Two payroll contributions come out of employment income before it reaches a bank account: Canada Pension Plan (CPP), which builds a retirement pension, and Employment Insurance (EI), which pays benefits after a job loss, illness or leave. Both stop at a yearly ceiling, so they take a smaller share of a high salary.
The rules (2026, employee share)
- CPP: 5.95% of earnings between a $3,500 basic exemption and the Year's Maximum Pensionable Earnings of $74,600. That is 4.95% base plus 1.00% enhancement.[1][2][3][4][5]
- CPP2: a further 4.00% on earnings between $74,600 and the additional ceiling of $85,000.[6][7]
- EI: 1.63% of earnings up to $68,900 (maximum insurable earnings).[8][9]
The employer pays matching CPP, and EI at 1.4 times the employee rate.[10] Neither employer share is part of take-home pay.
CPP + CPP2 maximum = 4.95% × 71,100 + 1.00% × 71,100 + 4.00% × 10,400
= 3,519.45 + 711.00 + 416.00 = $4,646.45
EI maximum = 1.63% × 68,900 = $1,123.07
On the tax return the pieces are treated differently. The base CPP and the EI premiums earn a credit at the lowest federal rate and the lowest Ontario rate.[11][12] The enhancement and CPP2 are a deduction from income instead, which lowers taxable income; see income tax brackets. EI premiums are refunded through the return when insurable earnings for the year are $2,000 or less.[13]
The self-employed pay both halves of CPP, twice the employee rates.[14] Half of the base part and all of the enhanced part are deducted from income;[15] the other half of the base part is a credit.[16] See self-employment income. Self-employed contributions share the same ceilings with any salary.
CPP contributions end with the month of a person's 70th birthday.[17] Between 65 and 69 a person already receiving the pension may elect to stop contributing; under 65 they are mandatory.[18] What the contributions buy is covered in the CPP retirement pension.
In Quebec
Quebec runs its own pension plan, the Québec Pension Plan (QPP), in place of CPP, and its own parental insurance plan (QPIP), which is why its workers pay less EI.
- QPP: 5.3% base plus 1% first additional on earnings between a $3,500 exemption and $74,600, then 4% up to $85,000. The ceilings match CPP's; the base rate is higher.[19][20][21][22][23][24] The self-employed pay both shares.[25]
- EI: 1.3% instead of 1.63%, on the same maximum insurable earnings.[26]
- QPIP: 0.43% of earnings up to $103,000, and 0.764% on self-employed income up to what employment left of that maximum.[27][28][29]
QPP contributions continue through the whole year of a worker's 72nd birthday, not the month of the 70th.[30]
What the engine does
- Calculates CPP, CPP2 and EI from each person's employment income every month, with the ceilings growing with wages after 2026 (the $3,500 exemption is held flat, as the law has it). The law grows the CPP ceilings and EI's maximum insurable earnings with average wages, not prices. The plan takes wages to rise 0.8% a year faster than its inflation rate, the Chief Actuary's estimate for the Canada Pension Plan.[31]
- Credits base CPP and EI and deducts the enhancement and CPP2 on the annual assessment.
- Calculates self-employed CPP on a sole proprietor's yearly net business income, sharing the ceilings with salary.
- Stops contributions at 70 and, in the year they stop, prorates the ceilings and exemption by the months contributed.
- Withholds them from pay through the year; see tax withheld from pay.
What it deliberately does not
EI benefits are never paid, so a stretch without work has no EI income in it. The EI opt-in for the self-employed and reduced employer premium rates are not modelled. A person already receiving CPP who keeps working earns a post-retirement benefit that is not estimated.