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A Guide to Payroll Contributions in Canada

Running payroll in Canada will mean making various contributions in payroll by both employer and employee, and those may be quite different than in your home country.  In addition, the rates of contribution can change frequently, and can even vary between Canadian provinces.

Here is a summary of the two primary payroll contributions, and how they are calculated.  But if you are running payroll for the first time in Canada it can be useful to rely on local experts for guidance and to keep you up to date on rate changes each year.

Canada Pension Plan (CPP) Contributions

CPP contributions are mandatory in payroll to add to employee retirement funds, but there are maximum contribution limits.

How much do the employer and employee have to contribute?

The rate of contribution has increased the past few years to a current 5.25% for both employee and employer contributions, for a total of 10.5% of salary.

What is the maximum contribution?

The maximum combined annual contribution is CAD 2898 in 2020.

QPP in Quebec

Quebec has a separate pension plan, where the maximum contribution is higher at CAD 3146, and rates are higher as well.

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Employment Insurance (EI) Contribution

Another required contribution is for employment insurance which provides assistance if a worker becomes unemployed.

How much do the employer and employee have to contribute?

The EI contribution is 2.21% for the employer and 1.58% for the employee.

What is the maximum contribution?

The maximum annual contribution to EI by the employer is CAD 1199, and for the employee, it is CAD 856.

EI in Quebec

The rates are different for EI in Quebec, and the contribution maximums are slightly lower because Quebec also imposes another contribution called the Quebec Parental Insurance Premium.

Client Case: Ontario Payroll Contributions

As mentioned, contribution rates can change each year, and one of our clients with employees in Ontario, Canada needed the new information, so they were remitting the correct amount to the employer of record for payroll.

Our local partner in Ontario relayed the new rates to them which affected payroll:

  • Ontario Workplace Safety and Insurance Board Premium: increase from .13% to 1.67%
  • EI rate: decrease from 2.268% to 2.21%
  • Employer Health Tax: remains 1.95%
  • CPP rate: increase from 5.10% to 5.25%
  • Total Payroll Contribution: increase from 9.45% to 11.08%

While these amounts are not too significant, it does show how important it is to stay current with the rates, so the payroll is accurate and in full compliance.

Do you need more information about Canada?

Companies that are new to hiring in Canada, may have other questions about employment in the country and provinces:

Are the pension plans administered by the Canadian government or private firms? 

Are contribution amounts based on pre-tax salary or after-tax?

Is Quebec the only province with a separate pension and insurance program?

We assist our clients in calculating and withholding contributions in their foreign payroll, so that they are in full compliance with local laws.  We make international employment simple.

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The information in this article is subject to changes in local legislation.

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