Published | Category : Source deductions and contributions

New Reduction of the Health Service Fund Contribution for SMBs as of 2018

On August 15, 2018, the Minister of Finance announced a new reduction of the health services fund contribution rate.

Increase in total payroll threshold for the reduced contribution rate

For 2018, the total payroll threshold for the reduced health services fund contribution rate will increase from $5 million to $5.5 million. It will then rise gradually from 2019 to 2022 and be indexed annually as of 2023.

Decrease in health services fund contribution rate

If you are an employer other than a public-sector employer and your total payroll is less than $5.5 million, you can qualify for the reduced contribution rate, subject to certain conditions. You must use the contribution rate for your sector of activity to calculate your health services fund contribution for the year. 

See the table below for the health services fund contribution rates for 2018 for each sector of activity.

SMBs in the primary and manufacturing sectors
Contribution rate for 2018
Total payroll (TP) Salaries or wages paid before March 28, 2018 Salaries or wages paid between March 28 and August 15, 2018 Salaries or wages paid after August 15, 2018
$1,000,000 or less 1.50% 1.45% 1.25%
$1,000,001 to $5,499,999 0.8867% + (0.6133% x TP/1,000,000) 0.8256% + (0.6244% x TP/1,000,000) 0.5811% + (0.6689% x TP/1,000,000)
$5,500,000 or more 4.26% 4.26% 4.26%
SMBs in the service and construction sectors
Contribution rate for 2018
Total payroll (TP) Salaries or wages paid before March 28, 2018 Salaries or wages paid between March 28 and August 15, 2018 Salaries or wages paid after August 15, 2018
$1,000,000 or less 2.30% 1.95% 1.75%
$1,000,001 to $5,499,999 1.8644% + (0.4356% x TP/1,000,000) 1.4367% + (0.5133% x TP/1,000,000) 1.1922% + (0.5578% x TP/1,000,000)
$5,500,000 or more 4.26% 4.26% 4.26%

If you stop carrying on a business or making payments in the year, you must calculate your health services fund contribution rate for 2018 as shown in the example below.

Example
You are an employer in the primary and manufacturing sectors and you stop carrying on your business on August 29, 2018. Your total payroll for the period from January 1 to August 29, 2018, is less than $1 million.
Salaries or wages paid before March 28, 2018 Salaries or wages paid between March 28 and August 15, 2018 Salaries or wages paid after August 15, 2018
Salaries or wages subject to the contribution $600,000 $300,000 $50,000
Contribution rate 1.50% 1.45% 1.25%
Contribution to the health services fund $9,000 $4,350 $625
Contribution for the period from January 1 to August 29, 2018: $9,000 + $4,350 + $625 $13,975
Keep your calculations in case we ask for them.

Reduction of the health services fund contribution for the creation of specialized jobs 

Form LE-34.1.12-V, Reduction of the Contribution to the Health Services Fund: Creation of Specialized Jobs, will be updated to incorporate the new rates for 2018. In addition, the denominator in the fraction used in the formula to determine your reduction rate if your total payroll is over $1 million has increased from $4 million to $4.5 million. 

Periodic payments of the health services fund contribution

Your periodic payments after August 15, 2018, may be adjusted to take into account the total payroll threshold increase for 2018. 

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