Two New Year’s Changes for BC Employers

2019 brings two changes for BC employers, one simple but worth noting and the other potentially costly.

New Date for Family Day: Commencing in 2019, BC has aligned its February Family Day statutory holiday with the date selected in Alberta and Ontario, being the third Monday in the month, instead of the second Monday in the month selected by the previous Liberal government. Take the time to update your office calendars to this year’s Family Day: Monday, February 18, 2019.

Employer Health Tax in Force: Starting January 2019, all BC Employers with a BC payroll of over $500K must pay Employer Health Tax (EHT) at rates that start at .98% rising in tiers to 1.95% for those with BC payrolls over $1.5M. For 2019 only, MSP premiums, albeit at the lower rates introduced last year, are still payable, making this a very expensive year for larger employers who will have to pay both MSP and EHT.

There are no simple ways to reduce EHT liability. To avoid the double whammy in 2019 of paying both MSP premiums and EHT, employers subject to EHT may wish to consider eliminating payment of MSP premiums in 2019 for employees where legally able to do so. Unionized employers will generally not be able to do so as most collective agreements require payment of MSP premiums.

To minimize EHT going forward, there are only a few options to consider:

a)     If you are a small business owner who is also paid a salary, consider paying more dividends rather than salary to you and family members to keep total payroll below the $500K threshold or reduce the total BC payroll to a lower rate. This should only be done after consideration of other tax impacts of such a change;

b)     Consider using payments to independent contractors, which do not count as “payroll”, to reduce your BC payroll to a lower rate or below the $500K threshold. However, contractors need to meet the legal test for contractor status;

c)     Where operating in other provinces with no payroll tax (e.g. Alberta), compare your overall total payroll burden (EHT, WorkSafe premiums, benefit costs etc.) in those provinces to determine if it makes sense to expand payroll in the other province; and

d)     Consider offering future compensation increases in the form of employer contributions to a Deferred Profit Sharing Plan (a profit-dependent plan that provides retirement savings for employees) or to an employee pension plan rather than salary, since such contributions are not subject to EHT.

For more information on how to manage these changes, contact You can contact Geoff Howard at ghoward@howardlaw.ca; 604.424.9686