Before COVID, one of the biggest stories in BC was the new BC Employer Health Tax, or “payroll tax.” This new tax coincided with the elimination of MSP monthly premiums paid by individuals, effectively shifting the financial burden of health care premiums from individuals to business owners. Now that some time has past, here is how the BC Employer Health Tax is expected to impact employees.
The payroll tax applies to employers with annual payrolls of $500,000 or more. Employers with payrolls in excess of $1,500,000 per year pay 1.95% of the total payroll amount. Companies with less than $1.5 million but more than $500K in payroll costs will pay 2.925% of that total, less $500k. For example, if an employer has a payroll of $800,000 annually, the calculation will be as follows:
2.925% X ($800,000 - $500,000) = $8775
Employees will benefit from an estimated savings of up to $900 per year for individuals, and $1800 per year for families. The government says the transition to the new tax would result in savings of more than $50 million annually due to the cost of administrating the old program being eliminated. However, a new study has recently been released that analyzes how the BC Employer Health Tax is expected to impact employees.
According to a new study released by the Fraser Institute, this new health tax could cost the average worker $3000 a year in foregone wages. Historically, when the government imposes new or increases existing taxes on employers, it is the employees who suffer with lower wages and other negative consequences. According to the new report: “A large number of empirical studies show that between two-thirds and 90 per cent of payroll taxes are ultimately passed through to employees, primarily in the form of lower wages, but also as reduced employment.”
It should be noted that the BC Employer Health Tax is expected to impact employees, however, it is not possible to determine the extent of this impact until more time has passed. Also, the COVID-19 crisis negatively affecting both employers and employees will distort the jobs and earnings reports from 2020.
If you want to learn more about how the BC Employer Health Tax is expected to impact employees and business owners, contact DENT Benefits today to speak with one of our experts.
The information in this material is derived from various sources. Material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact us for benefit, pension and insurance advice based on your corporate or personal circumstances.