Guide
Budgeting a hire in Canada: where the statutory cost actually bites
Updated
Once the arithmetic is clear, a few consequences follow that are genuinely useful when planning headcount, and none of them is obvious from a percentage.
Talk to a specialist One salary in, and you have the employer's CPP, CPP2 and EI for 2026, with every rate traceable to CRA.
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How this calculator works
- 2026 rates, employment outside Quebec. Quebec employment is a different calculation. It uses the Quebec Pension Plan rather than CPP, adds the Quebec Parental Insurance Plan, and carries a reduced EI rate (1.30% for employees in 2026, against 1.63% elsewhere). This tool does not model QPP or QPIP and should not be used for a Quebec employee (CRA).
- CPP: the 2026 maximum annual pensionable earnings are $74,600, the basic exemption is $3,500, and maximum contributory earnings are $71,100. The employee and employer contribution rate is 5.95% each, giving a maximum annual employee and employer contribution of $4,230.45 (CRA).
- CPP2: the 2026 additional maximum annual pensionable earnings are $85,000, the employee and employer rate is 4%, and the maximum annual employee and employer contribution is $416. CPP2 applies to earnings above the annual maximum pensionable earnings (CRA).
- EI: the 2026 maximum annual insurable earnings are $68,900 and the employee rate is 1.63%, giving a maximum annual employee premium of $1,123.07. CRA states that "the employer's premium will be 1.4 times this amount", giving a maximum annual employer premium of $1,572.30 (CRA).
- The employer EI figure is computed from the employee premium, not from insurable earnings, because that is how CRA defines it: 1.4 times the employee's premium, after rounding. Computing it as 1.4 times the rate applied to earnings gives a figure that differs by cents from the published maximum.
- Every published maximum reproduces exactly from these inputs, which checks that the tool and the source agree. ($74,600 minus $3,500) x 5.95% = $4,230.45. ($85,000 minus $74,600) x 4% = $416. $68,900 x 1.63% = $1,123.07, and x 1.4 = $1,572.30.
- The rates and ceilings are statutory in structure and announced annually in amount. Schedule 1 of the Canada Pension Plan sets the base rate at 4.95% for employees and employers from 2003 onward. Schedule 2 sets the first additional rate at 1.0% each from 2024, making the 5.95% above, and the second additional rate at 4.0% each from 2024.
- Section 20(2) fixes the Year's Basic Exemption at $3,500 for each year after 1997. Section 18.1(1)(b) sets the additional maximum pensionable earnings at 1.14 times the maximum pensionable earnings for 2025 and later, rounded down to the next multiple of $100. That is how $74,600 produces $85,000 (Canada Pension Plan).
- Not included: vacation pay, statutory holiday pay, benefits, pension contributions, workers compensation premiums, provincial health or payroll levies such as the Employer Health Tax, and any territorial payroll tax. Those vary by province and by employer and are not modelled here, so the figure is the federal statutory floor rather than the full cost of employment.
- The CPP exemption setting covers employees under 18, employees over 70, and employees for whom an election not to contribute is in force. An employer contributes only where the employee does. EI is unaffected by that setting and continues.
- These figures change every January. The date at the top of this page is when the rates were read from CRA, and it is the date they belong to.
The uplift is highest on junior salaries
Because all three contributions stop at ceilings, the statutory cost is close to 7.9% of pay around the EI ceiling and about 3.1% at $200,000.
So a team of four junior hires costs proportionately more in statutory contributions than one senior hire on the same total payroll. That is worth knowing when a headcount plan is being compared against a smaller, more expensive team.
The basic exemption favours nobody in particular
The $3,500 CPP basic exemption is a flat deduction from pensionable earnings, so it removes the same $208.25 of employer CPP from every full-year employee regardless of salary.
It matters most for part-time and low-earning staff, where it is a large share of their pensionable earnings. It is why the uplift on a very low salary is lower than on a middling one.
Ceilings reset in January
Contributions restart at the beginning of each calendar year, so an employee who reached the maximum in September begins contributing again in January, and so do you.
For cash flow, the employer contribution is front-loaded into the first part of the year for higher earners. That is easy to miss in a monthly budget built from an annual figure divided by twelve.
The multiple-employer problem is theirs, not yours
An employee with two jobs can overcontribute across the year and recovers the excess through their return. The employer does not: each employer contributes on the earnings it pays.
So there is no employer-side saving from an employee having reached a maximum elsewhere, which is a question that comes up and has a short answer.
Check the figures every January
All three ceilings and both EI rates are announced annually, and the CPP2 ceiling moves with the main one under the 1.14 formula.
The rates on this page are the 2026 figures read from CRA on the date shown at the top. A budget built in December against last year's numbers is wrong by the whole of the annual increase. Every 2026 maximum is on one page: CPP and EI max 2026.