Every Metro Vancouver scale-up founder should have one number in their spreadsheet right now: $1 million. This is the payroll level at which British Columbia’s Employer Health Tax (EHT) begins. For a tech firm paying the sector's median salary of $95,000 to $110,000, this threshold arrives at roughly ten to twelve employees. Cross it without a plan and you face an unbudgeted tax bill; cross it with a strategy and it is simply the cost of growth.

The EHT, introduced in 2018 to replace MSP premiums, uses a tiered structure. Employers with annual payrolls under $1 million pay nothing. Between $1 million and $1.5 million, a reduced rate applies to the amount exceeding the exemption. Above $1.5 million, the full rate of 2.925 per cent applies to the entire payroll. For a firm with a $1.1 million payroll, the tax applies only to the $100,000 above the threshold at the reduced rate. This distinction is critical for break-even modelling.

The "cliff-edge" effect is often misunderstood. The EHT is not a binary switch that taxes your entire payroll the moment you cross $1 million—a common misconception that leads some founders to artificially cap headcount. The reduced-rate band between $1 million and $1.5 million is designed to phase in the liability gradually. The genuine cliff arrives at $1.5 million, where the full 2.925 per cent rate applies to the entire payroll. At that level, a firm's annual EHT exposure reaches roughly $43,875, which alters the unit economics of each subsequent hire.

For a ten-person tech firm averaging $100,000 per employee—well within Metro Vancouver's sector median—the $1 million threshold lands almost precisely at the end of that cohort. The eleventh hire triggers a manageable, predictable cost. At a $100,000 salary, the incremental annual tax on that hire is roughly $2,925. The math only becomes constraining when a firm plans a large hiring cohort that pushes payroll past $1.5 million in a single fiscal year.

This is where the planning window opens. BC's 2026 budget documentation should be the primary reference for any founder or CFO modelling headcount. The parameters governing the EHT are set in provincial legislation and adjusted through the budget process. Confirming the current figures directly from the BC Ministry of Finance is essential before running any hiring scenario.

For firms in the $800,000 to $1.5 million payroll range, the EHT should be a standard line item in every hiring plan. The Canadian Federation of Independent Business has identified payroll taxes as a top constraint on hiring decisions among BC small and mid-sized firms—and the EHT is central to that concern for the scale-up cohort. Firms that treat the threshold as a hard ceiling may limit their growth, while those that ignore it until the end of the year face avoidable financial friction.

The playbook is straightforward: map your projected year-end payroll against the threshold before approving each hiring cohort. If you are within $200,000 of the $1 million mark, model two scenarios: hiring now versus deferring to the next fiscal year. Factor in the EHT cost when calculating the fully-loaded cost of each new hire. If your firm is approaching the $1.5 million level, consider whether accelerating certain hires into the current fiscal year changes your blended rate exposure. BC Tech Association members operating in this payroll band are navigating these trade-offs as they plan their 2026 and 2027 headcount.

The EHT was intended as a stable, broad-based revenue mechanism, and for most mature BC employers, it is simply a cost of doing business. For scale-ups, it is a threshold that rewards careful planning and penalises inattention. Firms that model it correctly will grow without breaking stride; those that treat it as a barrier will find their competitors moving ahead.