Canada Pension Plan and Employment Insurance deductions are mandatory payroll obligations for most Canadian employers. Getting the rates, ceilings, and remittance deadlines right matters because CRA can assess penalties on the employer portion just as it can on employee deductions. Here is what Canadian employers need to know about CPP and EI obligations in 2026.
CPP contributions: rates, ceilings, and employer matching
The Canada Pension Plan now operates in two tiers following the 2019–2023 enhancement phase.
CPP1 (base plan):The employee contribution rate is 5.95% on pensionable earnings between the Year's Basic Exemption (YBE) of $3,500 and the Year's Maximum Pensionable Earnings (YMPE), which is approximately $71,300 for 2026 (CRA confirms the exact figure annually in November). The employer matches the employee's CPP1 contribution dollar for dollar — also 5.95% on the same earnings range. The maximum employer CPP1 contribution per employee is therefore the same as the employee maximum, roughly $4,034 per year at the 2026 YMPE.
CPP2 (additional plan):Introduced in 2024, CPP2 applies to earnings above the YMPE up to a second ceiling (the Year's Additional Maximum Pensionable Earnings, or YAMPE), which is approximately $81,900 for 2026. The CPP2 employee rate is 4% on the earnings between YMPE and YAMPE, and the employer again matches dollar for dollar at 4%. The maximum additional employer CPP2 contribution per employee is approximately $424 per year at 2026 ceilings.
Once an employee reaches the YMPE (and separately the YAMPE) during the calendar year, CPP1 (and CPP2) deductions stop for that employee for the remainder of the year. Your payroll software should handle this automatically; if you run manual payroll, you must track cumulative CPP deductions per employee.
EI premiums: 2026 rates and the employer multiplier
Employment Insurance premiums apply to insurable earnings up to the annual Maximum Insurable Earnings (MIE), which is approximately $65,700 for 2026 (confirmed by ESDC each fall).
Employee EI rate: approximately 1.64% for 2026, meaning the maximum employee EI premium is roughly $1,078 per year.
Employer EI rate:1.4 times the employee rate, or approximately 2.296% on insurable earnings. The employer maximum EI contribution per employee is therefore approximately $1,109 per year at 2026 rates. Unlike CPP, the employer does not match the employee rate one-for-one — the employer pays 40% more than the employee, reflecting the employer's additional responsibility in the EI system.
Employers who provide a short-term disability or wage-replacement plan (called a Registered Wage Loss Replacement Plan) that meets ESDC requirements may apply for a reduced EI rate for their employees, reducing the employer's premium obligation. Contact Service Canada for the premium reduction program details.
Which workers are exempt from CPP and EI deductions
Not all workers trigger CPP and EI obligations. Key exemptions:
- CPP exemptions:Employees under 18 are exempt from CPP deductions. Employees who are 70 or older are exempt. Employees receiving CPP or Quebec Pension Plan (QPP) retirement or disability benefits are exempt from CPP1 (as of 2024 rules; confirm annually). Self-employed individuals pay both the employee and employer share of CPP themselves — you have no employer CPP obligation for true independent contractors.
- EI exemptions:Self-employed individuals are generally not insurable for EI unless they have elected into the special benefits program voluntarily. Certain family members employed in a business — specifically spouses, parents, and children in circumstances where CRA deems the employment is not at arm's length — may be found to have non-insurable employment. CRA makes arm's-length determinations on a case-by-case basis using Form CPT1.
- Students and casual workers: Students under 18 employed in summer programs and certain agricultural workers have specific EI rules. When in doubt, contact CRA or a payroll professional.
Independent contractor status is not determined by the label you give the relationship — CRA evaluates the substance of the working arrangement. Misclassifying an employee as a contractor to avoid CPP and EI is one of the most common and costly payroll compliance errors for Canadian SMBs.
Remittance deadlines and late-payment consequences
CPP and EI remittances are included in the same payroll remittance as income tax deductions. All three are remitted together to CRA on the deadlines below:
- Regular remitter— 15th of the month following the month in which you deducted. New employers are classified as regular remitters by default.
- Quarterly remitter— available to small employers with average monthly withholding under $3,000 and a clean CRA compliance record. Remit by the 15th of April, July, October, and January.
- Accelerated Tier 1 remitter— applies when average monthly withholding is $25,000–$99,999. Remit by the 25th of the current month and the 10th of the following month.
- Accelerated Tier 2 remitter— applies when average monthly withholding is $100,000 or more. Remit within three working days of each payroll.
CRA late-remittance penalties: 3% for amounts one to three days late, 5% for four to five days, 7% for six to seven days, 10% for eight or more days, and 20% for repeat failure or willful non-remittance. Interest accrues daily on unpaid amounts. Directors of corporations are personally liable for unremitted source deductions — this liability does not disappear if the company winds down.
Tracking CPP and EI correctly per employee each year
CPP1, CPP2, and EI all have annual maximums per employee. Once an employee reaches the YMPE for CPP1, deductions stop and your matching obligation for that employee also stops for the rest of the calendar year. The same logic applies to CPP2 at the YAMPE and EI at the MIE.
Payroll software handles this tracking automatically. If you calculate payroll manually, maintain a running total of CPP deductions, CPP2 deductions, and EI premiums per employee each calendar year, and stop deducting once each ceiling is reached. Over-deducting creates refund obligations and CRA complaints; under-deducting creates remittance shortfalls and penalties.
The amounts withheld from each employee and the employer contributions are reported on T4 slips at year-end (due by the last day of February) with specific boxes for CPP pensionable earnings, CPP contributions, CPP2 contributions, EI insurable earnings, and EI premiums. Errors on T4 slips can trigger CRA reviews.
Frequently asked questions
Does the employer have to match CPP contributions dollar for dollar?
Yes for CPP1: the employer matches the employee's CPP1 contribution exactly (5.95% up to the YMPE, less the basic exemption). For CPP2, the employer also matches the employee at 4% on earnings between the YMPE and the YAMPE. For EI, the employer does not match dollar for dollar — the employer pays 1.4 times the employee EI premium.
What happens if I classify a worker as a contractor to avoid CPP and EI?
CRA can reassess the employment status based on the actual working relationship regardless of what the contract says. If CRA determines the worker was an employee, you become liable for both the employee and employer portions of CPP and EI going back to the start of the arrangement, plus interest and penalties. Directors are personally liable for these amounts.
Are there any employees exempt from CPP deductions in 2026?
Yes. Employees under age 18 are exempt from CPP deductions. Employees who are 70 or older are exempt. Employees receiving a CPP or QPP retirement or disability pension who have not elected to continue contributing (CPP election forms apply from age 65 to 70) may be exempt. Verify the current rules with CRA annually as election rules changed in recent years.
Can a family member who works in my business be exempt from EI?
Possibly. CRA evaluates whether employment between related parties (e.g., spouses, parents, children) is at arm's length. If the arrangement is substantially similar to what you would offer an unrelated employee — same hours, pay, and working conditions — it is likely insurable. If you want a determination before or after the fact, file Form CPT1 (Request for a Ruling as to the Status of a Worker).
How do I remit CPP and EI to CRA?
Remit through My Business Account at canada.ca, through your bank's CRA payroll payment option (available at most major Canadian banks), or via NETFILE. The payment must reference your RP payroll account number. Include all three components in one payment: employee income tax, employee CPP and EI deductions, and your employer CPP and EI contributions.