EXCLUDING INELIGIBLE EMPLOYEES FROM EMPLOYER HEALTH TAX PAYROLL CALCULATIONS (2023)

Issue

When it was created, the Employer Health Tax (EHT) was framed by the provincial government as a tool for funding the Medical Services Plan (MSP) -- the provincial healthcare system. If we accept this premise, then the tax should not apply to the portion of a business' payroll that is paid to seasonal workers, temporary foreign workers, or others who the government does not make eligible for publicly funded healthcare in British Columbia in the first place.

Background

The Employer Health Tax shifted the cost of partially funding the healthcare system from individuals (who had been paying through individual premiums) to businesses. The EHT is a payroll tax charged to employers based on their total payroll in B.C. above a threshold of $500,000. When calculating their EHT obligations, employers must include all remuneration paid to anyone working for the business in B.C., including temporary foreign workers and seasonal workers.

Temporary foreign workers are individuals who come to Canada under one of the streams of the Temporary Foreign Worker (TFW) Program to work for a specific period of time. These workers play an important role in a number of sectors in British Columbia, including agriculture and tourism, where they are often employed seasonally to meet seasonal demands for labour which cannot be filled by Canadians.

Depending on the program stream an individual applies under, TFWs can receive work permits ranging from a few months to up to 3 years to work in Canada. In the agriculture sector, one well-utilized program stream is the Seasonal Agricultural Worker Program (SAWP) which allows employers to hire temporary foreign workers for up to eight months to work on farms and in agricultural settings.

In regard to accessing public healthcare, TFWs are deemed ineligible by the government unless they will be in the country for a certain length of time and have served a waiting period. For a TFW to qualify for coverage with B.C.’s public healthcare system they must have a work permit valid for longer than 6 months. If they meet this criteria, they then still must serve a waiting period during which they are ineligible for MSP coverage for 3 months. Therefore, many seasonal workers under the SAWP may not ever access the B.C. public health care system during their time in Canada due to the short duration of their permits, and won’t contribute any costs to the system. Beyond the SAWP, temporary foreign workers who enter Canada through other programs with longer work permit durations will still have 3 months at the beginning during which they are ineligible for B.C.’s MSP.

In fact, in recognition of this ineligibility for public healthcare, the federal government has made a formal requirement of the SAWP that employers provide private health insurance for the temporary workers! By doing this, the immigration program expressly acknowledges that the government does not allow TFWs to access the public healthcare system for a period of time, and instead places this burden on employers.

Therefore, given that these TFWs are not eligible for publicly funded healthcare in B.C. for at least part of their time working, it makes little sense to require their employers to pay the EHT on their payroll during that time to fund the healthcare system.

The EHT places an additional burden on businesses that are already operating in a highly competitive environment and can negatively impact sectors that rely heavily on temporary foreign workers or seasonal workers. By exempting from the employer health tax any payroll paid to temporary foreign workers during any period in which they are ineligible for MSP, the government can help to support these critical industries, reduce their tax burden, and ensure that they can remain competitive in a global marketplace.

THE CHAMBER RECOMMENDS

That the Provincial Government:

1. Amend the Employer Health Tax and/or related regulations to exempt from total payroll calculations any remuneration paid to a temporary foreign worker during a period in which they are ineligible for the provincial medical services plan healthcare system.