Payroll Deductions in Canada (2026): CPP, CPP2, EI, Income Tax and When to Remit

Every time you run payroll in Canada you hold back four things from an employee's pay: Canada Pension Plan contributions, Employment Insurance premiums, income tax and, for higher earners, the second-tier CPP2 contribution. You then add your own employer share and send the lot to the Canada Revenue Agency by a fixed date. This guide is for small business owners and bookkeepers running their own payroll in 2026. It sets out the current rates and ceilings, the Quebec differences, how the CRA's calculator works, when to remit, the penalties, and worked examples in Canadian dollars.

Quick answer

In 2026, Canadian employers deduct CPP at 5.95% on earnings between C$3,500 and C$74,600, CPP2 at 4% on earnings from C$74,600 to C$85,000, EI at 1.63% on earnings up to C$68,900, and federal plus provincial income tax based on the employee's TD1. You match CPP and CPP2, pay 1.4 × the EI premium, and remit everything to the CRA — usually by the 15th of the next month.

• Maximum employee CPP: C$4,230.45 + CPP2 C$416

• Maximum employee EI: C$1,123.07; employer C$1,572.30

• Quebec: QPP at 6.3%, EI at 1.30% and QPIP instead

• Check every figure with the CRA's free Payroll Deductions Online Calculator (PDOC)

• Already set for 2027: EI 1.64% on up to C$70,800

What payroll deductions are and who has to make them

In Canada, "payroll deductions" — the CRA also calls them source deductions — are the amounts an employer is legally required to withhold from an employee's pay and pass on to the government. There are three federal programs: the Canada Pension Plan (or the Quebec Pension Plan for people employed in Quebec), Employment Insurance, and income tax, which combines federal tax with the tax of the province or territory of employment. Quebec employers also withhold for the Quebec Parental Insurance Plan and remit Quebec income tax and QPP to Revenu Québec instead of the CRA.

You have to make these deductions as soon as you pay salary, wages, bonuses, commissions, vacation pay, tips you control, or taxable benefits and allowances. Before your first pay run, add a payroll program account (the "RP" account) to your business number. If you don't yet have a business number, you need one before your first remittance is due — our guide to registering a business in Canada covers that, and the CRA My Business Account guide shows how to manage the payroll account online.

Each new employee fills in a federal TD1 and, outside Quebec, a provincial or territorial TD1. The claim amounts on those forms drive the income tax calculation. If an employee doesn't give you a TD1, you use the basic personal amount — C$16,452 federally for 2026. The CRA indexes these amounts every January, and employees get the indexing automatically even if they don't file a new form.

The amounts you withhold are held in trust for the Crown. They aren't your working capital, and directors of a corporation can be held personally liable if the company deducts but doesn't remit. That's why payroll arrears are treated more harshly than almost any other tax debt.

CPP and CPP2 contribution rates for 2026

The Canada Pension Plan now has two layers that show up on a pay stub. The first layer — the base CPP plus the "first additional" contribution phased in from 2019 to 2023 — is charged at 5.95% each for employee and employer on pensionable earnings between the C$3,500 basic exemption and the year's maximum pensionable earnings (YMPE) of C$74,600. The second layer, CPP2, started on 1 January 2024. It applies only to earnings above the YMPE, up to the year's additional maximum pensionable earnings (YAMPE) of C$85,000, at 4% each.

The basic exemption is a yearly amount, so on each pay you subtract a slice of it: C$3,500 ÷ 26 = C$134.61 for a bi-weekly payroll, C$291.66 for a monthly one. There's no exemption on CPP2. Once an employee's year-to-date pensionable earnings pass C$74,600, every further dollar up to C$85,000 carries 4%.

CPP applies only to employees aged 18 to 70. You start deducting in the month after an employee turns 18 and stop in the month after they turn 70. A worker aged 65 to 70 who already receives a CPP or QPP retirement pension can choose to stop contributing by giving you a copy of Form CPT30; from then on neither of you pays CPP on their earnings. Some kinds of employment aren't pensionable at all — casual work that isn't for your business, for example — and the T4001 guide lists them.

Self-employed owners pay both halves: 11.9% up to the YMPE and 8% on the CPP2 band. That's collected through the personal tax return, not payroll. But if your corporation pays you a salary, you're an employee of the company and normal payroll deductions apply; dividends carry no CPP.

EI premium rates and maximum insurable earnings

Employment Insurance is simpler. For 2026, the employee premium is 1.63% of insurable earnings — C$1.63 for every C$100 — up to maximum insurable earnings of C$68,900, so the most any employee pays is C$1,123.07. The employer pays 1.4 times the employee premium, up to C$1,572.30 per employee. There's no exemption and no age limit: you deduct EI from a 16-year-old's first shift and from a 72-year-old who is still on the payroll.

In Quebec the employee EI rate is lower, 1.30% (maximum C$895.70), because Quebec pays its own parental benefits through QPIP. Employers that offer a qualifying short-term disability plan can apply to Service Canada's Premium Reduction Program to pay a lower employer rate; most small businesses won't, but it's worth asking your group benefits provider.

Some employment isn't insurable. The best-known case for owner-managers is that an employee who controls more than 40% of a corporation's voting shares isn't in insurable employment, so you don't deduct EI from their pay. Family members you don't deal with at arm's length may also be excluded unless the terms of their job are similar to those you'd offer a stranger. If you're unsure, the CRA can issue a ruling on insurability — don't guess, because getting it wrong means paying both shares later.

Income tax withholding

From gross pay to net pay

Step 1

Gross pay + taxable benefits

Step 2

− CPP and CPP2

Step 3

− EI (QPIP in Quebec)

Step 4

− Federal + provincial tax (TD1)

Step 5

Net pay

remit deductions + employer share

Income tax is the biggest deduction for most employees, and the one that varies most. The CRA's formulas apply the federal brackets — with a lowest federal rate of 14% for 2026 — and the brackets and credits of the province or territory where the employee reports for work, then subtract the TD1 claims and credits for CPP and EI contributions. That's why two people on the same salary can have different tax deducted: one may claim a spousal amount, the other may have asked for extra tax to be withheld because they have a second job.

Provinces don't always change rates on 1 January. The CRA's July 2026 edition of its formulas built in mid-year changes: British Columbia raised its lowest rate from 5.06% to 5.60% (applied at a prorated 6.14% for the rest of 2026) and increased its basic reduction; Newfoundland and Labrador raised its basic personal amount from C$11,188 to C$13,094 retroactive to 1 January, using a prorated C$15,000 from July; and Prince Edward Island added a 20% bracket on taxable income over C$200,000. If your payroll software didn't update in July, your B.C., N.L. and P.E.I. withholdings since then may be off.

Bonuses and retroactive pay are taxed using a separate bonus method so the lump sum isn't treated as if it were earned every pay period. Taxable benefits — a company car, a phone plan, a gym membership — are added to income for tax and usually CPP, and for EI only when they're paid in cash. The T4001 guide has a chart showing which deductions apply to each kind of benefit.

Quebec: QPP, QPIP and Revenu Québec

If an employee reports for work at an establishment in Quebec, the rules change. You deduct Quebec Pension Plan contributions instead of CPP, QPIP premiums on top of a reduced EI premium, and Quebec income tax — and you remit QPP, QPIP and Quebec tax to Revenu Québec on its own schedule, while federal tax and EI still go to the CRA.

Quebec vs rest of Canada — 2026 employee deductions

Deduction	Outside Quebec	In Quebec
Pension plan	CPP 5.95% up to C$74,600	QPP 6.3% up to C$74,600
Second-tier pension	CPP2 4% to C$85,000	QPP second additional 4% to C$85,000
Maximum pension contribution (first tier)	C$4,230.45	C$4,479.30
Employment Insurance	1.63% up to C$68,900	1.30% up to C$68,900
Parental insurance	—	QPIP 0.430% (employer 0.602%) up to C$103,000
Provincial income tax	Remitted to the CRA	Remitted to Revenu Québec
Calculator	CRA PDOC	PDOC (federal) + Revenu Québec WebRAS

Pension plan

Outside Quebec

CPP 5.95% up to C$74,600

In Quebec

QPP 6.3% up to C$74,600

Second-tier pension

Outside Quebec

CPP2 4% to C$85,000

In Quebec

QPP second additional 4% to C$85,000

Maximum pension contribution (first tier)

Outside Quebec

C$4,230.45

In Quebec

C$4,479.30

Employment Insurance

Outside Quebec

1.63% up to C$68,900

In Quebec

1.30% up to C$68,900

Parental insurance

Outside Quebec

—

In Quebec

QPIP 0.430% (employer 0.602%) up to C$103,000

Provincial income tax

Outside Quebec

Remitted to the CRA

In Quebec

Remitted to Revenu Québec

Calculator

Outside Quebec

CRA PDOC

In Quebec

PDOC (federal) + Revenu Québec WebRAS

QPP's rate is higher than CPP's because Retraite Québec splits it into a 5.3% base contribution and a 1% first additional contribution, for 6.3% each on earnings between C$3,500 and C$74,600. The QPP second additional contribution mirrors CPP2: 4% each on earnings between C$74,600 and C$85,000, up to C$416. QPIP has its own, higher ceiling of C$103,000. Quebec employers also pay contributions with no CPP equivalent — to the Health Services Fund, the labour standards body (CNESST) and, for larger payrolls, workforce training — which Revenu Québec's employer guide sets out.

The QPIP rates here come from Revenu Québec's official rate page, which refused our automated check on 9 October 2026; we read them from the indexed official page and they match the Canadian Federation of Independent Business's 2026 tables. Confirm them on the official page before you set up a Quebec payroll.

Using the CRA's Payroll Deductions Online Calculator (PDOC)

PDOC is the CRA's free web calculator, and it's the simplest way to check your payroll software or work out deductions by hand. You enter the province of employment, pay frequency, date paid, gross pay and the TD1 claim codes; it returns federal and provincial tax, CPP, CPP2 and EI for that pay. It handles salary, commission, pension payments and bonuses, and has a "verify CPP and EI" mode for checking year-end totals.

PDOC uses the formulas in the CRA's T4127 publication, which is updated every 1 January and 1 July. For pay dates on or after 1 July 2026 it applies the B.C., Newfoundland and Labrador and P.E.I. changes described above. For Quebec employees PDOC calculates federal tax, CPP-equivalent and EI figures only; you use Revenu Québec's WebRAS software for QPP, QPIP and Quebec tax.

Running a pay through PDOC

1. 1

   Choose the calculation type

   Pick Salary for regular pay, Bonus for a lump sum, Commission for commission-only staff.

2. 2

   Enter employer and employee details

   Province of employment, pay frequency (weekly, bi-weekly, semi-monthly, monthly) and the date the employee is paid — the date decides which formulas apply.

   Open PDOC
3. 3

   Enter gross pay and TD1 claim codes

   Use the claim code from the employee's federal and provincial TD1. Add any taxable benefits, RRSP or union dues deducted at source.

4. 4

   Add year-to-date CPP and EI

   Enter what you've already deducted this year so PDOC stops at the annual maximums and starts CPP2 at the right point.

   Tip: Forgetting year-to-date figures is the most common reason PDOC and payroll software disagree.

5. 5

   Save the PDF result

   Keep it with your payroll records — you must keep records for at least six years after the year they relate to.

The paper alternative is the T4032 Payroll Deductions Tables, published for each province. They're fine for a single employee on a regular salary but awkward for anything else; most employers now use PDOC or payroll software that uses the T4127 formulas.

Worked examples in C$ (2026 rates)

The examples below use the 2026 rates in this guide. Income tax depends on the TD1 and province, so we show CPP, CPP2 and EI exactly and leave tax to PDOC.

1. An Ontario employee on C$60,000, paid bi-weekly. Each pay is C$2,307.69.

• CPP: (C$2,307.69 − C$134.62) × 5.95% = C$129.30, matched by the employer.
• EI: C$2,307.69 × 1.63% = C$37.62; employer EI is 1.4 × C$37.62 = C$52.67.
• CPP2: none — annual earnings never reach C$74,600.
• Over the year: employee CPP C$3,361.75 and EI C$978.00; employer cost on top of salary C$3,361.75 + C$1,369.20 = C$4,730.95.

2. A manager on C$95,000, paid monthly (C$7,916.67 a month). This shows how the deductions switch on and off during the year.

• EI is C$129.04 a month and reaches its C$1,123.07 maximum in September, when only C$90.75 is deducted. No EI from October.
• CPP is C$453.69 a month (C$7,916.67 − C$291.67, × 5.95%). By the end of September the employee has paid C$4,083.21, so October takes only C$147.24 to reach C$4,230.45.
• CPP2 starts in October, when year-to-date earnings (C$79,166.67) pass the YMPE: (C$79,166.67 − C$74,600) × 4% = C$182.67. November takes the remaining C$233.33 as earnings reach C$85,000, for the C$416 maximum.
• Annual employee total: C$4,230.45 + C$416 + C$1,123.07 = C$5,769.52. Employer total: C$4,230.45 + C$416 + C$1,572.30 = C$6,218.75.

The manager's net pay jumps in October and again in December — expect questions, and explain it on the pay stub.

3. A Quebec employee on C$60,000. Annual QPP is (C$60,000 − C$3,500) × 6.3% = C$3,559.50; EI is C$60,000 × 1.30% = C$780; QPIP is C$60,000 × 0.430% = C$258. The employer matches QPP, pays EI of C$1,092 (1.4 ×) and QPIP of C$361.20, before Quebec's other employer contributions.

When to remit: remitter types and due dates

Your remittance schedule depends on your average monthly withholding amount (AMWA) — the total of employee and employer CPP, EI and tax you remitted two calendar years ago, divided by the number of months you remitted. The CRA tells you which type you are. Remittances must be received by the due date, not mailed by it; if a due date falls on a weekend or public holiday, the next business day counts.

A "perfect compliance record" means no late remittances or penalties on the payroll account, no overdue T4 returns, and — if you're GST/HST registered — no balance owing or overdue GST/HST returns. A new quarterly employer whose monthly withholding reaches C$1,000 becomes a regular remitter from the next quarter.

Since 1 January 2024, any payment to the Receiver General over C$10,000 must be made electronically — online banking, My Business Account, a pre-authorized debit or a wire — unless you can't reasonably do so. Each failure can cost a C$100 penalty. Below that amount you can still pay at a bank counter with a remittance voucher, but online banking is faster and gives you a record.

If you have no employees in a period, you still have to tell the CRA — file a nil remittance online or by phone — or it may assume you've missed a payment.

Penalties and common mistakes

Failing to deduct is the costliest mistake. If you didn't withhold CPP, EI or tax, the CRA assesses you for the amounts you should have deducted plus a 10% penalty, and you're liable for the employee's share as well as your own. The T4001 guide explains when and how much of an underdeduction you can recover from the employee's later pay; once the CRA assesses you, the cost usually stays with the business.

Remitting late triggers a graduated penalty. The CRA generally applies it only to the part of the late amount over C$500, unless the failure was knowing or grossly negligent, and charges interest from the due date. For example, a regular remitter who owes C$8,000 of September deductions and pays on 20 October instead of 15 October is five days late: the penalty is 5% × (C$8,000 − C$500) = C$375, plus interest.

CRA payroll penalties at a glance

10%

Failure to deduct

20% for repeat, knowing or grossly negligent failures in a year

3% – 10%

Late remittance

3% (1–3 days), 5% (4–5), 7% (6–7), 10% (8+ days or not paid)

C$100

Not paying electronically

Per payment over C$10,000

6 years

Keep payroll records

After the year they relate to

Other mistakes we see repeatedly:

• Treating a worker as a contractor to avoid deductions. If the CRA rules the person is an employee, you owe both shares of CPP and EI for the whole period. Ask the CRA for a ruling if the relationship is unclear.
• Using the wrong province. Tax is based on where the employee reports for work, not where they live; remote workers report to the establishment that pays them.
• Ignoring the YAMPE. Software set up before 2024 may not deduct CPP2. Check that box 16A of last year's T4s isn't empty for anyone earning over the YMPE.
• Not resetting maximums in January. CPP and EI maximums are per employer per year. If an employee changes jobs, the new employer starts from zero; the employee gets any overpayment back on their tax return, but the employer's share isn't refunded.
• Missing the July formula update in provinces that change rates mid-year, as B.C., N.L. and P.E.I. did in 2026.

What changes in 2027

Two 2027 changes are already public. The Canada Employment Insurance Commission set the 2027 EI rate at 1.64% (1.29% in Quebec) on maximum insurable earnings of C$70,800, so the maximum employee premium rises by about C$38. And the CRA's July 2026 payroll formulas say the government has announced its intention to cut the base CPP rate from 9.9% to 9.5% combined from 1 January 2027 — 4.75% each instead of 4.95%. With the 1% first additional contribution unchanged, the employee rate on earnings up to the YMPE would fall from 5.95% to 5.75%. The Office of the Chief Actuary's 33rd CPP report already uses 9.5% for 2027 onward. The 2027 YMPE and YAMPE are normally published in November; we'll update this page when they are.

Before your first January 2027 pay run, check that your payroll software has loaded the new tables, collect new TD1 forms from anyone whose situation changed, and diary the T4 deadline — the next section of your year-end work is in our guide to T4 slips.

Official links

• CRA — CPP contribution rates, maximums and exemptionsYMPE, exemption, rates by year
• CRA — CPP2 contribution rates and maximumsYAMPE and CPP2 maximums
• CRA — EI premium rates and maximumsFederal and Quebec rates
• CRA — Payroll Deductions Online CalculatorPDOC
• CRA — When to remit (pay)Remitter types and due dates
• CRA — T4001 Employers' GuideFull rules, penalties, special payments
• Retraite Québec — 2026 key dataQPP rates and maximums
• Revenu Québec — QPIP ratesQPIP maximum insurable earnings and rates

Next steps

Set up the payroll account, collect TD1s, run your first pay through PDOC to check your software, and put the 15th of every month (or your quarterly dates) in the calendar. Our salary slip generator creates a pay stub showing each deduction, the minimum wage guide confirms the pay floor before deductions, and the CRA business contact numbers page lists the payroll lines if a remittance goes astray.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What are the CPP and EI rates for 2026?

For 2026, employees and employers each pay CPP at 5.95% on pensionable earnings between the C$3,500 basic exemption and the C$74,600 YMPE, plus CPP2 at 4% on earnings from the YMPE up to C$85,000. EI is 1.63% for employees outside Quebec on insurable earnings up to C$68,900, and the employer pays 1.4 times the employee premium.

What is the maximum CPP contribution in 2026?

The maximum base-plus-first-additional CPP contribution is C$4,230.45 for the employee and the same amount for the employer. On top of that, CPP2 adds up to C$416 each for anyone earning C$85,000 or more. So an employee at or above that level pays C$4,646.45 in total CPP for the year, and the employer matches it.

When are payroll deductions due to the CRA?

Most small employers are regular remitters: deductions for a month must reach the CRA by the 15th of the following month. Very small employers with a perfect compliance record can remit quarterly, by 15 April, 15 July, 15 October and 15 January. Larger employers remit up to twice or four times a month depending on their average monthly withholding amount.

Does the Payroll Deductions Online Calculator work for Quebec?

PDOC calculates federal income tax, CPP and EI for Quebec employees, but not Quebec provincial income tax, QPP or QPIP. Revenu Québec administers those, so Quebec employers use Revenu Québec's WebRAS program or its tables for the provincial side. Outside Quebec, PDOC covers federal, provincial and territorial deductions in one calculation.

Do I deduct CPP from an employee who is under 18 or over 70?

No. CPP is deducted only from employees aged 18 to 70. Start in the month after the employee turns 18, and stop in the month after they turn 70. Employees aged 65 to 70 who receive a CPP or QPP pension can elect to stop contributing by giving you a copy of Form CPT30. EI has no age limits.

What happens if I remit payroll deductions late?

The CRA can charge 3% if a remittance is one to three days late, 5% at four or five days, 7% at six or seven days, and 10% after that, plus interest. Generally the penalty applies only to the part over C$500. Failing to deduct at all costs 10% of the amount you should have withheld, and you still owe both shares.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.CPP contribution rates, maximums and exemptions — Canada Revenue Agency · accessed 9 October 2026
2. 2.Second additional CPP (CPP2) contribution rates and maximums — Canada Revenue Agency · accessed 9 October 2026
3. 3.EI premium rates and maximums — Canada Revenue Agency · accessed 9 October 2026
4. 4.Summary of the 2027 Actuarial Report on the Employment Insurance Premium Rate — Employment and Social Development Canada · accessed 9 October 2026
5. 5.When to remit (pay) — Canada Revenue Agency · accessed 9 October 2026
6. 6.T4001 Employers' Guide – Payroll Deductions and Remittances — Canada Revenue Agency · accessed 9 October 2026
7. 7.T4127 Payroll Deductions Formulas – 123rd Edition, effective July 1, 2026 — Canada Revenue Agency · accessed 9 October 2026
8. 8.Payroll Deductions Online Calculator (PDOC) — Canada Revenue Agency · accessed 9 October 2026
9. 9.2026 benefit amounts and key data — Retraite Québec · accessed 9 October 2026
10. 10.QPIP maximum insurable earnings and premium rate — Revenu Québec · accessed 9 October 2026
11. 11.Payroll Deduction Tables – 2026 — Canadian Federation of Independent Business · accessed 9 October 2026