Canada: Quebec Cutting Employer and Employee Health Contributions

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By Molly Ward and Jared Mondschein

March 24—The Quebec Health Services Fund contribution rate based on total payroll is to be cut for small and medium size employers beginning in 2017 and the phasing out of individual health contributions will start retroactively from Jan. 1, 2016, Quebec Minister of Finance Carlos Leitão said March 17 in Quebec's budget speech for 2016-17.

The Health Service Fund contribution rate for employers currently ranges in five thresholds, from 2.7 percent for those with a total annual payroll amounts of C$1 million ($752,000) or less to 4.26 percent for employers with a total payroll of C$5 million ($3,763,000) or more. An exception was provided in 2015 for employers in the “primary and manufacturing” sectors, who were allowed reduced rates that begin at 1.6 percent for payroll amounts of C$1 million or less and increase to 4.26 percent for those with payroll amounts of C$5 million or more.

Under the proposed budget, the contribution rates for employers in all sectors with total payroll amounts under C$5 million would gradually decrease beginning Jan. 1, 2017, and continue to decrease through 2021. The rate for employers with payrolls of C$5 million or more will remain unchanged.

For example, effective Jan. 1, 2017, the contribution rate for employers with payrolls of C$1 million or less is to decrease to 1.45 percent from 1.6 percent by 2021 for the primary and manufacturing sectors and to 2 percent from 2.7 percent for the other sectors.

Health Contribution Rates for Employers in the Manufacturing Industries

Payroll of C$1 million or less Payroll of C$2 million or less Payroll of C$3 million or less Payroll of C$4 million or less Payroll of C$5 million or more
Current Rates 1.60% 2.27% 2.93% 3.60% 4.26%
2017 Rates 1.55% 2.23% 2.93% 3.60% 4.26%
2018-20 Rates 1.50% 2.19% 2.88% 3.57% 4.26%
2021 Rates 1.45% 2.15% 2.86% 3.56% 4.26%

Health Contribution Rates for Employers in the Non-Manufacturing Industries

Payroll of C$1 million or less Payroll of C$2 million or less Payroll of C$3 million or less Payroll of C$4 million or less Payroll of C$5 million or more
Current Rates 2.70% 3.09% 3.48% 3.87% 4.26%
2017 Rates 2.50% 2.94% 3.38% 3.82% 4.26%
2018 Rates 2.30% 2.79% 3.28% 3.77% 4.26%
2019 Rates 2.15% 2.68% 3.21% 3.73% 4.26%
2020 Rates 2.05% 2.60% 3.16% 3.71% 4.26%
2021 Rates 2.00% 2.57% 3.13% 3.70% 4.26%

Personal Health Contribution

The individual health contribution in Quebec is to be phased out over a two year period, starting retroactively from Jan. 1, 2016 and ending on Dec. 31, 2017.

Currently, employees who reside in Quebec are required to pay a yearly health insurance contribution, unless the individuals's annual income is equal to or less than C$18,571 ($14,069).

For 2016, the health contribution payable by a resident employee at the end of the year will be:

  • Level 1 income: reduced to C$50 ($37.85) from C$100 ($75.69) for incomes of C$41,265 ($31,233) or less;
  • Level 2 income: reduced to C$175 ($132.46) from C$200 ($151.38) for incomes of C$41,265 to C$134,095 ($101,496); and
  • Level 3 income: maintained at C$1,000 ($756) for incomes greater than C$134,095.
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    In 2017, the maximum health contribution will be:

  • Reduced to zero for Level 1 income;
  • Reduced to C$70 ($52.98) for Level 2 income; and
  • Reduced to C$800 ($605) for Level 2 income.
  •  

    The personal health contribution, included in the overall income tax at the source deduction—unless employees request amounts not to be withheld—will be entirely eliminated for all levels of income by 2018.

    The formal adoption of the budgetary proposals will take likely take a few weeks but is expected to pass “automatically” due to the ruling Quebec Liberal Party's majority in parliament, Quebec Ministry of Finance Spokesperson Jacques Delorme told Bloomberg BNA.

    To contact the reporter on this story: Molly Ward at mward@bna.com and Jared Mondschein at jmondschein@bna.com

    To contact the editor responsible for this story: Michael Baer at mbaer@bna.com

    For More Information

    The budget speech can be found at http://www.budget.finances.gouv.qc.ca/budget/2016-2017/en/documents/Speech.pdf.

    Additional information on the budget speech can be found at http://www.budget.finances.gouv.qc.ca/budget/2016-2017/en/documents/AdditionalInfo.pdf.

    The economic plan can be found at http://www.budget.finances.gouv.qc.ca/budget/2016-2017/en/documents/EconomicPlan.pdf.

    More information on payroll issues in Canada is available in the Canada country primer.