Ontario Payroll Taxes 2026: Complete Employer's Guide

Ontario Payroll Tax Overview

Ontario is Canada's most populous province with over 15 million residents. As an employer in Ontario, understanding provincial payroll requirements is essential for compliance.

2026 Ontario Provincial Tax Brackets

Ontario uses a 5-bracket progressive tax system:

| Taxable Income | Tax Rate | |----------------|----------| | $0 - $52,886 | 5.05% | | $52,886 - $105,775 | 9.15% | | $105,775 - $150,000 | 11.16% | | $150,000 - $220,000 | 12.16% | | Over $220,000 | 13.16% |

Ontario Basic Personal Amount (2026): $12,739

Ontario Surtax

Ontario applies a surtax on provincial tax exceeding certain thresholds:

• 20% surtax on provincial tax over $5,554
• 36% surtax on provincial tax over $7,108

This effectively increases the top marginal rate for high earners.

Surtax Example

If an employee's Ontario tax is $8,000:

• Surtax on amount over $5,554: ($8,000 - $5,554) × 20% = $489.20
• Surtax on amount over $7,108: ($8,000 - $7,108) × 36% = $321.12
• Total surtax: $489.20 + $321.12 = $810.32

Ontario Health Premium

The Ontario Health Premium (OHP) is collected through the income tax system:

| Taxable Income | Health Premium | |----------------|----------------| | Up to $20,000 | $0 | | $20,001 - $25,000 | 6% of income over $20,000 | | $25,001 - $36,000 | $300 + 6% of income over $25,000 | | $36,001 - $38,500 | $450 + 25% of income over $36,000 | | $38,501 - $48,000 | $600 + 25% of income over $38,500 | | $48,001 - $72,000 | $750 + 25% of income over $48,000 | | $72,001 - $200,000 | $900 + 25% of income over $72,000 | | Over $200,000 | $900 |

Maximum OHP: $900 per year

Employer Health Tax (EHT)

Ontario employers with payroll over $1 million pay the Employer Health Tax:

| Total Ontario Payroll | EHT Rate | |----------------------|----------| | Up to $1,000,000 | Exempt | | $1,000,001 - $1,500,000 | Graduated rate | | Over $1,500,000 | 1.95% |

Small businesses with payroll under $1 million are exempt from EHT.

Required Deductions for Ontario Employees

Every Ontario pay stub must include:

Federal Deductions

1. Federal Income Tax - Based on federal brackets
2. CPP - 5.95% (max $4,034.10/year)
3. EI - 1.64% (max $1,077.48/year)

Provincial Deductions

1. Ontario Provincial Tax - Based on Ontario brackets above
2. Ontario Surtax - If applicable

Toronto-Specific Considerations

Employers in Toronto should note:

• No additional municipal taxes
• Toronto has a higher cost of living, affecting salary expectations
• TTC commuter benefits can be offered tax-free

Ontario Employment Standards

Minimum Wage (2026)

• General: $17.20/hour
• Students under 18: $16.20/hour
• Liquor servers: $16.20/hour
• Homeworkers: $18.90/hour

Overtime

• Overtime begins after 44 hours/week
• Rate: 1.5× regular rate

Vacation Pay

• Minimum 4% of gross earnings (2 weeks)
• 6% after 5 years (3 weeks)

Common Ontario Payroll Mistakes

1. Forgetting the surtax - Significantly impacts high earners
2. Missing OHP deductions - Collected annually via tax return
3. Wrong overtime threshold - Ontario uses 44 hours, not 40
4. Not tracking vacation pay - Must be shown separately

Ontario Pay Stub Requirements

Under the Employment Standards Act, Ontario employers must provide:

• Pay period dates
• Wage rate (hourly or salary)
• Gross and net amounts
• Itemized deductions
• Vacation pay (if applicable)

Using PaystubPRO for Ontario

PaystubPRO automatically handles all Ontario requirements:

• ✅ Correct 2026 Ontario tax brackets
• ✅ Surtax calculations
• ✅ Federal deductions (CPP, EI, federal tax)
• ✅ Compliant pay stub format
• ✅ YTD tracking

Create your Ontario pay stub in under 2 minutes - first one is FREE!