CRA Payroll Deductions in Canada: A 2026 Guide for Employers

CRA payroll deductions are the amounts an employer must withhold from an employee’s pay and remit to the Canada Revenue Agency: Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax. Get any one of them wrong and the shortfall does not disappear — the CRA’s Pensionable and Insurable Earnings Review (PIER) compares your remittances against the T4 slips at year-end, and the employer is on the hook for both shares of any CPP or EI shortfall. This guide walks through each deduction with the 2026 rates and maximums, a worked example, and the remittance deadlines that keep you compliant.

The Three Statutory Deductions, at a Glance

Every paycheque in Canada (outside Quebec, which runs the QPP and QPIP instead) carries the same three statutory deductions. Anything else on the pay stub — a pension plan contribution, union dues, a garnishment — is separate, and is only deducted when it is authorized or legally required.

The first thing to notice: CPP and EI stop. Once an employee’s year-to-date earnings pass the ceiling, that deduction drops to zero for the rest of the year and take-home pay rises. The second: the employer share is real money. A fully maxed-out employee in 2026 costs the employer $4,230.45 + $416.00 + $1,572.30 = $6,218.75 in CPP, CPP2 and EI on top of gross pay — before income tax withholding, which is the employee’s money passing through you, not an employer cost.

CPP Contributions in 2026

CPP is calculated on pensionable earnings: gross pay minus the $3,500 annual basic exemption, prorated across pay periods. For 2026, the first ceiling (YMPE) is $74,600, up from $71,300 in 2025, and the employee rate stays at 5.95%.

Formula: (Pensionable earnings − $3,500) × 5.95%, capped at $4,230.45 for the year.

CPP stops in two other cases worth knowing: contributions end in the month an employee turns 70, and an employee aged 65–70 who is receiving CPP benefits can elect to stop contributing by filing Form CPT30 with the employer. Do not keep deducting out of habit — an over-deduction is a correction you will have to unwind.

CPP2 — the Second Layer Most Spreadsheets Miss

CPP2 has applied since 2024 and is still the deduction most often missed in manual payroll. It is a second, additional CPP contribution of 4% on earnings between the first ceiling ($74,600) and the second ceiling ($85,000) — a maximum of $416.00 per employee per year, again matched by the employer.

The practical risk is using last year’s ceilings. An employee earning $80,000 in 2026 owes CPP2 on $5,400 of earnings ($216.00). Run the same pay on 2025 tables and you under-deduct CPP by $196.35 and CPP2 by $20.00 — small per cheque, but PIER will find it, and the employer pays both shares of the shortfall plus the EI difference. If your payroll is still keyed to 2025 tables, update it before the first January pay run, not after.

EI Premiums in 2026

EI is simpler than CPP: 1.63% of insurable earnings up to $68,900, for a maximum employee premium of $1,123.07 in 2026 (down from 1.64% in 2025, but on a higher ceiling, so the maximum still rose from $1,077.48). The employer pays 1.4 times the employee premium, to a maximum of $1,572.30. Unlike CPP, there is no basic exemption — EI applies from the first dollar of insurable earnings.

Quebec is the exception: Quebec employees pay 1.30% EI (maximum $895.70) because parental benefits there are covered by the Quebec Parental Insurance Plan, and they contribute to the QPP rather than the CPP. If you have staff in both Ontario and Quebec, never run one set of rates for the whole payroll.

Income Tax Withholding — Where the TD1 Comes In

Income tax is the only deduction with no annual maximum, and the only one that depends on the employee’s personal situation. The amount is set by the federal and provincial/territorial payroll deduction tables (CRA publication T4032) or the CRA’s Payroll Deductions Calculator, based on:

1. Gross pay for the period and pay frequency (weekly, biweekly, semi-monthly, monthly).
2. The province or territory of employment.
3. The employee’s TD1 (federal) and TD1ON or provincial equivalent claim amounts — the basic personal amount plus any additional claims such as tuition, disability, or spousal amounts.

A new employee who has not filed a TD1 is treated as claiming only the basic personal amount, which usually means more tax withheld, not less. Employees with more than one job, or who expect large non-employment deductions, may file a TD1 with a reduced claim or ask for additional tax withheld — both are common, legitimate, and far better than a balance owing in April. Never guess an employee’s claim amount, and never copy last year’s TD1 forward without checking whether the employee wants it changed.

Taxable benefits count too: a company car, group life insurance premiums paid by the employer, or a taxable allowance is added to pensionable, insurable and taxable earnings as applicable, and it is one of the most common sources of year-end T4 surprises. If you are unsure whether a benefit is taxable, check the CRA’s taxable benefits guide before the pay run, not at T4 time.

How to Calculate CRA Payroll Deductions, Step by Step

Use the CRA’s Payroll Deductions Calculator (PDOC) or the T4032 tables for the actual pay run — the steps below are the logic behind them, so you can check the output rather than blindly trusting it:

1. Confirm the pay period and province of employment. Rates and tables are applied per pay period, and the province determines the provincial tax table.
2. Calculate CPP: (gross pensionable pay for the period − prorated $3,500 exemption) × 5.95%, subject to the year-to-date maximum of $4,230.45.
3. Calculate CPP2: if year-to-date pensionable earnings exceed $74,600, apply 4% to earnings between $74,600 and $85,000, capped at $416.00.
4. Calculate EI: insurable earnings × 1.63%, subject to the year-to-date maximum of $1,123.07.
5. Calculate income tax: look up the federal and provincial tables (or PDOC) for the pay, frequency, province and TD1 claim, and add tax on any taxable benefits.
6. Add other authorized deductions (pension, union dues, garnishments) only where authorized or legally required.
7. Check the year-to-date totals before finalizing: has CPP or EI already hit its maximum? Did a mid-year raise push the employee into CPP2 territory?

Worked Example — $60,000 Salary in Ontario

An employee earning $60,000 a year in Ontario, with no taxable benefits and a standard TD1 claim, owes the following statutory deductions for 2026 (income tax excluded — it depends on the TD1 claim and the pay frequency, so run it through PDOC or the T4032 tables):

Worked Example — $80,000 Salary in Ontario

At $80,000, all three layers apply:

Notice what happens late in the year for the $80,000 employee: EI stops once insurable earnings pass $68,900, CPP stops at $74,600, and CPP2 stops at $85,000 — so the final paycheques of the year are visibly larger. Warn employees about this in advance; otherwise the first “bigger” cheque generates a payroll query, and the first January cheque after the maximums reset generates another.

Using the CRA Payroll Deductions Calculator

The CRA payroll deductions calculator (PDOC) is the fastest way to check a single pay run, and it is the tool behind the “cra payroll deductions calculator” searches: enter the pay period, gross pay, province, pay frequency and TD1 claim, and it returns the CPP, EI and income tax for that period. Treat it as a checker, not a payroll system — it does not store records, track year-to-date maximums across pay runs, or file anything. For a recurring payroll, use payroll software or the T4032 tables, and use PDOC to spot-check an unusual cheque (a bonus, a final pay, a mid-year hire) before you finalize it.

Remitting Deductions and Year-End: the Deadlines That Matter

Withholding the deductions is only half the job. As a regular remitter, you must remit the amounts withheld — plus your employer CPP, CPP2 and EI shares — to the CRA by the 15th of the month following the month the pay was made, using Form PD7A or electronic remittance through CRA My Business Account or online banking. New or small employers may qualify for quarterly remitting; check your remitter type in My Business Account rather than assuming monthly applies.

At year-end, issue T4 slips by the last day of February following the tax year, file the T4 Summary, and reconcile: the totals on the T4s must match what you remitted. That reconciliation is exactly what PIER checks. If PIER finds a shortfall, you have 30 days to respond — and the employer pays both the employee and employer shares of any CPP or EI gap, with no right to recover the employee share from a later cheque. The cheapest payroll control in Canada is a year-to-date maximum check on every pay run.

Common CRA Payroll Deduction Mistakes to Avoid

• Using last year’s tables. The 2026 ceilings moved (CPP $74,600, CPP2 $85,000, EI $68,900) — 2025 tables under-deduct on every paycheque above the old ceilings.
• Forgetting CPP2. Any employee earning over $74,600 needs the 4% second layer; it is not optional and it is not included in the 5.95% rate.
• Running Quebec rates for Ontario staff (or vice versa). QPP and QPIP rates differ from CPP and EI — one payroll, two rate sets, if you employ in both.
• Ignoring taxable benefits. A benefit left off the pay stub becomes a T4 correction and a PIER variance in February.
• Deducting after the maximum. CPP and EI stop at their ceilings; continuing to deduct creates over-deductions and employee complaints.
• Missing the remittance date. The 15th-of-the-following-month deadline applies even when the 15th is a weekend — remit early, and keep the PD7A confirmation as proof.

Learn Payroll Properly, Not Just One Pay Run

Calculating a single paycheque is arithmetic. Running a compliant payroll — CPP2, taxable benefits, Quebec rates, remittances, T4s and PIER — is a professional skill, and it is one of the most employable skills in Canadian bookkeeping: every employer with staff needs it, every month. If you want hands-on training in Canadian payroll taught by working professionals, look at Get Trained Get Hired’s Payroll Course in Mississauga

Related reading: our guide to GST/HST returns in Canada and T1 vs T2 tax returns

Frequently Asked Questions

What are CRA payroll deductions?

The amounts an employer must withhold from pay and remit to the CRA: CPP contributions, EI premiums, and income tax. The employer also pays its own matching CPP/CPP2 contributions and 1.4 times the EI premium.

What are the 2026 CPP and EI rates?

CPP is 5.95% on earnings between the $3,500 basic exemption and $74,600 (maximum $4,230.45), plus CPP2 at 4% between $74,600 and $85,000 (maximum $416.00). EI is 1.63% on insurable earnings up to $68,900 (maximum $1,123.07). Quebec employees contribute to the QPP and pay 1.30% EI under QPIP.

When do CPP and EI deductions stop?

When the employee reaches the annual maximum: CPP at $4,230.45, CPP2 at $416.00, and EI at $1,123.07 for 2026. They reset every January, which is why January paycheques look smaller than December’s.

How do I use the CRA payroll deductions calculator?

Enter the pay period, gross pay, province of employment, pay frequency and the employee’s TD1 claim into the CRA’s Payroll Deductions Calculator (PDOC). It returns the CPP, EI and income tax for that period — use it to check unusual pay runs, not as a substitute for a payroll system.

When must I remit payroll deductions to the CRA?

As a regular remitter, by the 15th of the month following the month the pay was made, including your employer CPP, CPP2 and EI shares. T4 slips are due by the last day of February following the tax year.

What happens if I under-deduct CPP or EI?

The CRA’s PIER review compares your remittances to the T4 slips. If there is a shortfall, the employer must pay both the employee and employer shares of the gap — you cannot recover the employee share from a later paycheque.