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Canadian Payroll Tax Rates
Payroll Tax Deduction Topics - Part 2


by L. Kenway BComm CPB Retired

In this chat, you'll find a handy reference of current payroll tax rates that would be useful to Canadian small business owners and bookkeepers working from home. Make Bookkeeping-Essentials YOUR practical solutions RESOURCE for basic accounting help.



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Other Chats in This
4 Part Series On Canadian Payroll



Click on an image to go to the chat.

Part 1

Canadian payroll tax deductions

Payroll Tax Deductions
Employee Taxable Benefits

Part 2

Canadian payroll tax rates - current Ei and CPP rates

2024 EI & CPP Rates
Paying Employees With Cash

Part 3

Canadian subcontracting reporting requirements

CRA Subcontracting
Reporting Requirements

Part 4

Minimum wage rates and provincial labor standards

Minimum Wages
Provincial Labor Standards

Table of Contents
for Series

Canadian Payroll Series Table of Contents and Forum

Payroll Q&A


Payroll Tax Rates Has Moved

Sorry for the inconvenience. I am in the process of transitioning all the Canadian information to its own site - Bookkeeping-Essentials.ca . I've moved this section to the new site.

Click here to find who is excluded from paying CPP and EI premiums on my new sister site.

More On Payroll ...

Current CRA Payroll Deductions Tables

2012 Changes to CPP

Filing Deadlines and Due Dates

Latest CRA Information

Standby Charges

Current CRA Form TD1 Personal Tax Credits Return ... The latest form should be used by bookkeepers for all new employees or revisions to existing employees.

Good To Know

How To Stop CPP Contributions

Employees between 65-70 of age who are already receiving CPP benefits must file an election (Form CPT30 Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election) with CRA if they do NOT want to continue making contributions.

Employees between 65-70 years old who have filed elections can revoke them ... but the revocation doesn't come into effect until the following calendar year.



Historical Canadian Payroll Tax Rates

Historical rates (1997 - 2023) for CPP and EI can be found on CRA's website (https://www.canada.ca/en/revenue-agency). The easiest place on the new website (which is really hard to navigate) is to go to the "All Rate" page and follow the links. The file path is Canada.ca> Canada Revenue Agency> Payroll> Calculate deductions and contributions> Canada Pension Plan (CPP) > What are the CPP contribution rates, maximums and exemptions? ...  Canada.ca> Canada Revenue Agency> Payroll> Calculate deductions and contributions> Employment Insurance (EI) respectively.


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How to Proof CPP and EI ... Payroll Tax Rates

In this day and age of computers, sometimes it is hard to know and understand how a number is calculated. Have you ever wanted to figure out your CPP and EI deductions by hand?

If you don't have a payroll program or service, and your payroll requirements are minimal, you can go to the CRA website and use their Payroll Deductions Online Calculator (PDOC). It will calculate the correct payroll tax rates for each employee.

Generally, here is how to calculate the employee and employer's portion for CPP and EI manually so you can spot check your overall payroll tax rates for CPP contributions and EI premiums.  I like to do this when I first setup payroll to ensure I've done it correctly.

Remember, this is the calculation for a single payroll run. If you are proofing your full year, omit the "divide by the number of pay periods in the year" part of the calculation.


Calculation of payroll tax rates for CPP contributions - The gross payroll less the basic exemption ($3500 per employee divided by the number of pay periods in the year) times the CPP contribution rate of 4.95% (2016) equals the CPP premium (employee portion). The employer portion is equal to the employee contributions.

For example: Gross Pay of $2,500 - ($3,500 / 24 pay periods = $145.83) x 4.95% = $116.53 employee CPP contribution + $116.53 CPP employer portions = $233.06 total CPP contribution remittance due to CRA for this one employee.

Year




CPP Maximum Contribution Per Employee
CPP Maximum Pensionable Earnings Per Employee CPP Basic Exemption Per Employee

CPP Contri-
bution Rate


CPP Employer Portion


2017 2,564.10 55,300 3,500 4.95% match
2016 2,544.30 54,900 3,500 4.95% match
2015 2,479.95 53,600 3,500 4.95% match
2014 2,425.50 52,500 3,500 4.95% match
2013 2,356.20 51,100 3,500 4.95% match
2012 2,306.70 50,100 3,500 4.95% match
2011 2,217.60 48,300 3,500 4.95% match
2010 2,163.15 47,200 3,500 4.95% match
2009 2,118.60 46,300 3,500 4.95% match
2008 2,049.30 44,900 3,500 4.95% match

Calculation of payroll tax rates for EI premiums - The gross payroll times the EI premium rate of 1.63% (2017) equals the EI premium (employee portion). The employer portion is 1.4 times the employee premiums. Note there is no basic exemption for EI premiums.

For example: Gross Pay of $2,500 x 1.63% = $40.75 employee EI premium + ($40.75 x 1.4 EI employer portion) = $97.80 total EI premium remittance due to CRA for this one employee.

Year





EI Maximum Premiums Per Employee

EI Maximum Insurable Earnings Per Employee EI Basic Exemption Per Employee


EI Premium Rate



EI Employer Portion



2017 836.19 51,300 nil 1.63% 1.4 times
2016 955.04 50,800 nil 1.88% 1.4 times
2015 930.60 49,500 nil 1.88% 1.4 times
2014 913.68 48,600 nil 1.88% 1.4 times
2013 891.12 47,400 nil 1.88% 1.4 times
2012 839.97 45,900 nil 1.83% 1.4 times
2011 786.76 44,200 nil 1.78% 1.4 times
2010 747.36 43,200 nil 1.73% 1.4 times
2009 731.79 42,300 nil 1.73% 1.4 times
2008 711.03 41,100 nil 1.73% 1.4 times

Now you can quickly verify that your payroll taxes were calculated using the proper payroll tax rates.

Employees who have over payments to EI and CPP in the year receive a refund when they file their annual personal tax return.

Overpayments can happen if an employee has more than one job or retires during the year. The employer portion of the overpayment is NOT refundable.

You will want to check the CRA payroll tables each year to determine the maximum pensionable / insurable earnings, the contribution/premium rates and maximum contributions / premiums.



2024 RRSP and Defined Benefit Limits
Rates Used to Calculate PA, PSPA, PAR

Following are the limits for 2024 with regards RRSP and defined benefit limits:

  • MP limit - $32,490 restricted to 18% of compensation for PA purposes
  • RRSP limit - $31,560
  • DPSP limit is half of the MP limit and restricted to 18% of compensation for PA purposes - $16,245
  • YMPE limit - $68,600
  • Defined benefit limit - $3,610.00 (1/9 of the MP limit for 2025)
  • TFSA limit - $7,000 is expected to be announced on or about November 14, 2023. 2023 limit was $6,500.

The 2025 RRSP limit will be the prior year's MP limit - $32,490.


Historical rates back to 1990 can be found on CRA's website (canada.ca/en/revenue-agency). The new website is really hard to navigate but I found the easiest way to find what you are looking for is to search for the "All Rate" page and follow the link called MP, DB, RRSP, DPSP, and TFSA limits and YMPE".


Acronyms Index and Definitions:

  • PA - Pension adjustment ensures that all taxpayers at comparable income levels will have access to comparable tax assistance, regardless of the type of plan to which they belong. It is limited to 18% of earned income.
  • PSPA - Past service pension adjustment ensures benefit upgrades and past service purchases to defined benefit pension plans are charged against the 18% limit. As past service event is broadly defined as any transaction, event or circumstance that causes a member's post-1989 benefits to increase.
  • PAR - Pension adjustment reversal is used to restore an individual's RRSP room when a member terminates their membership in a benefit provision of a registered pension plan or deferred profit sharing plan (DPSP).
  • MP - Money purchase is an RPP. Unlike defined benefit plans, MPPs shift the risk of the retirement income level to the employee instead of the employer.
  • RPP - Retirement pension plan is an arrangement by an employer or a union to provide pensions to retired employees in the form of periodic payments.
  • RRSP - Registered retirement savings plan allows tax deferral on contributions until retirement income commences. Earnings in the plan remain tax-free and payments out of an RRSP are taxable on receipt.
  • DPSP - Deferred profit sharing plan is an arrangement under which an employer may share profits from their business with all or a designated group of employees to provide pensions.
  • YMPE - Year's maximum pensionable earnings is set by the government. It is the amount used in calculating annual CPP contributions.
  • TFSA - Tax free savings account


Source: CRA website


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What is PIER? ... And What To Do If You Get One

PIER stands for Pensionable and Insurable Earnings Review. It is a review CRA performs every year on T4 slips and T4 summaries submitted. They examine whether the correct payroll tax rates were used in your source deductions, and if remittances and reporting were adequate.

If you receive a PIER report (usually sometime during the summer), CRA has found a payroll tax rate deficiency in your records for the year under review. OOPS! The report comes with detailed instructions on how to proceed.

Here are two references on the CRA website that should help you deal with any CPP or EI under/over payments ... as you cannot recover shortfalls by adjusting the employee's income tax deductions.

A to Z index> Payroll> C> CPP ... Overpayment (includes information on recoveries as well)

A to Z index> Payroll> E> EI, Employment Insurance> EI overpayment and recovering EI premiums

If you are looking for more information on PIER reports, here is your reference:

A to Z index> Payroll> P> PIER-Employment Insurance (EI)



Statutory Holiday Payroll Tax Rates

Provincial labour standards on statutory holiday pay.

To determine the pay rates for statutory holidays, refer to your provincial labour standards if you are under provincial regulations ... or federal labour standards for those under federal jurisdiction.

For BC, here are the links to the BC Ministry of Labour Statutory Holidays ...

https://www2.gov.bc.ca/gov/content/employment-business/employment-standards-advice/employment-standards/statutory-holidays

https://www2.gov.bc.ca/gov/content/employment-business/employment-standards-advice/employment-standards/statutory-holidays/calculate-statutory-holiday-pay

The Tax Detective blog on November 19, 2010 mentions that in B.C., "if a stat holiday falls on a regular day off, an eligible employee is to be paid an average day's pay, but the employer isn't required to give the employee another day off. Unless you have a very generous employer, don't expect to be paid for the statutory holidays and to get a day off in lieu, it will be one or the other, not both."

It should also be noted that Easter Sunday, Easter Monday, and Boxing Day are not a statutory holidays in B.C.

For Alberta ...

alberta.ca/general-holidays-pay.aspx

For Ontario ...

ontario.ca/document/your-guide-employment-standards-act-0/public-holidays

For federal standards and all other provinces / territories, try this link ...

canada.ca/en/employment-social-development/programs/employment-standards/holidays.html



Let's Chat About ...

Who is excluded from paying CPP and EI premiums?

Sorry for the inconvenience. I am in the process of transitioning all the Canadian information to its own site - Bookkeeping-Essentials.ca . I've moved this section to the new site.

Click here to find who is excluded from paying CPP and EI premiums on my new sister site.

Let's Chat About ...

How to Pay Employees with Cash

Egads, this chat has moved. You'll find it here ... So sorry about that!




Let's Chat About ...

Employer Direct Deposit Rules 


How to pay employess with cash.

PaySavvy posted a great blog on the various direct deposit rules for employers across Canada. As you peruse the blog, you will notice that each province/territory is similar but different.

Generally, payroll direct deposits must be paid into the employee's account NOT third party accounts and side deals are illegal.

While it is important to be knowledgeable of and in compliance with the current payroll tax rates ... being aware of the Employment Standards Act in your province ... which includes the rules around payroll direct deposits ... is critical for employers.


Information Source: PaySavvy Blog June 27, 2013 The Shocking Truth About Paying Employees Via Direct Deposit (You Probably Didn't Know About) by James Plett



This concludes my notes on payroll tax rates for Canadian bookkeepers. If you would like me to present any other information, please drop me a line.



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