Thresholds only feel safe until they don't. BC's Employer Health Tax (EHT) exemption was increased to $1 million in annual payroll in 2024, providing a significant reprieve for small businesses. However, as wages continue to climb, the math is catching up with Metro Vancouver employers who assumed they were safely below the line.
BC average hourly wages rose approximately 18 to 22 per cent between 2019 and 2025, according to Statistics Canada's Labour Force Survey. While the 2024 threshold hike offered relief, the rapid pace of wage inflation means that businesses are reaching the $1 million mark faster than anticipated. The threshold is not indexed to wage growth, leaving employers to navigate the gap.
Crossing that threshold carries an immediate cost. Under BC's EHT rate structure, employers with payrolls between $1 million and $1.5 million pay 2.925 per cent on the amount above $1 million. An employer at $1.1 million owes $2,925. The levy is progressive within the band, but the entry is abrupt: one dollar above $1 million triggers the obligation. Payrolls above $1.5 million shift to a flat 1.95 per cent on the full amount, with no exemption.
For a business that has never modelled EHT exposure, even $5,000 to $10,000 in new annual liability can represent a meaningful margin hit. Hospitality operators running at 4 to 6 per cent net margins, for instance, would need to generate roughly $100,000 to $250,000 in additional revenue to offset a $10,000 EHT bill.
The structural issue remains the lack of indexation. The BC Chamber of Commerce has previously called for the threshold to be indexed, and the Canadian Federation of Independent Business has flagged the cumulative payroll cost burden on small and mid-size BC employers. With the province managing a significant deficit, there is little current political pressure to further raise the floor.
The planning burden falls on employers. Finance teams that identify threshold exposure now—before year-end payroll locks in—have several levers. Timing of bonuses and discretionary compensation can shift payroll between calendar years. Contractor versus employee classification decisions, where legally appropriate, affect gross payroll calculations. In some cases, the analysis simply confirms that crossing the threshold is unavoidable, allowing the cost to be budgeted properly.
The sectors most exposed in Metro Vancouver are predictable. Hospitality and food service operators, who absorbed significant wage increases through minimum wage hikes, are crossing the threshold in larger numbers. Retail operations with stable headcounts but rising wages face the same dynamic. Professional services firms—accounting practices, engineering consultancies, and marketing agencies—that have grown in staff and compensation are another cohort to watch.
The practical action is straightforward: pull your year-to-date payroll figure, annualize it, and compare it to $1 million. If you are within 10 per cent of the threshold, you have a modelling problem worth solving before December 31. EHT instalments are required quarterly for employers with annual liability exceeding $2,925; an employer who crosses the threshold mid-year and has not been remitting faces both the annual liability and potential interest on late instalments.
What to watch:
- BC's fall fiscal update for any signal on threshold adjustment.
- Statistics Canada's Q2 2026 Labour Force Survey data, due later this month, for updated BC wage growth figures.
- Your own Q2 payroll actuals: annualize them now, not in November.
- The $1.5 million upper band: employers approaching that level face a different calculation, as the rate drops to 1.95 per cent on the full payroll, which can create a perverse notch effect near the boundary.
