On this page

• What are CPP pensionable earnings
• When to deduct CPP contributions
• When to stop deducting CPP contributions
• What if the employee has different jobs
• What to do if you have employees whose province of employment is Quebec
• What to do if you have First Nations employees
• What to do if you have employees outside Canada
• What to do if you have a business outside Canada
• What to do if you are self-employed
• What is the CPP enhancement
• References

What are CPP pensionable earnings

Pensionable earnings are the employee's remuneration from pensionable office or employment with certain exceptions.

Generally, you must deduct CPP contributions from:

• Salary, wages or other remuneration
• Commissions
• Bonuses
• Most taxable benefits
• Honorariums
• Certain tips and gratuities

To determine if you need to deduct CPP contributions, refer to:

• Determine if a benefit is taxable
• Determine the tax treatment of payments other than regular employment income

When to deduct CPP contributions

You have to deduct CPP contributions from your employee's pensionable earnings if the employee meets all of the following conditions:

• Employee is in pensionable employment during the year
• Employee is not considered to be disabled under the CPP or the Quebec Pension Plan (QPP)
• Employee is between 18 and 69 years old, even if the employee is receiving a CPP or QPP retirement pension

If the employee is between 65 and 69 years old and gives you a completed Form CPT30, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election during the year, you should stop deducting CPP contributions.

Learn more: Start, stop or restart CPP deductions.

Employer CPP contributions

You must also contribute an amount equal to the CPP contributions that you deduct from your employees' remuneration and remit the total of both amounts. Even if the required deductions were not made, you are deemed to have made them and the deductions not being made may result in a PIER.

Learn more: Pensionable and insurable earnings review (PIER).

When to stop deducting CPP contributions

What if the employee has different jobs

The CPP annual maximum pensionable earnings apply to each job the employee holds with different employers (different business numbers).

What happens if your employee has multiple employers

If an employee leaves one employer during the year to start work with another employer, the new employer also has to deduct CPP contributions without taking into account what the previous employer paid. This is the case even if the employee has contributed the maximum amount during the previous employment.

Any overpayments will be refunded to employees when they file their income tax and benefit returns. As an employer, you are not entitled to a refund for the employer's share of the contributions.

Example

What happens when an employer is restructuring

Where there was an employer restructuring, the successor employer may, under certain situations, consider the amounts of CPP deducted, remitted or paid by the former employer for the employment of the employees for the year as if they had been deducted, remitted, or paid by the successor employer.

Learn more: Employer restructuring/Succession of employers – CPP/EI explained.

What to do if you have employees whose province of employment is Quebec

If you have employees whose province of employment is Quebec, regardless of your employee's province or territory of residence, you have to deduct Quebec Pension Plan (QPP) contributions instead of CPP contributions.

Learn more: Québec Pension Plan Contributions | Revenu Québec.

What to do if you transfer an employee between Quebec and another province or territory

You may have a place of business in Quebec and in another province or territory. If you transfer an employee from Quebec to another province or territory, you can take into account the QPP contributions you deducted from that employee throughout the year when calculating the maximum CPP contributions to deduct.

If you do this before the end of the year, you must use a formula to reconcile the amounts contributed to the CPP and QPP to make sure that enough contributions to the CPP are withheld and future benefits are not affected.

Learn more: Guide T4127, Payroll Deductions Formulas.

How to report on T4 slips

In addition to deducting CPP/QPP contributions, you will also have to prepare two T4 slips.

It is important that you calculate and report the proper deductions and insurable/pensionable earnings on both T4 slips.

What to do if you have First Nations employees

The employment income of a First Nations employee which is exempt from income tax is not subject to CPP contributions. If their employment income is not tax exempt, it will be subject to CPP deductions.

How to apply for CPP coverage

Election by the employerYou have the option to extend CPP coverage to your First Nations employees who are exempt from tax by filing out Form CPT124, Application for Coverage of Employment of an Indian in Canada Under the Canada Pension Plan Whose Income is Exempt Under the Income Tax Act.
However, you cannot revoke this election and you have to cover all First Nations employees. Coverage under the CPP starts on either the date you sign the application or on a later date that you specify. It cannot be retroactive to a date before the date you signed the application.

Election by the employee

If you do not choose to cover CPP for your First Nations employees who are exempt from tax, a First Nations employee can elect to pay CPP on tax-exempt earnings by filling out Form CPT20, Election to Pay Canada Pension Plan Contributions when filing their personal income tax return.

Learn more: Indian workers and the Canada Pension Plan.

What to do if you have employees outside Canada

If you are a Canadian employer and if you have employees working outside Canada, you must deduct CPP contributions if one of the following applies:

Learn more: Employment outside Canada.

What to do if you have a business outside Canada

If you do not have a place of business in Canada, you have the option to extend CPP coverage to your employees in Canada (resident or non-resident) by filling out Form CPT13, Application for an Employer Resident Outside Canada to Cover Employment in Canada Under the Canada Pension Plan.

What to do if your employee may be subject to a foreign social security plan

Canada has reciprocal social security agreements with certain other countries to ensure that only one plan covers an employee, either the CPP or a foreign social security plan. To find out if a particular country has an agreement with Canada and which CPT application form to use, see What is the purpose of international social security agreements?

What to do if you are self-employed

If your net self-employment income or pensionable employment income is more than $3,500, you have to contribute to the CPP.

You need to calculate the amount of CPP you have to contribute when you complete your income tax and benefit return (line 22200, line 31000, line 42100, and Schedule 8).

Learn more:

• Are you self-employed? Here's what the Canada Pension Plan enhancement means for you
• Canada Pension Plan (CPP) and Employment Insurance (EI) Rulings.

First Nations workers who are self-employed

If you are a self-employed First Nations worker exempt from tax, you can elect to pay CPP on your tax-exempt self-employment income by filing out Form CPT20, Election to Pay Canada Pension Plan Contributions when filing your personal income tax return.

What is the CPP enhancement

From 2003 to 2018, employees were making a contribution of 4.95% on their pensionable earnings up to their annual maximum pensionable earnings (first ceiling), with employers making an equal contribution. These are the base contributions to the CPP.

From 2019 to 2023, the contribution rate for employees was increased gradually from 4.95% to 5.95%. These are the base contributions (4.95%) and the first additional contribution to the CPP (1%).

Beginning in 2024, an additional maximum pensionable earnings (second higher ceiling) is introduced. Employees and employers are required to make a second additional CPP contribution (CPP2) on these earnings, beginning at the first earnings ceiling and going up to the second earnings ceiling, at a rate of 4.0%.

References

Related topics

• Administration of the Canada Pension Plan and the Employment Insurance Act
• Canada Pension Plan – Overview

Multimedia

• Video: A deeper look at the Canada Pension Plan and Employment Insurance | 42 minutes
• Webinar: Enhanced CPP & You | 45 minutes

Legislation