register for EHT?

You must register for EHT if you are an Ontario employer and:

• Your annual Ontario remuneration exceeds the EHT exemption threshold ($1,000,000 for private employers in 2025)
• You are associated with other employers and the combined group payroll exceeds $1,000,000
• You have employees working or being paid from Ontario operations, even if you are headquartered outside Ontario

Employers who are below the threshold but growing quickly should register preemptively — Ontario requires registration by December 31 of any year in which the threshold is exceeded. Register through the Ontario Ministry of Finance at ontario.ca/taxes.

Pathak Professional Corporation reviews payroll projections for Mississauga employers and advises on the registration trigger date to avoid late registration penalties. Call 437-872-7399.

What Counts as Ontario Remuneration for EHT?

EHT applies to “Ontario remuneration” — all wages, salaries, and other forms of employment income paid to Ontario employees:

• Regular wages and salary
• Bonuses, commissions, and overtime pay
• Vacation pay
• Taxable employee benefits (company car, group life insurance, RRSP contributions made by employer)
• Automobile standby charges and operating cost benefits
• Tips and gratuities if controlled by the employer (allocated and paid through the employer’s payroll)
• Directors’ fees paid to Ontario directors
• Payments to employees on leave (maternity, parental, sick leave)

NOT included in EHT remuneration: payments to independent contractors (non-employees), dividends paid to shareholders (as dividends, not wages), and tips controlled entirely by employees. However, CRA and the Ontario Ministry of Finance may challenge worker classification — a contractor misclassified as self-employed can retroactively trigger EHT obligations. Our contractor vs employee guide covers CRA’s 4-factor test for worker classification.

EHT Filing Deadlines — Monthly, Quarterly, or Annual

Ontario employers filing monthly pay EHT by the 15th of the month following the payroll period. The annual reconciliation confirms all instalments were made correctly and resolves any overpayment or shortfall. Annual filers with payroll under $600,000 file once by March 15.

Missing the March 15 annual reconciliation deadline triggers an immediate 5% penalty on any balance owing. Pathak Professional Corporation prepares and files all EHT returns for Mississauga employer clients as part of our payroll compliance service. Call 437-872-7399.

EHT Penalties and Interest

The Ontario Ministry of Finance charges significant penalties for EHT non-compliance:

• Late registration: Penalty of 5% of tax owing + 1% for each additional month late (up to 17 months)
• Late payment: 5% penalty on the amount outstanding + daily compound interest at the Ontario prescribed rate
• Failure to file: 5% penalty on the taxes owing for the period
• False statements or omissions: Up to 100% of taxes avoided + criminal prosecution in serious cases
• Interest: Compound daily on all outstanding balances at the Ontario Ministry of Finance prescribed rate (currently 9% annually)

EHT for Multi-Location Ontario Employers

If your business has multiple Ontario locations (e.g., a Mississauga head office and a Toronto branch), EHT applies to all Ontario employees regardless of location. The exemption threshold is $1,000,000 for the ENTIRE employer entity — not per location. If you are part of a corporate group of associated companies, ALL associated Ontario employers share one $1,000,000 exemption (similar to the corporate tax Small Business Deduction association rules). Our small business deduction guide explains association rules that also apply to EHT.

Frequently Asked Questions

Do I owe EHT if I only have one employee in Ontario?

No — a single employee in Ontario means your Ontario remuneration is almost certainly well below the $1,000,000 EHT exemption threshold. As long as your total Ontario payroll stays below $1,000,000 for the year and you are NOT associated with other employers whose combined payroll exceeds $1,000,000, you have no EHT obligation. However, you must REGISTER for EHT in the year your payroll exceeds the threshold (by December 31 of that year). Even if you expect to briefly exceed the threshold and drop below it the following year, you may still owe EHT for the year the threshold was exceeded. Pathak Professional Corporation monitors payroll levels for growing Mississauga businesses and advises on the EHT registration trigger point. Call 437-872-7399.

Are shareholder salaries subject to EHT?

Yes — salary and wages paid to shareholders who are also employees of the corporation are subject to EHT if the Ontario remuneration threshold is exceeded. This is true even if the shareholder-employee is the sole owner. However, dividends paid to shareholders are NOT subject to EHT — they are not employment income. This is one of the considerations in the salary-versus-dividend decision for incorporated business owners: dividends avoid EHT (and also avoid CPP contributions), while salary is subject to both EHT and CPP. Pathak Professional Corporation analyzes the optimal salary/dividend mix for Mississauga incorporated professionals and business owners, factoring in EHT costs. Our incorporation vs sole proprietor guide covers the full analysis. Call 437-872-7399.

My Ontario payroll is just under $1 million. When do I register?

Register for EHT by December 31 of any year your Ontario payroll is projected to exceed $1,000,000. If you anticipate exceeding it mid-year, register as soon as it becomes apparent. EHT owing for a year when you exceed the threshold must be paid by March 15 of the following year (for annual filers). If your payroll crosses the $600,000 threshold, switch to monthly instalments — the Ministry of Finance will notify you, but it’s your responsibility to remit on time. Many Mississauga businesses miss the registration trigger when they hire seasonal employees or pay year-end bonuses that push total remuneration over the threshold. Pathak Professional Corporation reviews payroll annually for this exact scenario. Call 437-872-7399.

Can I deduct EHT as a business expense?

Yes — EHT paid by an Ontario employer is a deductible business expense for income tax purposes (federal and Ontario). EHT is included in the same category as CPP employer contributions and other employer payroll taxes — it reduces the corporation’s taxable income or the self-employed individual’s business income. This means the after-tax cost of EHT is significantly less than the headline rate: at Ontario’s combined corporate tax rate of 26.5% for general rate corporations, a $10,000 EHT payment only costs approximately $7,350 after the corporate tax deduction. Our corporate tax strategies guide explains all deductible payroll taxes. Call 437-872-7399.

EHT Compliance for Mississauga Employers

Pathak Professional Corporation provides complete EHT compliance services for Mississauga businesses: threshold monitoring, registration, monthly remittance preparation, annual reconciliation, and Ministry of Finance audit representation. Don’t let EHT penalties surprise you at year-end.

Call 437-872-7399 or email info@pathakcpa.ca. 48 Village Centre Place, Mississauga, Ontario L4Z 1V9.