Employers who thought they were off the hook for Medical Services Plan premiums as employee benefits when the NDP government announced the phase-out of premiums last year got a surprise on Tuesday.
The NDP’s budget unveiled a new payroll tax to take effect on Jan. 1, 2019, to offset the loss in revenue from premiums. But the payroll tax will be a new expense for many companies with payrolls over $500,000 who did not pay premiums for their employees; those with payrolls under $500,000 are exempt from the tax.
The “employer health” tax, as it is dubbed by government, requires companies with payrolls over $500,000 a year to pay a 0.98 per cent tax on annual payroll. The tax goes up in increments up for every $250,000 in payroll. Big companies will be hardest hit as they will pay a 1.95 per cent of tax on payrolls over $1.5 million.
Since the government is one of the biggest employers in B.C., the public sector will account for about 20 per cent (ultimately $400 million a year) of the revenue that new tax brings in when fully implemented, Finance Minister Carole James said.
The tax is projected to bring in $463 million in 2018-19 (it applies for only the last three months of that fiscal year), $1.85 billion in 2019-20, and $1.92 billion in 2020-21. MSP premiums brought in $2.6 billion annually in revenue so there will still be a revenue gap to make up.
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