Unlike Ontario, premiums for provincial medical services in British Columbia are billed on a monthly basis rather than covered through income tax. Because of this, employees are occasionally surprised and disappointed to find out their employer does not cover this charge.
Interestingly enough, having the employer pay doesn’t really make much sense in the end when you break it down.
Think About The Tax
For both the employer and employee, you need to consider where the best use of money is going to be. If you pay for your employee’s provincial medical premium, that becomes taxable income for the employee. They get taxed at their personal tax rate and you pay the applicable payroll taxes.
The employer gets a tax break for covering it but that $60 premium (for a single person) becomes a taxable benefit to the employee. If they end up paying tax on that $720 at the end of the year anyways then what is the value of this benefit to the employee?
Depending on the employee’s gross annual salary, it’s possible that $720 could put the employee into a higher tax bracket, further reducing the value of the employer’s generosity in paying the Provincial Medical Premium.
Creating A Win-Win Situation
The thing that many employees (and even unions) don’t realize is that it’s actually better for the employee to pay for their own medical premium and have the employer allocate those funds to an enhanced employee benefit plan instead.
Take that Provincial Medical Premium amount and apply it to the premium paid by the employee for his benefit plan. This will increase the employees take home pay. It is still a tax-deductible expense to the employer that does not incur any payroll taxes or income taxes for the employee.
That’s what I call a win-win!