If your business pays employees in Ontario, there may be another employer cost to plan for beyond wages, CPP, EI and income-tax source deductions: Ontario’s Employer Health Tax (EHT). EHT is a provincial payroll tax paid by the employer on qualifying remuneration. It is not an amount withheld from an employee’s take-home pay.
For 2026, the main exemption remains $1 million for eligible employers, but it is not automatic. The $5 million annual payroll eligibility test, associated-employer rules, the $1.2 million instalment threshold and the March 15, 2027 annual-return deadline all matter. This guide explains how to check your exposure and prepare.
Information current as of November 14, 2026.
Who may have to pay Ontario EHT?
Ontario EHT applies to remuneration paid to employees who physically report for work at an employer’s permanent establishment in Ontario, are attached to that Ontario establishment, or do not report to any establishment but are paid from or through the Ontario establishment. The employee’s home address alone may not settle the question. For remote or cross-border work arrangements, look closely at where the employee is attached and how payroll is administered.
Remuneration can include salaries, wages, bonuses, taxable benefits and stock options, among other amounts. The rules can also cover remuneration paid to former employees. EHT is an employer liability: it is separate from the employee’s income-tax, CPP and EI deductions. Do not assume that an amount is outside EHT simply because it is not part of the employee’s regular salary.
The Ministry’s Employer Health Tax guide
The $1 million exemption: who qualifies?
Ontario currently provides a $1 million annual exemption to eligible employers. In general, eligible employers are employers subject to income tax that are not under the control of a level of government. This commonly includes private-sector businesses, but eligibility should be checked against the statutory definition rather than assumed from the organization’s name or legal structure.
The exemption is generally available only where the employer’s total annual Ontario payroll, including the payroll of associated employers, is below the $5 million threshold. If the associated group’s combined Ontario payroll is over $5 million, the exemption is not available. Registered charities are treated differently and may claim the exemption even when their payroll is above that threshold.
Associated employers do not each receive a separate $1 million exemption. The group has one exemption to allocate. The associated employers must agree on the allocation and submit the Associated Employer Exemption Allocation form with the annual return. Ontario warns that if an associated employer is left off the form, or the form is not submitted, the group can lose the exemption. The association rules can be technical, so review ownership and control relationships before claiming the amount.
Part-year employers may need to prorate both the $1 million exemption and the $5 million eligibility threshold based on the number of days they were eligible Ontario employers with an Ontario permanent establishment. A business that starts, closes, amalgamates or changes its structure during the year should not automatically claim a full-year exemption.
For the current eligibility details, see Ontario’s [EHT tax-exemption guidance]
How to calculate EHT: choose the rate before subtracting the exemption
The rate is selected using the employer’s total Ontario remuneration before the exemption is deducted. You then subtract the allowable exemption and multiply the remaining taxable remuneration by that one rate. This order matters: choosing a lower rate after deducting the exemption can understate the tax.
Ontario’s currently published rate schedule is:
Up to $200,000 of total Ontario remuneration — 0.98%.
$200,000.01 to $230,000 — 1.101%.
$230,000.01 to $260,000 — 1.223%.
$260,000.01 to $290,000 — 1.344%.
$290,000.01 to $320,000 — 1.465%.
$320,000.01 to $350,000 — 1.586%.
$350,000.01 to $380,000 — 1.708%.
$380,000.01 to $400,000 — 1.829%.
Over $400,000 — 1.95%.
These are not marginal brackets applied separately to slices of payroll. Select the applicable rate based on the total remuneration before the exemption, then apply it to the amount left after the exemption.
Example: an eligible employer with $1.3 million in Ontario payroll
Assume an eligible private-sector employer has $1,300,000 of Ontario remuneration for 2026, is not associated with another employer and can claim the full $1 million exemption. Because its payroll before the exemption is over $400,000, the applicable rate is 1.95%. The calculation is: $1,300,000 less the $1,000,000 exemption equals $300,000; $300,000 multiplied by 1.95% equals $5,850 of EHT.
The example follows Ontario’s published calculation method. A real calculation can differ if the employer is part-year, has associated employers, operates multiple EHT accounts or is not eligible for the exemption.
Instalments and the 2026 annual return
Employers whose total Ontario remuneration is more than $1.2 million are generally required to make monthly EHT instalments. The $1.2 million figure is the instalment threshold; it is not the exemption amount. An employer can therefore have a $1 million exemption and still need instalments once payroll passes $1.2 million. Ontario’s guidance describes monthly instalments as due on the 15th of the following month. Check the account statement and payment instructions for the exact amount and period.
If annual Ontario remuneration is below $1.2 million, monthly instalments are generally not required. That does not, by itself, settle whether an annual return is required. Ontario says a return is required in several situations, including where payroll exceeds the available exemption, the employer received a personalized return, the employer is not eligible for the exemption but has Ontario payroll, instalments were remitted, or an associated group’s combined payroll exceeds the exemption amount.
For a calendar-year employer reporting 2026 remuneration, the annual EHT return and any balance owing are due on or before March 15, 2027, where a return is required. Employers with multiple EHT accounts may have separate return obligations for each account with taxable Ontario remuneration. Keep the payroll calculation, exemption allocation, instalment history and supporting records together.
Ontario’s [EHT filing guidance] explains the annual-return triggers and associated-employer form requirements.
Important payment change coming December 1, 2026
If you still pay Ontario taxes in person at a financial institution using a paper remittance voucher, plan to change that process now. Beginning December 1, 2026, financial institutions will no longer accept paper remittance vouchers for in-person bill payments to the Ontario Ministry of Finance. This change is only 17 days away as of the date of this article. Ontario lists online options, including payments through ONT-TAXS online; other payment methods may also be available depending on the account. Confirm the accepted method and account reference before sending a payment.
See the Ministry’s [Ontario tax payment options] for the current methods and instructions.
A practical year-end EHT checklist
Reconcile gross payroll and identify Ontario remuneration, including bonuses, taxable benefits and stock options where applicable.
Confirm which employees report to, are attached to, or are paid through an Ontario permanent establishment.
Estimate full-year Ontario remuneration and compare it with the $1 million exemption, $1.2 million instalment threshold and $5 million associated-group eligibility threshold.
Check whether corporations or other employers are associated, and agree on the group’s exemption allocation before filing.
Recalculate instalments if payroll forecasts or the employer group structure changed during 2026.
Replace paper-voucher payment routines before December 1, 2026, if they are still used.
Prepare the 2026 annual return and supporting records for the March 15, 2027 deadline, if filing is required.
Keep the EHT calculation separate from the CRA payroll source-deduction reconciliation. They relate to the same workforce, but they are different obligations administered by different authorities.
Common EHT mistakes to avoid
Treating EHT as an employee deduction instead of an employer-paid tax.
Assuming every employer automatically receives the $1 million exemption.
Applying the rate after deducting the exemption, rather than selecting it using payroll before the exemption.
Claiming multiple exemptions within an associated group or missing the allocation form.
Assuming no annual return is needed simply because no monthly instalments were made.
How Presyz can help
Presyz supports Ontario businesses with payroll processing workflows, deduction and remittance record reviews, payroll reconciliation summaries and year-end reporting coordination. If you want to understand how EHT records fit into your payroll process, we can discuss the records, payroll size and support required. Learn more about Presyz payroll services in Toronto or contact Presyz to start a conversation.
General educational information only. EHT eligibility and calculations depend on the employer’s facts, associated-employer relationships, payroll locations and year-specific records. Confirm your position against the current Ontario guidance or obtain advice for your circumstances.
Official sources and further reading
Ontario Ministry of Finance — Employer Health Tax overview and rate schedule
Ontario Ministry of Finance — EHT tax exemption and eligible employers
Ontario Ministry of Finance — Associated employers and exemption allocation
Ontario Ministry of Finance — EHT filing how-tos
Ontario Ministry of Finance — Pay Ontario taxes and charges
Ontario 2026 Fall Statement — EHT exemption description
General educational content only. Verify current CRA and provincial guidance before acting.