Estimated Contribution Rate

Important

This page is not up to date. It does not contain any tax changes for 2018 that were announced after November 21, 2017. To find out what has changed for the year with regard to source deductions and employer contributions, see the Tax News article Reduction of the Health Services Fund Contribution Rate for SMBs.

At the time you make your periodic remittances of the contribution to the health services fund for the year, you will not know your actual contribution rate for the year because the rate depends on your total payroll, which cannot be determined until the end of the year. Consequently, in order to calculate your periodic remittances for the year, you must use an estimated contribution rate. If you are a new employer, you must use a special method to calculate the rate.

Note

If you are a public-sector employer, the contribution rate to calculate your periodic remittances is 4.26%.

Estimated contribution rate for the first two years

The contribution rate for each periodic remittance made during the first two consecutive calendar years in which you are subject to the contribution to the health services fund will correspond to the rate that would apply if your total payroll for the calendar year were equal to the portion of your total payroll paid from the beginning of the year to the end of the period covered by the remittance. The contribution rate must therefore be adjusted for each remittance period on the basis of the cumulative total payroll for the preceding periods.

Example: Monthly remittance frequency
MonthTotal payroll for the monthCumulative total payrollContribution rate1Date of remittance
January$425,460$425,4602.30%February 15
February$474,540$900,0002.30%March 15
March$611,420$1,511,4202.55%April 15
April$875,875$2,387,2952.98%May 15
May$1,219,457$3,606,7523.58%June 15
June$1,540,360$5,147,1124.26%July 15
  1. In this example, the employer is not entitled to the reduced rate of the contribution to the health services fund for small and medium-sized businesses in the primary and manufacturing sectors.

As long as the total payroll since the beginning of the year is not more than $1 million, the contribution rate remains 2.30%. Once the total payroll is more than $1 million (but is still less than $5 million), the contribution rate is determined according to the following formula:

W (%) = 1.81 + 0.49 × S
where S = the cumulative total payroll $ 1,000,000

For example, if your total payroll is $1,500,000, the value of S is 1.5. The contribution rate is therefore 2.55%.

Notes
  • Contribution rates must be rounded off to the second decimal place. For example, if the result is:
    • 2.934%, the contribution rate is 2.93%;
    • 3.285%, the rate is 3.29%;
    • 2.899%, the rate is 2.9%.
  • Once the total payroll reaches $5 million, the contribution rate will be 4.26% until the end of the year.

Contribution rate starting with the third year

Starting with the third calendar year, your contribution rate will be the rate that would apply if your total payroll for 2018 were the same as your total payroll for 2017. For example, if your total payroll for 2017 was not more than $1 million, your periodic remittances of the contribution to the health services fund for 2018 must be based on a rate of 2.30%. This is the rate that would apply for 2018 if your total payroll for 2018 were the same as your total payroll for 2017.

Example
Corporation's taxation yearJanuary 1 to December 31, 2018
Corporation's remittance frequency for 2018Monthly
Total payroll for 2017$950,000
Applicable contribution rate for 2018 if the total payroll for 2018 were the same as the total payroll for 20172.30%
Salaries or wages paid in January 2018$35,000

Contribution to the health services fund to be paid when filing form TPZ-1015.R.14.1-V for the period from January 1 to 31, 2018: $35,000 × 2.30% = $805

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