Payroll Tax Deduction Rates
in the U.S. and Canada

Neck pain while reviewing payroll tax deductionsNeck pain while reviewing payroll tax deductions. Photo 282387481 © Yuri Arcurs | Dreamstime.com
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by L. Kenway BComm CPB Retired

Published November 2012 | Edited June 6, 2024


In this chat, I'll answer these two questions:

  1. What is the employer's and employee's Social Security tax rate for 2024?
  2. What are the CPP and EI rates for 2024?

Payroll tax deductions are mandatory for small business owners in the U.S. and Canada. If they are giving you "tech" neck, here is a nice short chair sitting routine to ease pain in the neck and shoulders caused by looking at your computer, phone or other screens.

Good To Know

2023 W2 Deadline - Friday, January 31, 2024

2023 T4 Deadline - Friday, February 29, 2024

Turn off your phone for just a few minutes while you browse through these rates. I've put together a chart to show you the comparable payroll tax components between the U.S. and Canada.

Item


Canada


U.S.


Payroll Tax


Canada Pension Plan (CPP)


Social Security Tax (SST)**


Medicare


Provincial Health Insurance


Hospital Insurance (HI)**


Unemployment Insurance


Employment Insurance (EI)


Federal Unemployment Tax* 


* FUTA
**SST and HI together are known as FICA

What is the U.S. employer's and employee's Social Security tax rate for 2024?

A history of FICA & SECA rates from 1937 to present can be found at https://www.ssa.gov/OACT/ProgData/taxRates.html

EE = employee's portion of FICA, ER = employer's portion of FICA

2024 FICA EE Rate ER Rate EE+ER Rate Wage Base Limit Maximum Tax
Social Security6.2%6.2%12.4%*$168,600$10,453.20 EE $10,453.20 ER
Medicare1.45%1.45%2.9%$200,000$2,900 EE $2,900 ER
Medicare2.35%1.45%3.8%over $200,000no limit

FICA (Federal Insurance Contributions Act) establishes two taxes on self-employed workers, employers, and employees.

     ✔ The first employee payroll tax known as the Social Security tax is for Old Age, Survivors and Disability Insurance (OASDI).
     ✔ The second employee payroll tax known as the Medicare tax is for Hospital Insurance (HI).

Business owners (YOU) are responsible for:

  1. Withholding the employee's social security tax from an employee's pay check;
  2. Calculating the employer's social security tax;
  3. Remitting the mandatory payroll tax deposit.
  4. Submitting your quarterly employer return IRS Form 941.
  5. Submitting IRS Form 4070 which is your monthly reporting of tips.

5 Payroll Tax Mistakes To Avoid in the States

You may want to read the US Small Business Administration article by Barbara Weltman titled 5 Payroll Tax Mistakes to Avoid. It discusses best protection strategies for:

  1. Misclassifying workers

    ["You don’t have the freedom to select the label for the worker; classification depends on whether you have sufficient control over the worker."]
    [Editor's Note: Form 1099-MISC referred to in the article is now 1099-NEC for independent contractor income.]
  2. Not using an accountable plan for employee reimbursements

    ["To be an accountable plan, the employer must formalize the arrangement and set reasonable times for action"]
  3. Failing to keep payroll records

    ["You should also retain copies of Forms I-9 , which shows an employee’s eligibility to work in the U.S. States "]
  4. Choosing to pay creditors before the IRS

    ["Best strategy: Set aside cash to cover payroll taxes so you won’t use these funds for any other purpose. "]
  5. Failing to monitor payroll company activities

    ["Best protection: Monitor your tax account to see that funds are being deposited on time and in the correct amount."]


What are the CPP (Canada Pension Plan) and EI (Employment Insurance) rates for 2024?

2024 Rates to be released in November 2023. The contribution rate increased to 5.95 % due  CPP Enhancement which began implementation on January 1, 2019.

CPP Rates 2024
Employee Contribution Rate5.95%
Employer Contribution Rate5.95%
Basic Exemption$3,500
Maximum Pensionable Earnings$68,500
Maximum Contribution$3,867.50
Maximum Monthly Contribution$322.29
EI Rates 2024
Employee Contribution Rate1.66%
Employer Contribution Rate2.32%
Maximum Insurable Earnings$63,200
Maximum Contribution$1,049.12

CRA (Canada Revenue Agency) and Social Development Canada share administration responsibilities of payroll taxes on self-employed individuals, employers, and employees.

     ✔ Canada Pension Plan (CPP) contributions are shared by employers and employees. Self-employed individuals pay both the employee and employer portions.
     ✔ Employment Insurance (EI) premiums are shared by employers and employees and set by The Canada Employment Insurance Finance Board (CEIFB). Self-employed individuals do not pay EI premiums unless they have opted into the volunteer EI program.
     ✔ Medical premiums are administered provincially.

5 Payroll Mistakes to Avoid in Canada

  1. Arbitrarily deducting money

    Labour standards often deal with what deductions are not allowed such as uniforms, faulty work or broken equipment, employee mistakes, cash shortages or loss of property under certain circumstance
  2. Not deducting CPP or EI when paying in cash

    More >> How To Pay Employees with Cash
  3. Not recording and reporting taxable benefits

    More>> Employee Taxable Benefits Rules
    Also see CRA Guide T4130 Employers' Guide - Taxable Benefits and Allowances for more information
  4. Treating employees like contractors

    More >> CRA Employment Status Determination
  5. Not remitting source deductions on time

    More >> Payroll Tax Filing Deadlines

Business owners (YOU) are responsible for:

  1. Opening a payroll account with CRA;
  2. Obtaining information from employees through the TD1 Form;
  3. Withholding the employee's federal CPP contributions, EI premiums and income tax withholdings from an employee's pay cheque;
  4. Withholding provincial medical premiums if you are based in BC, Alberta or Ontario;
  5. Calculating the employer's share of payroll taxes;
  6. Remitting the mandatory source deductions via PD7A Form each reporting period (assigned when you open your account with CRA);
  7. Paying provincially administered workers compensation premiums;
  8. Issuing T4 and T4A slips annually; and
  9. Submitting your annual information returns to CRA for T4 and T4A slips issued.



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