Guide
How employer CPP and EI are actually calculated
Updated
The employer side of Canadian payroll is not one percentage. It is three separate calculations that stop at three different points, which is why the cost of a hire does not scale with the salary in the way people expect.
CPP: match the employee, exactly
Take the salary, cap it at the maximum pensionable earnings of $74,600 for 2026, subtract the basic exemption of $3,500, and apply 5.95%. That is the employee's contribution and it is also yours: the rates are identical.
At or above the ceiling that gives maximum contributory earnings of $71,100 and a contribution of $4,230.45 on each side, which is exactly the maximum CRA publishes.
CPP2: a second band, not a second rate on everything
Earnings between $74,600 and the additional maximum of $85,000 attract a further 4%, again matched by the employer. That is a band of $10,400 and a maximum of $416 each side.
It is a band rather than a surcharge on the whole salary, which is the most common misunderstanding. Somebody on $80,000 pays CPP2 on $5,400, not on $80,000.
EI: a multiple of the premium, not of the earnings
Cap the salary at the maximum insurable earnings of $68,900 and apply the 2026 employee rate of 1.63%, which gives a maximum employee premium of $1,123.07.
Then apply the multiplier. CRA states that the employer's premium will be 1.4 times this amount, which gives $1,572.30. Note what is being multiplied: the employee's premium, after rounding, not the earnings. Applying 1.4 times the rate to the earnings gives a figure that differs by cents from the published maximum, and cents matter when a year-end reconciliation is being checked.
Why the uplift falls as salary rises
All three charges stop. EI stops at $68,900, CPP at $74,600 and CPP2 at $85,000, so above $85,000 the employer's statutory contribution is frozen at $6,218.75 however high the salary goes.
The consequence is that the statutory cost of a junior hire is a much larger share of their pay than that of a senior one. Around the EI ceiling the uplift is close to 7.9%; at $200,000 the same dollars are about 3.1%.
Where the structure comes from
The dollar ceilings are announced each year, and the rate structure behind them is statutory. Schedule 1 to the Canada Pension Plan sets the base contribution rate at 4.95% for employees and employers from 2003 onward; Schedule 2 sets the first additional rate at 1.0% each from 2024 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, and section 18.1 sets the additional ceiling at 1.14 times the main one for 2025 onward, rounded down to the next multiple of $100. That is why a maximum of $74,600 produces an additional maximum of exactly $85,000.