Canadian Payroll Tax Rates
Source Deductions - CPP, EI, ITW
By L.Kenway BComm CPB Retired
Updated November 6, 2024 | Edited October 24, 2024 | Originally Published on Bookkeeping-Essentials.com in 2010.
WHAT'S IN THIS ARTICLE
What is Payroll Tax | EI Rates | EI FAQ | SE EI Voluntary Program | CPP Rates | FAQ CPP
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Why do I care about the payroll tax rates for CPP and EI? Employer payroll taxes and employee source withholdings.What is a payroll tax?
In general, payroll taxes refers to both employee source deductions and employer contributions.
Small business owners are required to withhold and remit payroll deductions (also referred to as source deductions) to the Canada Revenue Agency (CRA) based on CPP and EI tax rates announced annually by the Canadian Government.
Employers must contribute and remit their portion of CPP and EI payroll taxes at the same time.
What is the difference between a payroll tax and an income tax withholding?
To answer that question, we need to refine the definition of payroll taxes. The 4 source deductions employers must withhold are:
- CPP contributions - this is a payroll tax on the business because the employer must contribute 1.4x the employee contribution deducted from their paycheque.
- EI premiums - this is also a payroll tax on the business because the employer must match the employee's paycheque deduction.
- Federal tax income tax - a required withholding of income tax (WIT) from the employee's paycheque.
- Provincial / territorial tax - a required withholding of income tax (WIT) from the employee's paycheque.
As income tax withholdings are paid by the employee on their earnings, they are not considered an employer payroll tax but they are a source deduction. Employer payroll taxes refer specifically to the CPP & EI amounts paid by the employer.
MORE >> Steps new employers must take before they can remit their withholdings and contributions.
Your current EI and CPP rates are found below. There is no need to get uptight about what to do with these payroll tax rates as your payroll software as a service (SaaS) subscription handles the calculations for you. You just need to be aware that they exist. They can be used to forecast future payroll expenses or proof program calculations.
Current Year Payroll Tax Rates
Employment Insurance (EI) Notes
EI provides temporary income support to unemployed workers- Employers contribute 1.4 times the employee rates.
- Self-employed sole proprietors do NOT make EI contributions unless they have opted into the voluntary program. If they have joined, they pay the same rates as employees.
- EI premiums start to be deducted from the first dollar earned up to the yearly maximum.
- There is no age exemptions for deducting them.
- Employees might not be insurable if they are related to their employer, who is either a self-employed individual or a private corporation. If the business has negotiated a similar contract with an arm's length relationship, then their earnings are insurable.
- The EI clawback threshold is 1.25 x the maximum insurable earnings. That is $82,125 for 2025 is $82,125 versus $79,000 in 2024.
2025 Employment Insurance Rates
| EI Rates |
Employee Contribution Rate |
Employer Contribution Rate See Note 1 |
Maximum Insurable Earnings |
Maximum Contribution |
Self Employed Voluntary Contribution Rate See Note 2 |
Self Employed Minimum Annual Earnings Required |
|---|---|---|---|---|---|---|
| 2025 | 1.64% | 2.30% | $65,700 | $1,077.48 | 1.64% | $8,826 |
| 2024 | 1.66% | 2.32% | $63,200 | $1,049.12 | 1.66% | $8,492 |
| 2023 | 1.63% | 2.282% | $61,500 | $1,002.45 | 1.63% | $8,255 |
| 2022 | 1.58% | 2.212% | $60,300 | $952.54 | 1.58% | $8,092/$5,289 |
| 2021 | 1.58% | 2.212% | $56,300 | $889.54 | 1.58% | $7,555/$5,000 |
| 2020 | 1.58% | 2.212% | $54,200 | $856.36 | 1.58% | $7,279 |
| 2019 | 1.62% | 2.268% | $53,100 | $860.22 | 1.62% | $7,121 |
| 2018 | 1.66% | 2.324% | $51,700 | $858.22 | 1.66% | $6,947 |
| 2017 | 1.63% | 2.282% | $51,300 | $836.19 | 1.63% | $6.888 |
| 2016 | 1.88% 1.60% w credit | 2.632% 2.24% w credit | $50,800 | $955.04 $812.80 | 1.88% | $6,820 |
| 2015 | 1.88% 1.60% w credit | 2.632% 2.24% w credit | $49,500 | $930.60 $792.00 | 1.88% | $6,645 |
| 2014 | 1.88% | 2.632% | $48,600 | $913.68 | 1.88% | $6,515 |
| 2013 | 1.88% | 2.632% | $47,400 | $891.12 | 1.88% | $6,342 |
| 2012 | 1.83% | 2.562% | $45,900 | $839.97 | 1.83% | $6,222 |
| 2011 | 1.78% | 2.492% | $44,200 | $786.76 | 1.78% | $6,000 |
FAQ about EIFAQ About Canadian Employment Insurance
Following are the some questions asked about employment insurance.
- When are EI rates released?
- Can you get EI if you are self-employed?
- Background: Who Sets The EI Rates?
Continue reading for the answers to these questions.
Self Employed Voluntary ProgramWhen are EI rates released?
When are EI rates released?
The Canada Employment Insurance Commission announces EI payroll tax rates in September each year of the upcoming year.
Can you get EI if you are self-employed?
Can you get EI if you are self-employed?
The Canada Revenue Agency (CRA) introduced new Employment Insurance (EI) measures for self-employed persons, that came into effect in January 2010. Claims** can be made after twelve months of participation in the program which meant people were first eligible in January 2011, if they were registered before April 1, 2010. This is a voluntary program.
"If you are a self-employed person, or if you are employed by a corporation and you control more than 40 percent of the voting shares of that corporation, you will be able to voluntarily enter into an agreement, through Service Canada, to be eligible for EI special benefits ... If you enter into such an agreement, you will be required to calculate and pay EI premiums on your tax returns for the applicable years."
Independent workers (taxi drivers, fishermen, hair dressers) are NOT eligible for this program as they are eligible for regular EI.
You can find more details on how to apply on the Service Canada website at A to Z Services Index> S> Self Employed EI benefits. The special benefits are listed as well as qualifications to enter the program.
The cost will be the same premiums as salaried employees. You will NOT have to pay the employer portion which is 1.4 times the employee rate.
**One caveat - This program does not include regular EI benefits. Once you collect EI from this program, you will not be allowed to remove yourself from it (if you stay self-employed) ... so take time to make your decision before increasing your home business taxes.
___
Employment and Social Development Canada announced August 20, 2020 on their website that "self-employed workers who have opted in to the EI program to access special benefits may use a 2020 earnings threshold of $5,000 for claims established between January 3, 2021 and September 25, 2021. This is lower compared to the previous threshold of $7,555."
On September 14, 2021, the Commission's report titled "Summary of the 2022 Actuarial Report on the Employment Insurance Premium Rate" stated that "for 2022, the prescribed amount of self-employed earnings is $8,092. However, special temporary measures are lowering this amount to $5,289 for claims established between September 26, 2021 and September 24, 2022."
Initial reference: Government of Canada news release November 3, 2009
Background: Who Sets The EI Rates?
Background: Who Sets The EI Rates?
The Canada Employment Insurance Finance Board (CEIFB) was established in June 2008 to improve the governance and management of the EI Account. It reports to the Minister of Human Resources and Social Development.
The Employment Insurance Commission will continue to be responsible "for supporting the EI appeal system, making regulations with the approval of the Governor in Council and reviewing and approving policies related to EI program administration and delivery."
In September 2013, the government suspended the CEIFB permanently. The Canada Employment Insurance Commission (the Commission) is responsible for rate setting from 2017 forward.
sources: www.rhdcc-hrsdc.gc.ca/eng/employment/ei/ceifb/index.shtml and www.esdc.gc.ca/en/reports/ei/premium/rates2015.page?
Canada Pension Plan (CPP) Notes
Abbreviations EE = Employee ER = Employer SE = Self-Employed
YMPE = Year's Maximum Pensionable Earnings
YAMPE = Year's Additional Maximum Pensionable Earnings
CPP provides employee retirement pension savings for the future- CPP payroll tax rates for employers and employees remain at 5.95%. The rate was capped at 4.95% for 2013 to 2018. The rates began changing in 2019 due to the CPP Enhancement implementation on January 1, 2019. Prior to 2019, CPP retirement income replaced one quarter of average work earnings. Beginning in 2019, CPP retirement income will eventually one third of average work earnings. It will gradually increase by 14% by 2025.
- First $3,500 of earnings continue to be exempt. However, thresholds and maximum contributions increase each year as average weekly salaries increase.
- Contributors are not permitted to make contributions over the maximum pensionable earnings ceiling referred to as YMPE (Year’s Maximum Pensionable Earnings). Starting in 2024, a higher, second earnings ceiling was implemented and used to determine second additional CPP contributions (CPP2). As a result, pensionable earnings between YMPE and YAMPE are subject to additional contributions (CPP2).
- Employers will continue to contribute 1.0 times the employee rates. This means the maximum self-employed contribution is double ($4,034.10 x 2 = $8,068.20 or $672.35 per month). A good practice for the self-employed is to set aside monies monthly or make quarterly installments to pay your income tax and CPP that will become due in April each year.
- This year's CRA news release stated, "In 2024, a second earnings ceiling was introduced, the Year’s Additional Maximum Pensionable Earnings (YAMPE). The YAMPE is used to determine second additional Canada Pension Plan contributions (CPP2). In 2024, the YAMPE is approximately 7% above the Year’s Maximum Pensionable Earnings (YMPE). In 2025 and every year after, the YAMPE will be approximately 14% above the YMPE."
CRA employee and employer CPP2 contribution rates for 2024 and 2025 will be 4.00%, and the maximum contribution will be $188.00 and $396 respectively; the self-employed CPP2 contribution rate will be 8.00%, and the maximum self-employed contribution will be $376.00 and $792 respectively.
CPP2 is calculated as follows: (YAMPE - YMPE) x contribution rate %. For example, for 2025, the calculation is ($81,200 - $73,300) x 4% (for employees) or 8% (for self-employed). - All employees between 18 and 69 must contribute to CPP plans. However, an employee can choose to stop CPP contributions at age 65 if they submit form CPT30 Election to Stop Contributing to CPP to CRA.
Resource: November 1, 2024 Canada Revenue Agency announces maximum pensionable earnings and contributions for 2025
2025 Canada Pension Plan Rates
| CPP Rates |
EE/ER Contribution Rate See Note 1 |
Basic Exemptions See Note 2 |
Maximum Pensionable Earnings (YMPE) See Note 3 |
Maximum Contribution CCP1 |
Maximum Monthly Contribution CCP1 |
YAMPE See Note 5 |
EE/ER CPP2 Rate |
Maximum Contribution CCP2 See Note 5 |
|---|---|---|---|---|---|---|---|---|
| 2025 | 5.95% | $3,500 | $71,300 | $4,034.10 | $336.18 | $81,200 | 4% | $396 |
| 2024 | 5.95% | $3,500 | $68,500 | $3,867.50 | $322.29 | $73,200 | 4% | $188 |
| 2023 | 5.95% | $3,500 | $66,600 | $3,754.45 | $312.87 | |||
| 2022 | 5.70% | $3,500 | $64,900 | $3,499.80 | $291.65 | |||
| 2021 | 5.45% | $3,500 | $61,600 | $3,166.45 | $263.870 | |||
| 2020 | 5.25% | $3,500 | $58,700 | $2,898.00 | $241.50 | |||
| 2019 | 5.10% | $3,500 | $57,400 | $2,748.90 | $229.081 | |||
| 2018 | 4.95% | $3,500 | $55,900 | $2,593.80 | $216.15 | |||
Self-Employed CPP Information
| CPP Rates |
EE/ER Contribution Rate See Note 1 |
Basic Exemptions See Note 2 |
Maximum Pensionable Earnings (YMPE) See Note 3 |
Maximum Contribution CCP1 |
Maximum Monthly Contribution CCP1 |
YAMPE See Note 5 |
EE/ER CPP2 Rate |
Maximum Contribution CCP2 See Note 5 |
|---|---|---|---|---|---|---|---|---|
| 2025 | 11.9% | $3,500 | $71,300 | $8,068.20 | $672.35 | $81,200 | 8% | $792 |
| 2024 | 11.9% | $3,500 | $68,500 | $7,735.00 | $644.58 | $73,200 | 8% | $376 |
| 2023 | 11.9% | $3,500 | $66,600 | $7,508.90 | $625.74 | |||
| 2022 | 11.4% | $3,500 | $64,900 | $6,999.60 | $583.30 | |||
| 2021 | 10.9% | $3,500 | $61,600 | $6,332.90 | $527.74 | |||
| 2020 | 10.5% | $3,500 | $58,700 | $5,796.00 | $483.00 | |||
| 2019 | 10.2% | $3,500 | $57,400 | $5,497.80 | $458.12 | |||
| 2018 | 9.9% | $3,500 | $55,900 | $5,187.60 | $432.30 | |||
FAQ about CPPFAQ about Canada Pension Plan
Following are the some questions asked about employment insurance.
- When are CPP rates released?
- Who is excluded from paying CPP contributions and EI premiums?
- Is CPP sustainable for future generations? YES.
- Background: Who Invests the CPP contributions?
Continue reading for the answers to these questions.
CPP & EI ExclusionsWhen are CPP rates released?
When are CPP rates released?
The Canada Pension Plan Investment Board (CPPIB) releases CPP payroll tax rates in early November each year for the upcoming year.
Who Is Excluded From Paying CPP Contributions And EI Premiums?
Who Is Excluded From Paying CPP Contributions And EI Premiums?
As a small owner manager, the employer portion of payroll tax rates burdens your payroll. The question you need to ask is ... when is it mandatory to pay CPP contributions and EI premiums to your employees?
CPP is a mandatory deduction for anyone employed between the ages of 18 and 65, then voluntary until age 70 if you continue to work.
Everyone who is employed must contribute to EI. There are no age restrictions. Employees with earnings under $2,000 receive a 100% refund when they file their tax return. Those who earn over $2,000 may receive a partial refund calculated as follows: premiums paid - (earnings - $2,000) = refund.
The above are general rules. There are a lot of exceptions. So now let's answer that question by looking at when CPP and EI do not have to paid by the employer.
Some income is exempt from paying the payroll tax rates for CPP contributions and EI premiums. Check out these CRA resources to make your determination:
(1) Special payments chart - helps you determine whether or not to deduct CPP contributions, EI premiums, and income tax on the special payments you make to your employees or recipients.
(2) Benefits and allowances topical search - explains difference between a benefit, an allowance, or a reimbursement
(3) CPP/EI Explained - discusses various interpretive rulings including tips/gratuities controlled by the employer.
Is CPP Sustainable For Future Generations? Yes.
Is CPP Sustainable For Future Generations? Yes.
Every three years the Chief Actuary issues a report that reviews the financial state of the Fund and measures its sustainability. "The most recent triennial report (2022) by the Office of the Chief Actuary confirmed that the CPP is financially sustainable for at least 75 years."
The Chief Actuary’s latest projections are currently based on the assumption that the base CPP account will earn an average annual real rate of return of 3.69% above the rate of Canadian consumer price inflation, after all expenses, over the 75-year projection starting in year 2022. The projections also assume that the additional CPP account, which targets a lower level of risk, will earn an average annual real rate of return of 3.27%, after all expenses over the same time period. The previous 2019 report was based on a 3.4% real rate of return.
Starting in 2021, the CPP is expected to begin using a small portion of CPPIB investment earnings to supplement the contributions that constitute the primary means of funding benefits.
source: cppib.com/en/our-performance>cpp-sustainability
Background: Who Invests The CPP Contributions?
Background: Who Invests The CPP Contributions?
The Canada Pension Plan Investment Board (CPPIB) was created in December 1997 by an Act of Parliament to manage the CPP investment portfolio. This federal Crown corporation operates like a private sector investment management company with several legislative safeguards to protect it from political interference.
Their role is "to invest the assets of the CPP Fund with a view to achieving a maximum rate of return without undue risk of loss.".
CPPIB does not administer CPP benefits; this is done by The Canada Pension Plan. The Chief Actuary of Canada reviews the funding of the CPP program every three years. The last review for the period 2019-2021 was November 2022 .
source: www.cppinvestments.com/About_Us/
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