T4127JUL(E) Rev. 22/07

La version française de cette publication est intitulée Formules pour le calcul des retenues sur la paie – 116^e édition.

Is this guide for you?

Use this guide if you are a payroll software provider or a company which develops its own in-house payroll solution.

This guide has the formulas you need to determine federal, provincial (except Quebec), and territorial income taxes, Canada Pension Plan (CPP) contributions, and employment insurance (EI) premium deductions. The formulas also let you calculate payroll deductions for income sources such as commission, pension, bonuses, and retroactive pay increases.

The formulas used in this guide to calculate statutory deductions have been approved for purposes of the Income Tax Act, the Canada Pension Plan, and the Employment Insurance Act, as well as their related regulations and any amendments proposed to these acts.

For more information on income amounts that are subject to payroll deductions, see the publication T4001, Employers' Guide – Payroll Deductions and Remittances.

If you have questions about the formulas in this guide, contact your tax services office or tax centre. For the address and telephone numbers of your tax services office or tax centre, see the listings in the government section of your telephone book or visit canada.ca/taxes.

Distribution of this guide

This guide is available in electronic format only.

Electronic mailing lists – more ways to serve you!

We provide an electronic service that can notify you immediately, free of charge, of any changes for payroll deductions.

To subscribe, go to canada.ca/cra-email-lists and enter your business's email address for each mailing list that you want to join.

Payroll Deductions Online Calculator

For your payroll deductions, you can use our Payroll Deductions Online Calculator (PDOC). The calculator includes an option to help you make sure that enough Canada Pension Plan contributions and employment insurance premiums have been withheld for full-year employees.

It calculates payroll deductions for the most common pay periods, as well as the applicable province (except Quebec) or territory. The calculation is based on exact salary figures.

Effective January 1, 2022, PDOC users may choose to calculate personal tax credits by either entering the Total Claim value manually or by selecting the corresponding claim code.

PDOC is available at canada.ca/pdoc.

Payroll Deductions Tables

Using the following links, you can download the publications T4032, Payroll Deductions Tables and T4008, Payroll Deductions Supplementary Tables. You can also choose to print only the pages or information that you need. For more information on payroll, see our webpage at canada.ca/payroll.

What's new for July 1, 2022?

This guide reflects some income tax changes recently announced which, if enacted as proposed, would be effective July 1, 2022. At the time of publishing, these proposed changes were not law. We recommend that you use the Payroll Deductions Online Calculator (PDOC), the publication T4032 Payroll Deductions Tables, or the publication T4008 Payroll Deductions Supplementary Tables, and the formulas in this guide for withholding, starting with your first payroll in July 2022.

Federal Changes

At the time of publishing, there were no federal changes announced.

Provincial and territorial tax changes

You will find below the provincial and territorial tax changes effective July 1, 2022. The current figures for the most commonly used rates, amounts, and claim codes can be found in Chapter 8.

Please note that there is no change for Alberta, Manitoba, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Quebec, Saskatchewan, Yukon or Outside Canada.

British Columbia

The Provincial Labour Sponsored Funds Tax Credit rate and amount have been removed from Chapter 8.

New Brunswick

Upcoming Guidance for January 2023 and January 2024 Editions

On March 3, 2022, the Governor General in Council on the recommendation of the Minister of National Revenue, made amendments to Subsection 100 (3), paragraph 60 (e.1) of the Income Tax Regulation, ensuring CPP additional contributions are treated as a deduction at source. These changes will come into effect January 1, 2023. The formulas for this change are outlined in Appendix 1.

As per Canada Pension Plan Regulations Subsection 5.1 (1), for the year 2024 and each subsequent year, pensionable earnings up to the second earnings ceiling are subject to the second additional contributions. The formulas for this change are outlined in Appendix 2.

These changes are being published early to allow users to have adequate time to update their payroll systems. These changes are not to be implemented in 2022.

Following the summer release, some clarifications were requested and therefore some amendments were made to Appendix 1 and Appendix 2.

• The factors F5A and F5B will be calculated for all periodic and non-periodic payments. Factor F5A will replace factor F5 in all formulas used to calculate annual taxable income.
• All formulas to calculate the CPP non-refundable tax credit are now updated to include proration of the maximum contribution based on pensionable months.
• The example for year-to-date bonus calculation method has been amended to include a pensionable previous bonus.
• The K2R and K2RQ formulas have amendments to the placement of parentheses to better serve the intent of the formula. The K2RP formula has also been added to provide additional clarity.
• K2Q commission formula has been modified to use the QPP base rate.

In addition, example scenarios illustrating the changes to the formulas have been added in Appendix 3.

Clarification to T4127 January 2022 Edition

The following changes are clarifications to the January 2022 Edition.

Chapter 4 – Option 1 – Tax Formulas

K2 calculation

Current text

In either case, for the rest of the pay periods in the year, (P × C), (P × EI), or (P × IE × 0.00494) (as applicable) is replaced by the maximum annual deduction(s). This modification ensures that the employee will get the maximum CPP, EI, and QPIP tax credit for the rest of the pay periods in the year.

Updated text

In either case, once the employee contribution has reached the annual maximum for CPP, EI or QPIP, for the rest of the pay periods in the year, (P × C), (P × EI), or (P × IE × 0.00494) (as applicable) is replaced by the employee's maximum annual contribution or premium. This modification ensures that the employee will get the maximum CPP, EI, and QPIP tax credit for the rest of the pay periods in the year.

Current text

If you want to use a year‑to‑date method to calculate CPP, EI, and QPIP federal tax credits, (P × C) and (P × EI) can be modified as follows:

(P × C) is changed to the lesser of:
(i) $3,499.80; and
(ii) Year‑to‑date C + (PR × C)

(P × EI) is changed to the lesser of:
(i) $952.74; and
(ii) Year‑to‑date EI + (PR × EI)

Only for employees in Quebec:

(P × EI) is changed to the lesser of:
(i) $723.60; and
(ii) Year‑to‑date EI + (PR × EI)

(P × IE × 0.00494) is changed to the lesser of:
(i) $434.72; and
(ii) Year‑to‑date QPIP + (PR × IE × 0.00494)

Updated text

If you want to use a year-to-date method to calculate CPP, EI, and QPIP federal tax credits, (P × C) and (P × EI) can be modified as follows:

(P × C) is changed to the lesser of:
(i) $3,499.80;
(ii) D + (PR × C)

(P × EI) is changed to the lesser of:
(i) $952.74;
(ii) D1 + (PR × EI)

Only for employees in Quebec:

(P × C) is changed to the lesser of:
(i) $3,776.10;
(ii) DQ + (PR × C)

(P × EI) is changed to the lesser of:
(i) $723.60;
(ii) D1 + (PR × EI)

(P × IE × 0.00494) is changed to the lesser of:
(i) $434.72;
(ii) Year‑to‑date QPIP + (PR × IE × 0.00494)

Year-to-date bonus calculation

Current text

A = [(I_YTD – F_YTD – F2_YTD – U1_YTD) + (PR × (I – F – F2 – U1)) – F1 – HD]* + (B1 – F4)**

* If the result is negative, enter $0.
** Result cannot be negative, and result cannot be negative after deducting CPP and EI.

Updated text

A = [(I_YTD – F_YTD – F2_YTD – U1_YTD) + (PR × (I – F – F2 – U1)) – F1 – HD]* + (B1 – F4)**

* If the result is negative, enter $0.
** Result cannot be negative, and result cannot be negative after deducting CPP and EI.

If there is no current I, use the most recent I.

Chapter 7 – Employment Insurance (EI)

Current text

Note:

When an employee changes province of employment during the year but stays with the same employer, the maximum premium for the year is based on the province where the first $60,300 of insurable earnings is paid.

Updated text

Note:

When an employee changes province or territory of employment during the year but stays with the same employer, the maximum premium for the year is based on the provinces or territories where the first $60,300 of insurable earnings is paid.

Chapter 1 – General information

As the general information has not changed, this section has not been reproduced.

Chapter 2 – Personal tax credits return (Form TD1)

As the formula to calculate the personal tax credits return and the explanatory variables have not changed, they have not been reproduced.

Chapter 3 – Glossary

All factor definitions appear only in the Glossary unless further details are required in specific situations.

Table 3.1 Glossary

Chapter 4 – Option 1 – Tax Formulas

Step 1 – Formula to calculate annual taxable income (A)

As the formula to calculate the annual taxable income and the explanatory variables have not changed, they have not been reproduced.

Step 2 – Formula to calculate basic federal tax (T3)

As the formula to calculate the basic federal tax and the explanatory variables have not changed, they have not been reproduced.

Step 3 – Formula to calculate the annual federal tax payable (T1)

As the formula to calculate the annual federal tax payable and the explanatory variables have not changed, they have not been reproduced.

Step 4 – Formula to calculate annual basic provincial or territorial tax (T4)

As the formula to calculate the annual basic provincial or territorial tax and the explanatory variables have not changed, they have not been reproduced.

Step 5 – Formulas to calculate the annual provincial or territorial tax deduction (T2)

As the formula to calculate the annual basic provincial or territorial tax and the explanatory variables have not significantly changed, only the changes have been reproduced.

British Columbia

T2 = T4 + V1 – S – LCP
If the result is negative, T2 = $0.

Where:
T4 = (V × A) – KP – K1P – K2P – K3P

V and KP are based on 2022 index values for A see the Rates (R, V), income thresholds (A), and constants (K, KP) for 2022 Table 8.2 in Chapter 8.

V1 and LCP = $0

New Brunswick

K1P = 0.094 × TCP

Where:
TCP = The total of personal non‑refundable tax credits amounts reported on Form TD1NB. If Form TD1NB is not filed, TCP is $12,623.

Step 6 – Formula to calculate the estimated federal and provincial or territorial tax deductions (T) for the pay period

As the formula to calculate the estimated federal and provincial or territorial tax deductions for the pay period and the explanatory variables have not changed, they have not been reproduced.

Chapter 5 – Option 2 – Tax formula based on cumulative averaging

As the formula to calculate the estimated federal and provincial or territorial tax deductions for the pay period and the explanatory variables have not significantly changed, only the changes have been reproduced.

Formulas to calculate provincial and territorial tax payable (T2)

New Brunswick

K1P = 0.094 × TCP

Where:
TCP = The total of personal non‑refundable tax credits amounts reported on Form TD1NB. If Form TD1NB is not filed, TCP is $11,720.

Chapter 6 – Canada Pension Plan (CPP)

As the formula to calculate the Canada Pension Plan contributions and the explanatory variables have not changed, they have not been reproduced.

Chapter 7 – Employment Insurance (EI)

As the formula to calculate the employment insurance premiums and the explanatory variables have not changed, they have not been reproduced.

Chapter 8 – Rates and amounts

To download the Chapter 8 tables in comma-separated value (CSV) format see the T4127 Payroll Deductions Formulas website.

Note:

Only the tables with changes have been reproduced.

Table 8.2 Other rates and amounts for 2022

For information on 2022 federal personal amounts, see the form TD1, Personal Tax Credits Return and the form TD1X, Commission Income and Expenses for Payroll Tax Deductions. For information on 2022 provincial or territorial personal amounts, see the respective form TD1AB, TD1BC, TD1MB, TD1NB, TD1NL, TD1NS, TD1NT, TD1NU, TD1ON, TD1PE, TD1SK, or TD1YT. For information on QC amounts, refer to Revenu Québec

Table 8.9 New Brunswick claim codes

Appendix 1: Upcoming Guidance for T4127 January 2023 Edition

This Appendix only includes the information impacted or added due to the Income Tax Regulation Amendment, effective January 1, 2023.

Chapter 1 – General Information

As the general information has not changed, this section has not been reproduced.

Chapter 2 – Personal Tax Credit Returns (Form TD1)

As the formula to calculate the personal tax credits return and the explanatory variables have not changed, they have not been reproduced.

Chapter 3 – Glossary

The factors in the following table only include the factors to be added due to the Income Tax Regulation Amendment.

Chapter 4 – Option 1 – Tax Formulas

This chapter only includes the formulas to be impacted or added due to the Income Tax Regulation Amendment. The 2022 rates and maximums are used for illustrative purposes only.

Step 1 – Formula to calculate annual taxable income (A)

A = Annual taxable income

= [P × (I – F – F2 – F5A – U1)] – HD – F1

If the result is negative, T = L.

F5 = C × (0.0075/0.0570)

Only for employees in Quebec:

F5Q = C × (0.0075/0.0615)

F5A = F5* × ((PI – B)/PI)
* When in the province of Quebec, replace F5 with F5Q.

F5B = F5* × (B/PI)
* When in the province of Quebec, replace F5 with F5Q.

Step 2 – Formula to calculate basic federal tax (T3)

T3 = Annual basic federal tax
= (R × A) – K – K1 – K2* – K3 – K4
If the result is negative, T3 = $0.
*For employees being transferred from Quebec to a location outside Quebec, replace K2 with K2R.

Only for employees in Quebec:
(R × A) – K – K1 – K2Q* – K3 – K4
If the result is negative, T3 = $0.
*For employees being transferred to Quebec from a location outside Quebec, replace K2Q with K2RQ.

R and K are based on 2022 index values for A see the Rates (R, V), income thresholds (A), and constants (K, KP) for 2022 Table 8.1 in Chapter 8.

K2 = [(0.15 × (P × C × (0.0495/0.0570), maximum $3,039.30 × (PM/12))) + (0.15 × (P × EI, maximum $952.74))]*

K2R = [(0.15 × (P × C × (0.0495/0.0570), maximum ($3,039.30 × (PM/12) – (DQ × (0.0495/0.0615)) + (DQ × (0.0540/0.0615))))) + (0.15 × (P × EI, maximum $952.74))]*

Only for employees in Quebec:

K2Q = Quebec Pension Plan contributions, employment insurance premiums, and Quebec Parental Insurance Plan premiums federal tax credits for the year

= [(0.15 × (P × C × (0.0540/0.0615), maximum $3,315.60 × (PM/12))) + (0.15 × (P × EI, maximum $723.60)) + (0.15 × (P × IE × 0.00494, maximum $434.72))]*

K2RQ = [(0.15 × (P × C × (0.0540/0.0615), maximum ($3,315.60 × (PM/12) – (D × (0.0540/0.0570)) +

(D × (0.0495/0.0570))))) + (0.15 × (P × EI, maximum $723.60)) + (0.15 × (P × IE × 0.00494, maximum $434.72))]*

* In all cases, once the employee contributions or premiums have reached annual for CPP, EI or QPIP, for the rest of the pay periods in the year, (P × C × (base rate/(base rate + first additional rate))), (P × EI), or (P × IE × 0.00494) (as applicable) is replaced by the employee's maximum annual contribution or premium. This modification ensures that the employee will get the maximum CPP, EI, and QPIP tax credit for the rest of the pay periods in the year.

If you want to use the year‑to‑date method to calculate CPP, EI, and QPIP federal tax credits:

(P × C × (0.0495/0.0570)) is changed to the lesser of:

(i) $3,039.30 × (PM/12);

(ii) (D × (0.0495/0.0570)) + (PR × C × (0.0495/0.0570))

(P × EI) is changed to the lesser of:

(i) $952.74;

(ii) D1 + (PR × EI)

Only for employees in Quebec:

(P × C × (0.0540/0.0615)) is changed to the lesser of:

(i) $3,315.60 × (PM/12);

(ii) (DQ × (0.0540/0.0615)) + (PR × C × (0.0540/0.0615))

(P × EI) is changed to the lesser of:

(i) $723.60;

(ii) D1 + (PR × EI)

(P × IE × 0.00494) is changed to the lesser of:

(i) $434.72;

(ii) QPIP_YTD + (PR × IE × 0.00494)

Note:

The K2 formulas are subject to the rules in Chapter 6 – "Canada Pension Plan (CPP)" and Chapter 7 – "Employment Insurance (EI)" of this document and the instructions in Guide T4001 Employers' Guide – Payroll Deductions and Remittances.

Step 3 – Formula to calculate the annual federal tax payable (T1)

TB = The difference between:

(i) the annual tax amount (T1 + T2) based on the instructions in Step 1 below; and

(ii) the annual tax amount (T1 + T2) based on the instructions in Step 2 below

(1) Regular bonus calculation

Step 1

Determine the annual tax (T1 + T2) based on the annual taxable income (factor A) with the non-periodic payment payable now. The formula to calculate factor A is as follows:

A = ([P × (I – F – F2 – F5A – U1)] – HD – F1)* + (B – F3 – F5B)** + (B1 – F4 – F5B_YTD)**

* If the result is negative, enter $0.

** Result cannot be negative, and result cannot be negative after deducting CPP and EI.

Note:

If the result above is less than or equal to $5,000, deduct 15% tax (10% in Quebec) from the bonus or retroactive pay increase.

Step 2

Determine the annual tax (T1 + T2) based on the annual taxable income (factor A) without the non-periodic payment payable now. The formula to calculate factor A is as follows:

A = ([P × (I – F – F2 – F5A – U1)] – HD – F1)* + (B1 – F4 – F5B_YTD)**

* If the result is negative, enter $0.

** Result cannot be negative, and result cannot be negative after deducting CPP and EI.

If there is no current I, use the most recent I.

(2) Year‑to‑date bonus calculation (optional)

Step 1

Determine the annual tax (T1 + T2) based on the annual taxable income (factor A) with the non-periodic payment payable now. The annual taxable income (factor A) is based on a year‑to‑date concept, plus the estimated income for the rest of the pay periods in the year. YTD means year‑to‑date (before this pay period). The formula to calculate factor A is as follows:

A = [(I_YTD – F_YTD – F2_YTD – F5A_YTD – U1_YTD) + (PR × (I – F – F2 – F5A – U1)) – F1 – HD]* + (B – F3 – F5B)** +
(B1 – F4 – F5B_YTD)**

* If the result is negative, enter $0.

** Result cannot be negative, and result cannot be negative after deducting CPP and EI.

Note:

If the result above is less than or equal to $5,000, deduct 15% tax (10% in Quebec) from the bonus or retroactive pay increase.

Step 2

A = [(I_YTD – F_YTD – F2_YTD – F5A_YTD – U1_YTD) + (PR × (I – F – F2 – F5A – U1)) – F1 – HD]* +

(B1 – F4 – F5B_YTD)**

* If the result is negative, enter $0.

** Result cannot be negative, and result cannot be negative after deducting CPP and EI.

If there is no current I, use the most recent I.

Example for year‑to‑date bonus calculation method

In this example, an employee got a retroactive pay increase from $1,000 to $1,100 per week that applies to 25 weeks. Therefore, a retroactive pay increase payment of $2,500 is payable now. An amount of $1,000 will be directed to the employee's RRSP. Thirty pay periods have passed and 22 pay periods remain in the year. Year‑to‑date income is $31,000 which includes a one-time $1,000 bonus that was previously paid, year‑to‑date RPP is $1,350, year to date CPP deductions for additional contributions are $217.21(F5AYTD = $209.96; F5BYTD = $7.25) and year‑to‑date union dues are $150. The current income is $1,100 with RPP withheld of $45, CPP deductions for additional contributions against periodic income of $8.09 and union dues of $5. The employee received $7.25 of CPP deductions for additional contributions (F5B) on the $1,000 bonus payment that was previously received.

C = 0.0570 × ($3,600 – ($3,500/52))
= $201.36
F5 = C × (0.0075/0.0570)
= $201.36 × (0.0075/0.0570)
= $26.49

F5A = $26.49 × (($3,600 – $2,500)/$3,600)

= $8.09

F5B = $26.49 × ($2,500/$3,600)

= $18.40

Step 1

A = Annual taxable income with the non-periodic payment payable now

= [(I_YTD – F_YTD – F2_YTD – F5A_YTD – U1_YTD) + (PR × (I – F – F2 – F5A – U1)) – F1 – HD]* + (B – F3 – F5B)** +

(B1 – F4 – F5B_YTD)**

= [($30,000 – $1,350 – $0 – $209.96 – $150) + (22 × ($1,100 – $45 – $0 – $8.09 – $5)) – $0 – $0] +

($2,500 – $1,000 – $18.40) + ($1,000 – $0 – $7.25)

= $28,290.04 + $22,921.80 + $1,481.60 + $992.75

= $53,686.19

Step 2

A = Annual taxable income without the non-periodic payment payable now

= [(I_YTD – F_YTD – F2_YTD – F5A_YTD – U1_YTD) + (PR × (I – F – F2 – F5A – U1)) – F1 – HD]* + (B1 – F4 – F5B_YTD)**

= [($30,000 – $1,350 – $0 – $209.96 – $150) + (22 × ($1,100 – $45 – $0 – $8.09 – $5)) – $0 – $0] + ($1,000 – $0 – $7.25)

= $28,290.04 + $22,921.80 + $992.75

= $52,204.59

After calculating the annual taxable income, factor A, in steps 1 and 2, calculate the factors T1 and T2 in the same way as for regular remuneration.

Note:

The TB formula above can be used to calculate the tax deductions on non-periodic payments such as accumulated overtime not paid in the same pay period earned, paid vacation not taken by the employee, and bonuses.

Step 4 – Formula to calculate annual basic provincial or territorial tax (T4)

As the formula to calculate the annual basic provincial or territorial tax and the explanatory variables have not changed, they have not been reproduced.

Step 5 – Formulas to calculate the annual provincial or territorial tax deduction (T2)

K2P = [(Lowest provincial tax rate × (P × C × (0.0495/0.0570), maximum $3,039.30 × (PM/12))) + (Lowest provincial tax rate × (P × EI, maximum $952.74))]

K2RP = [(Lowest provincial tax rate × (P × C × (0.0495/0.0570), maximum ($3,039.30 × (PM/12) – (DQ × (0.0495/0.0615)) + (DQ × (0.0540/0.0615))))) + (Lowest provincial tax rate × (P × EI, maximum $952.74))]

Replace the lowest provincial or territorial tax rate with the appropriate rate for the province or territory that applies to the employee or pensioner.

Step 6 – Formulas to calculate the estimated federal and provincial or territorial tax deductions (T) for the pay period

As the formula to calculate the estimated federal and provincial or territorial tax deductions for the pay period and the explanatory variables have not changed, they have not been reproduced.

Chapter 5 – Option 2 – Tax Formulas based on cumulative averaging

Formula to calculate annual taxable income (A)

A = Projected annual taxable income
= [S1 × (I – F – F2 – F5A – U1)] + B1 – HD – F1
If the result is negative, A = $0.

F5 = C × (0.0075/0.0570)

Only for employees in Quebec:
F5Q = C × (0.0075/0.0615)

F5A = F5* × ((PI – B)/PI)
* When in the province of Quebec, replace F5 with F5Q.

F5B = F5* × (B/PI)
* When in the province of Quebec, replace F5 with F5Q.

Formula to calculate basic federal tax (T3)

K2 = [(0.15 × (0.0495 × ((S1 × PI) + B1 – $3,500.00)*, maximum $3,039.30 × (PM/12))) +
(0.15 × (0.0158 × ((S1 × IE) + B1), maximum $952.74))]
* If the result is negative, enter $0.

Only for employees in Quebec:
K2Q = [(0.15 × (0.0540 × ((S1 × PI) + B1 – $3,500.00)*, maximum $3,315.60 × (PM/12))) +
(0.15 × (0.0120 × ((S1 × IE) + B1), maximum $723.60)) + (0.15 × (0.00494 × ((S1 × IE) + B1), maximum $434.72))]
* If the result is negative, enter $0.
Where:
PI = Pensionable income for the pay period, or the gross income plus any taxable benefits for the pay period, plus PI_YTD
IE = Insurable earnings for the pay period including insurable taxable benefits for the pay period, plus IE_YTD
The above has to follow the rules in Chapter 6 – "Canada Pension Plan (CPP)" and Chapter 7 – "Employment Insurance (EI)" of this publication and the instructions contained in Guide T4001, Employers' Guide – Payroll Deductions and Remittances.

Formulas to calculate provincial and territorial tax payable (T2)

K2P = [(Lowest provincial or territorial tax rate × (0.0495 × ((S1 × PI) + B1 – $3,500.00)*, maximum $3,039.30 × (PM/12))) + (lowest provincial or territorial tax rate × (0.0158 × ((S1 × IE) + B1), maximum $952.74))]
* If the result is negative, enter $0.
Replace the lowest provincial or territorial tax rate with the appropriate rate for the province or territory that applies to the employee or pensioner.

TB = Estimated federal and provincial or territorial tax deduction on a non-periodic payment for the pay period
= Step 1 minus Step 2 below (if negative, TB = $0)
Step 1
Projected annual taxable income including B1 and B
= [(S1 × (I – F – F2 – F5A – U1)) – HD – F1] + (B1 – F4 – F5B_YTD) + (B – F3 – F5B)
Step 2
Projected annual taxable income including B1, but not B
= [(S1 × (I – F – F2 – F5A – U1)) – HD – F1] + (B1 – F4 – F5B_YTD)

Chapter 6 – Canada Pension Plan (CPP)

For the following formulas, round the resulting amount to the nearest $0.01.
Note:
This chapter also outlines the Quebec Pension Plan (QPP) formulas. In addition, the term "location outside Quebec" refers to a province or territory outside Quebec.

To determine CPP contributions for employees receiving salary or wages

C = The lesser of:
(i) $3,499.80* × (PM/12) – D*;
(ii) 0.0570* × [PI – ($3,500.00 / P)]
If the result is negative, C = $0.
* For employees employed in Quebec
use the QPP max contribution amount of $3,776.10 instead of $3,499.80;
use DQ instead of D; and
use the QPP contribution rate of 0.0615 instead of 0.0570.

To determine CPP contributions – only for employees paid by commission

C = The lesser of:
(i) $3,499.80* × (PM/12) – D*;
(ii) 0.0570* × [G – ($3,500.00 × N / 365, minimum $67.30)]
If the result is negative, C = $0.
* For employees employed in Quebec
use the QPP max contribution amount of $3,776.10 instead of $3,499.80;
use DQ instead of D; and
use the QPP contribution rate of 0.0615 instead of 0.0570.

To determine CPP contributions for employees who were transferred by their employer from Quebec to a location outside Quebec during the year receiving salary or wages

C = The lesser of:
(i) $3,499.80 × (PM/12) – [(DQ × (0.0570/0.0615)*) + D];
(ii) 0.0570 × [PI – ($3,500.00 / P)]
If the result is negative, C = $0.
* No rounding required for this factor.

To determine CPP contributions for employees who were transferred by their employer from Quebec to a location outside Quebec during the year – only for employees paid by commission

C = The lesser of:
(i) $3,499.80 × (PM/12) – [(DQ × (0.0570/0.0615)*) + D];
(ii) 0.0570 × [G – ($3,500.00 × N / 365, minimum $67.30)]
If the result is negative, C = $0.
* No rounding required for this factor.

To determine QPP contributions for employees who were transferred by their employer to Quebec from a location outside Quebec during the year receiving salary or wages

C = The lesser of:
(i) $3,776.10 × (PM/12) – [(D × (0.0615/0.0570)*) + DQ];
(ii) 0.0615 × [PI – ($3,500.00 / P)]
If the result is negative, C = $0.
* No rounding required for this factor.

To determine QPP contributions for employees who were transferred by their employer to Quebec from a location outside Quebec during the year – only for employees paid by commission

C = The lesser of:
(i) $3,776.10 × (PM/12) – [(D × (0.0615/0.0570)*) + DQ];
(ii) 0.0615 × [G – ($3,500.00 × N / 365, minimum $67.30)]
If the result is negative, C = $0.
* No rounding required for this factor.

Chapter 7 – Employment Insurance (EI)

As the formula to calculate the employment insurance premiums and the explanatory variables have not changed, they have not been reproduced.

Chapter 8 – Rates and amounts

This chapter only includes the tables to be impacted or added due to the Income Tax Regulation Amendment. The 2022 rates and maximums are used for illustrative purposes only.

* All self-employed workers pay both the employer and employee portions of CPP contributions.

Appendix 2: Upcoming Guidance for T4127 January 2024 Edition

This Appendix only includes the information impacted or added due to the CPP Regulation Amendment.

Chapter 1 – General Information

As the general information has not changed, this section has not been reproduced.

Chapter 2 – Personal Tax Credit Returns (Form TD1)

As the formula to calculate the personal tax credits return and the explanatory variables have not changed, they have not been reproduced.

Chapter 3 – Glossary

The factors in the following table only include the new factors to be added due to the CPP Regulation Amendment.

Chapter 4 – Option 1 – Tax Formulas

This chapter only includes the formulas to be impacted or added due to the CPP Regulation Amendment. The 2022 rates and maximums are used for illustrative purposes only.

Step 1 – Formula to calculate annual taxable income (A)

A = Annual taxable income
= [P × (I – F – F2 – F5A – U1)] – HD – F1
If the result is negative, T = L.

F5 = C × (0.0075/0.0570) + C2

Only for employees in Quebec:

F5Q = C × (0.0075/0.0615) + C2

F5A = F5* × ((PI – B)/PI)
* When in the province of Quebec, replace F5 with F5Q.
F5B = F5* × (B/PI)
* When in the province of Quebec, replace F5 with F5Q.

Step 2 – Formula to calculate basic federal tax (T3)

T3 = Annual basic federal tax
= (R × A) – K – K1 – K2* – K3 – K4
If the result is negative, T3 = $0.
*For employees being transferred from Quebec to a location outside Quebec, replace K2 with K2R.

Only for employees in Quebec:
(R × A) – K – K1 – K2Q* – K3 – K4
If the result is negative, T3 = $0.
*For employees being transferred to Quebec from a location outside Quebec, replace K2Q with K2RQ.

R and K are based on 2022 index values for A see the Rates (R, V), income thresholds (A), and constants (K, KP) for 2022 Table 8.1 in Chapter 8.

K2 = [(0.15 × (P × C × (0.0495/0.0570), maximum $3,039.30 × (PM/12))) + (0.15 × (P × EI, maximum $952.74))]*

K2R = [(0.15 × (P × C × (0.0495/0.0570), maximum ($3,039.30 × (PM/12) – (DQ × (0.0495/0.0615)) + (DQ × (0.0540/0.0615))))) + (0.15 × (P × EI, maximum $952.74))]*

Only for employees in Quebec:
K2Q = Quebec Pension Plan contributions, employment insurance premiums, and Quebec Parental Insurance Plan premiums federal tax credits for the year
= [(0.15 × (P × C × (0.0540/0.0615), maximum $3,315.60 × (PM/12))) + (0.15 × (P × EI, maximum $723.60)) + (0.15 × (P × IE × 0.00494, maximum $434.72))]*
K2RQ = [(0.15 × (P × C × (0.0540/0.0615), maximum ($3,315.60 × (PM/12) – (D × (0.0540/0.0570)) +
(D × (0.0495/0.0570))))) + (0.15 × (P × EI, maximum $723.60)) +
(0.15 × (P × IE × 0.00494, maximum $434.72))]*

* In all cases, once the employee contributions or premiums have reached annual maximum for CPP, EI or QPIP, for the rest of the pay periods in the year, (P × C × (base rate/(base rate + first additional rate))), (P × EI), or (P × IE × 0.00494) (as applicable) is replaced by the employee's maximum annual contribution or premium. This modification ensures that the employee will get the maximum CPP, EI, and QPIP tax credit for the rest of the pay periods in the year.

If you want to use the year‑to‑date method to calculate CPP, EI, and QPIP federal tax credits:
(P × C × (0.0495/0.0570)) is changed to the lesser of:
(i) $3,039.30 × (PM/12);
(ii) (D × (0.0495/0.0570)) + (PR × C × (0.0495/0.0570))

(P × EI) is changed to the lesser of:
(i) $952.74;
(ii) D1 + (PR × EI)

Only for employees in Quebec:
(P × C × (0.0540/0.0615)) is changed to the lesser of:
(i) $3,315.60 × (PM/12);
(ii) (DQ × (0.0540/0.0615)) + (PR × C × (0.0540/0.0615))

(P × EI) is changed to the lesser of:
(i) $723.60;
(ii) D1 + (PR × EI)

(P × IE × 0.00494) is changed to the lesser of:
(i) $434.72;
(ii) QPIP_YTD + (PR × IE × 0.00494)

Note:

The K2 formulas are subject to the rules in Chapter 6 – “Canada Pension Plan (CPP)” and Chapter 7 – “Employment Insurance (EI)” of this document and the instructions in Guide T4001 Employers’ Guide – Payroll Deductions and Remittances.

Step 3 – Formula to calculate the annual federal tax payable (T1)

Tax calculation formulas for bonuses, retroactive pay increases, and other non-periodic payments

TB = The difference between:
(i) the annual tax amount (T1 + T2) based on the instructions in Step 1 below; and
(ii) the annual tax amount (T1 + T2) based on the instructions in Step 2 below

(1) Regular bonus calculation

Step 1
Determine the annual tax (T1 + T2) based on the annual taxable income (factor A) with the non-periodic payment payable now. The formula to calculate factor A is as follows:
A = ([P × (I – F – F2 – F5A – U1)] – HD – F1)* + (B – F3 – F5B)** + (B1 – F4 – F5B_YTD)**
* If the result is negative, enter $0.
** Result cannot be negative, and result cannot be negative after deducting CPP and EI.
Note:
If the result above is less than or equal to $5,000, deduct 15% tax (10% in Quebec) from the bonus or retroactive pay increase.
Step 2
Determine the annual tax (T1 + T2) based on the annual taxable income (factor A) without the non-periodic payment payable now. The formula to calculate factor A is as follows:
A = ([P × (I – F – F2 – F5A – U1)] – HD – F1)* + (B1 – F4 – F5B_YTD)**
* If the result is negative, enter $0.
** Result cannot be negative, and result cannot be negative after deducting CPP and EI.
If there is no current I, use the most recent I.

(2) Year‑to‑date bonus calculation (optional)

Step 1
Determine the annual tax (T1 + T2) based on the annual taxable income (factor A) with the non-periodic payment payable now. The annual taxable income (factor A) is based on a year‑to‑date concept, plus the estimated income for the rest of the pay periods in the year. YTD means year‑to‑date (before this pay period). The formula to calculate factor A is as follows:
A = [(I_YTD – F_YTD – F2_YTD – F5A_YTD – U1_YTD) + (PR × (I – F – F2 – F5A – U1)) – F1 – HD]* + (B – F3 – F5B)** +
(B1 – F4 – F5B_YTD)**
* If the result is negative, enter $0.
** Result cannot be negative, and result cannot be negative after deducting CPP and EI.
Note:
If the result above is less than or equal to $5,000, deduct 15% tax (10% in Quebec) from the bonus or retroactive pay increase.
Step 2
A = [(I_YTD – F_YTD – F2_YTD – F5A_YTD – U1_YTD) + (PR × (I – F – F2 – F5A – U1)) – F1 – HD]* +
(B1 – F4 – F5B_YTD)**
* If the result is negative, enter $0.
** Result cannot be negative, and result cannot be negative after deducting CPP and EI.
If there is no current I, use the most recent I.

Example for year‑to‑date bonus calculation method

In this example, an employee got a retroactive pay increase from $1,000 to $1,100 per week that applies to 25 weeks. Therefore, a retroactive pay increase payment of $2,500 is payable now. An amount of $1,000 will be directed to the employee's RRSP. Thirty pay periods have passed and 22 pay periods remain in the year. Year‑to‑date income is $31,000 which includes a one-time $1,000 bonus that was previously paid, year‑to‑date RPP is $1,350, year to date CPP deductions for additional contributions are $217.21(F5AYTD = $209.96; F5BYTD = $7.25) and year‑to‑date union dues are $150. The current income is $1,100 with RPP withheld of $45, CPP deductions for additional contributions against periodic income of $8.09 and union dues of $5. The employee received $7.25 of CPP deductions for additional contributions (F5B) on the $1,000 bonus payment that was previously received.

C = 0.0570 × ($3,600 – ($3,500/52))
= $201.36

F5 = C × (0.0075/0.0570) + C2
= $201.36 × (0.0075/0.0570) + 0
= $26.49

F5A = $26.49 × (($3,600 – $2,500)/$3,600)
= $8.09

F5B = $26.49 × ($2,500/$3,600)
= $18.40

Step 1
A = Annual taxable income with the non-periodic payment payable now
= [(I_YTD – F_YTD – F2_YTD – F5A_YTD – U1_YTD) + (PR × (I – F – F2 – F5A – U1)) – F1 – HD]* + (B – F3 – F5B)** +
(B1 – F4 – F5B_YTD)**
= [($30,000 – $1,350 – $0 – $209.96 – $150) + (22 × ($1,100 – $45 – $0 – $8.09 – $5)) – $0 – $0] +
($2,500 – $1,000 – $18.40) + ($1,000 – $0 – $7.25)
= $28,290.04 + $22,921.80 + $1,481.60 + $992.75
= $53,686.19
Step 2
A = Annual taxable income without the non-periodic payment payable now
= [(I_YTD – F_YTD – F2_YTD – F5A_YTD – U1_YTD) + (PR × (I – F – F2 – F5A – U1)) – F1 – HD]* + (B1 – F4 – F5B_YTD)**
= [($30,000 – $1,350 – $0 – $209.96 – $150) + (22 × ($1,100 – $45 – $0 – $8.09 – $5)) – $0 – $0] + ($1,000 – $0 – $7.25)
= $28,290.04 + $22,921.80 + $992.75
= $52,204.59

After calculating the annual taxable income, factor A, in steps 1 and 2, calculate the factors T1 and T2 in the same way as for regular remuneration.

Step 4 – Formula to calculate annual basic provincial or territorial tax (T4)

As the formula to calculate the annual basic provincial or territorial tax and the explanatory variables have not changed, they have not been reproduced.

Step 5 – Formulas to calculate the annual provincial or territorial tax deduction (T2)

K2P = [(Lowest provincial tax rate × (P × C × (0.0495/0.0570), maximum $3,039.30 × (PM/12))) + (Lowest provincial tax rate × (P × EI, maximum $952.74))]

K2RP = [(Lowest provincial tax rate × (P × C × (0.0495/0.0570), maximum ($3,039.30 × (PM/12) – (DQ × (0.0495/0.0615)) + (DQ × (0.0540/0.0615))))) + (Lowest provincial tax rate × (P × EI, maximum $952.74))]

Replace the lowest provincial or territorial tax rate with the appropriate rate for the province or territory that applies to the employee or pensioner.

Step 6 – Formulas to calculate the estimated federal and provincial or territorial tax deductions (T) for the pay period

As the formula to calculate the estimated federal and provincial or territorial tax deductions for the pay period and the explanatory variables have not changed, they have not been reproduced.

Chapter 5 – Option 2 – Tax Formulas based on cumulative averaging

Formula to calculate annual taxable income (A)

A = Projected annual taxable income
= [S1 × (I – F – F2 – F5A – U1)] + B1 – HD – F1
If the result is negative, A = $0.

F5 = C × (0.0075/0.0570) + C2

Only for employees in Quebec:
F5Q = C × (0.0075/0.0615) + C2

F5A = F5* × ((PI – B)/PI)
* When in the province of Quebec, replace F5 with F5Q.

F5B = F5* × (B/PI)
* When in the province of Quebec, replace F5 with F5Q.

Formula to calculate basic federal tax (T3)

K2 = [(0.15 × (0.0495 × ((S1 × PI) + B1 – $3,500.00)*, maximum $3,039.30 × (PM/12))) +
(0.15 × (0.0158 × ((S1 × IE) + B1), maximum $952.74))]
* If the result is negative, enter $0.

Only for employees in Quebec:
K2Q = [(0.15 × (0.0540 × ((S1 × PI) + B1 – $3,500.00)*, maximum $3,315.60 × (PM/12))) +
(0.15 × (0.0120 × ((S1 × IE) + B1), maximum $723.60)) + (0.15 × (0.00494 × ((S1 × IE) + B1), maximum $434.72))]
* If the result is negative, enter $0.
Where:
PI = Pensionable income for the pay period, or the gross income plus any taxable benefits for the pay period, plus PI_YTD
IE = Insurable earnings for the pay period including insurable taxable benefits for the pay period, plus IE_YTD
The above has to follow the rules in Chapter 6 – "Canada Pension Plan (CPP)" and Chapter 7 – "Employment Insurance (EI)" of this publication and the instructions contained in Guide T4001, Employers' Guide – Payroll Deductions and Remittances.

Formulas to calculate provincial and territorial tax payable (T2)

K2P = [(Lowest provincial or territorial tax rate × (0.0495 × ((S1 × PI) + B1 – $3,500.00)*, maximum $3,039.30 ×
(PM/12))) + (lowest provincial or territorial tax rate × (0.0158 × ((S1 × IE) + B1), maximum $952.74))]
* If the result is negative, enter $0.
Replace the lowest provincial or territorial tax rate with the appropriate rate for the province or territory that applies to the employee or pensioner.

TB = Estimated federal and provincial or territorial tax deduction on a non-periodic payment for the pay period
= Step 1 minus Step 2 below (if negative, TB = $0)
Step 1
Projected annual taxable income including B1 and B
= [(S1 × (I – F – F2 – F5A – U1)) – HD – F1] + (B1 – F4 – F5B_YTD) + (B – F3 – F5B)
Step 2
Projected annual taxable income including B1, but not B
= [(S1 × (I – F – F2 – F5A – U1)) – HD – F1] + (B1 – F4 – F5B_YTD)

Chapter 6 – Canada Pension Plan (CPP)

For the following formulas, round the resulting amount to the nearest $0.01.
Note:
This chapter also outlines the Quebec Pension Plan (QPP) formulas. In addition, the term "location outside Quebec" refers to a province or territory outside Quebec.

To determine CPP contributions for employees receiving salary or wages

C = The lesser of:
(i) $3,499.80* × (PM/12) – D*;
(ii) 0.0570* × [PI – ($3,500.00 / P)]
If the result is negative, C = $0.
* For employees employed in Quebec
use the QPP max contribution amount of $3,776.10 instead of $3,499.80;
use DQ instead of D; and
use the QPP contribution rate of 0.0615 instead of 0.0570.

To determine CPP contributions – only for employees paid by commission

C = The lesser of:
(i) $3,499.80* × (PM/12) – D*;
(ii) 0.0570* × [G – ($3,500.00 × N / 365, minimum $67.30)]
If the result is negative, C = $0.
* For employees employed in Quebec
use the QPP max contribution amount of $3,776.10 instead of $3,499.80;
use DQ instead of D; and
use the QPP contribution rate of 0.0615 instead of 0.0570.

To determine CPP contributions for employees who were transferred by their employer from Quebec to a location outside Quebec during the year receiving salary or wages

C = The lesser of:
(i) $3,499.80 × (PM/12) – [(DQ × (0.0570/0.0615)*) + D];
(ii) 0.0570 × [PI – ($3,500.00 / P)]
If the result is negative, C = $0.
* No rounding required for this factor.

To determine CPP contributions for employees who were transferred by their employer from Quebec to a location outside Quebec during the year – only for employees paid by commission

C = The lesser of:
(i) $3,499.80 × (PM/12) – [(DQ × (0.0570/0.0615)*) + D];
(ii) 0.0570 × [G – ($3,500.00 × N / 365, minimum $67.30)]
If the result is negative, C = $0.
* No rounding required for this factor.

To determine QPP contributions for employees who were transferred by their employer to Quebec from a location outside Quebec during the year receiving salary or wages

C = The lesser of:
(i) $3,776.10 × (PM/12) – [(D × (0.0615/0.0570)*) + DQ];
(ii) 0.0615 × [PI – ($3,500.00 / P)]
If the result is negative, C = $0.
* No rounding required for this factor.

To determine QPP contributions for employees who were transferred by their employer to Quebec from a location outside Quebec during the year – only for employees paid by commission

C = The lesser of:
(i) $3,776.10 × (PM/12) – [(D × (0.0615/0.0570)*) + DQ];
(ii) 0.0615 × [G – ($3,500.00 × N / 365, minimum $67.30)]
If the result is negative, C = $0.
* No rounding required for this factor.

To determine CPP second additional contributions for employees receiving salary or wages

C2 = The lesser of:
(i) $180.00 × (PM/12) – D2*;
(ii) (PI_YTD + PI – W) × 0.04

W = The greater of:
(i) PI_YTD;
(ii) YMPE × (PM/12)
If the result is negative, C2 = $0.
* For employees employed in Quebec, use D2Q instead of D2

To determine CPP second additional contributions – only for employees paid by commission

C2 = The lesser of:
(i) $180.00 × (PM/12) – D2*;
(ii) (G_YTD + G – W) × 0.04

W = The greater of:
(i) G_YTD;
(ii) YMPE × (PM/12)
If the result is negative, C2 = $0.
* For employees employed in Quebec, use D2Q instead of D2

To determine CPP second additional contributions for employees who were transferred by their employer from Quebec to a location outside Quebec during the year receiving salary or wages

C2 = The lesser of:
(i) $180.00 × (PM/12) – [(D2Q × (0.04/0.04)) + D2];
(ii) (PI_YTD + PI – W) × 0.04

W = The greater of:
(i) PI_YTD;
(ii) YMPE × (PM/12)
If the result is negative, C2 = $0.

To determine CPP second additional contributions for employees who were transferred by their employer from Quebec to a location outside Quebec during the year – only for employees paid by commission

C2 = The lesser of:
(i) $180.00 × (PM/12) – [(D2Q × (0.04/0.04)) + D2];
(ii) (G_YTD + G – W) × 0.04

W = The greater of:
(i) G_YTD;
(ii) YMPE × (PM/12)
If the result is negative, C2 = $0.

To determine QPP second additional contributions for employees who were transferred by their employer to Quebec from a location outside Quebec during the year receiving salary or wages

C2 = The lesser of:
(i) $180.00 × (PM/12) – [(D2 × (0.04/0.04)) + D2Q];
(ii) (PI_YTD + PI – W) × 0.04

W = The greater of:
(i) PI_YTD;
(ii) YMPE × (PM/12)
If the result is negative, C2 = $0.

To determine QPP second additional contributions for employees who were transferred by their employer to Quebec from a location outside Quebec during the year – only for employees paid by commission

C2 = The lesser of:
(i) $180.00 × (PM/12) – [(D2 × (0.04/0.04)) + D2Q];
(ii) (G_YTD + G – W) × 0.04

W = The greater of:
(i) G_YTD;
(ii) YMPE × (PM/12)
If the result is negative, C2 = $0.

Chapter 7 – Employment Insurance (EI)

As the formula to calculate the employment insurance premiums and the explanatory variables have not changed, they have not been reproduced.

Chapter 8 – Rates and amounts

This chapter only includes the tables to be impacted or added due to the CPP Regulation Amendment. The 2022 rates and maximums are used for illustrative purposes only.

* All self-employed workers pay both the employer and employee portions of CPP contributions.

* All self-employed workers pay both the employer and employee portions of CPP contributions.

Appendix 3: Example Scenarios

This Appendix provides example scenarios that illustrate the changes in the formulas. Note that the 2022 rates and amounts are used for illustrative purposes.

*Note: Rate ratios imbedded in the formulas are part of the calculation and should not be rounded. The results from formulas are rounded as each parenthesis is resolved (rounding rules for CPP exemption and CPP contribution apply).

Scenario 1

An employee is earning $960.00 per pay period. There are 52 pay periods in the year since this employee is getting paid weekly. K2, F5, F5A, F5B and A calculations for the 1^st period are as follows:

PI = $960.00
PM = 12
P = 52

C = The lesser of:
(i) $3,499.80 × (PM/12) – D = $3,499.80
(ii) 0.0570 × [PI – ($3,500/P)] = 0.0570 × [$960.00 – ($3,500.00/52)] = $50.88

K2 = [(0.15 × (P × C × (0.0495/0.0570), maximum $3,039.30 × (PM/12))) + (0.15 × (P × EI, maximum $952.74))]
= [(0.15 × (52 × $50.88 × (0.0495/0.0570))) + (0.15 × (52 × (0.0158 × $960.00)))]
= $344.64 + $118.33
= $462.97

F5 = C × (0.0075/0.0570)
= $50.88 × (0.0075/0.0570)
= $6.69

F5A = F5 × ((PI – B)/PI)
= $6.69 × (($960.00 – 0)/$960.00)
= $6.69

F5B = F5 × (B/PI)
= $6.69 × (0/$960.00)
= 0

A = [P × (I – F – F2 – F5A – U1)] – HD – F1
= [52 × ($960.00 – 0 – 0 – $6.69 – 0)] – 0 – 0
= $49,572.12

Scenario 2

An employee is earning $3,000 per pay period. There are 24 pay periods in the year since this employee is getting paid semi-monthly. The province of employment is Ontario until the 12th pay period. From the 13th pay period, the province of employment is Quebec until the 15th pay period. From the 16th pay period and onwards, the province of employment is Alberta. C, K2R and K2RP calculations for the 16th period are as follows:

PI = $3,000.00
PM = 12
P = 24
D = $1,952.28*
DQ = $526.59*

* Please see Table 1 for CPP contributions and year-to-date contributions for each pay period.

C = The lesser of:
(i) $3,499.80 × (PM/12) – [(DQ x (0.0570/0.0615)) + D] = $3,499.80 – [($526.59 x (0.0570/0.0615)) + $1,952.28] = $1,059.46
(ii) 0.0570 × [PI – ($3,500/P)] = 0.0570 × [$3,000.00 – ($3,500.00/24)] = $162.69

C = $162.69

K2R = [(0.15 × (P × C × (0.0495/0.0570), maximum ($3,039.30 × (PM/12) – (DQ × (0.0495/0.0615)) + (DQ × (0.0540/0.0615))))) + (0.15 × (P × EI, maximum $952.74))]
= [(0.15 × ($3,390.80, maximum ($3,039.30 – $423.84 + $462.37))) + (0.15 × ($1,137.60, maximum $952.74))]
= [(0.15 × $3,077.83) + (0.15 × $952.74)]
= $461.67 + $142.91
= $604.58

K2RP = [(0.10 × (P × C × (0.0495/0.0570), maximum ($3,039.30 × (PM/12) – (DQ × (0.0495/0.0615)) + (DQ × (0.0540/0.0615))))) + (0.10 × (P × EI, maximum $952.74))]
= [(0.10 × ($3,390.80, maximum ($3,039.30 – $423.84 + $462.37))) + (0.10 × ($1,137.60, maximum $952.74))]
= [(0.10 × $3,077.83) + (0.10 × $952.74)]
= $307.78 + $95.27
= $403.05

Scenario 3

There are two employees earning $2,000 per pay period. There are 24 pay periods in the year since these employees are getting paid semi-monthly. The province of employment is Ontario. Employee 1 is required to contribute to CPP throughout the year and employee 2 turns 18 in March. C, K2 and K2P calculations for period 20 for the employees are as follows:

Employee 1:

PI = $2,000.00
PM = 12
P = 24
D = $2,008.11*
* Please see Table 2 for CPP contributions and year-to-date contributions for each pay period.

C = The lesser of:
(i) $3,499.80 × (PM/12) – D = $3,499.80 – $2,008.11 = $1,491.69
(ii) 0.0570 × [PI – ($3,500/P)] = 0.0570 × [$2,000.00 – ($3,500.00/24)] = $105.69

C = $105.69

K2 = [(0.15 × (P × C × (0.0495/0.0570), maximum $3,039.30 × (PM/12))) + (0.15 × (P × EI, maximum $952.74))]
= [(0.15 × ($2,202.80, maximum $3,039.30)) + (0.15 × ($758.40, maximum $952.74))]
= [(0.15 × $2,202.80) + (0.15 × $758.40)]
= $330.42 + $113.76
= $444.18

K2P = [(0.0505 × (P × C × (0.0495/0.0570), maximum $3,039.30 × (PM/12))) + (0.0505 × (P × EI, maximum $952.74))]
= [(0.0505 × ($2,202.80, maximum $3,039.30)) + (0.0505 × ($758.40, maximum $952.74))]
= [(0.0505 × $2,202.80) + (0.0505 × $758.40)]
= $111.24 + $38.30
= $149.54

Employee 2:

PI = $2,000.00
PM = 9
P = 24
D = $1,373.97*
* Please see Table 2 for CPP contributions and year-to-date contributions for each pay period

C = The lesser of:
(i) $3,499.80 × (PM/12) – D = $2,624.85 – $1,373.97 = $1,250.88
(ii) 0.0570 × [PI – ($3,500/P)] = 0.0570 × [$2,000.00 – ($3,500.00/24)] = $105.69

C = $105.69

K2 = [(0.15 × (P × C × (0.0495/0.0570), maximum $3,039.30 × (PM/12))) + (0.15 × (P × EI, maximum $952.74))]
= [(0.15 × ($2,202.80, maximum $2,279.48)) + (0.15 × ($758.40, maximum $952.74))]
= [(0.15 × $2,202.80) + (0.15 × $758.40)]
= $330.42 + $113.76
= $444.18

K2P = [(0.0505 × (P × C × (0.0495/0.0570), maximum $3,039.30 × (PM/12))) + (0.0505 × (P × EI, maximum $952.74))]
= [(0.0505 × ($2,202.80, maximum $2,279.48)) + (0.0505 × ($758.40, maximum $952.74))]
= [(0.0505 × $2,202.80) + (0.0505 × $758.40)]
= $111.24 + $38.30
= $149.54