Calculation of Canada Pension Plan (CPP) contributions (multiple pay periods or year-end verification)

Use this calculation to determine an employee's CPP contributions over multiple pay periods, or to verify an employee's CPP contributions at year-end before you fill out and file the T4 slips. You can get the information you need to fill out this calculation from each employee's payroll master file.

Using the calculation will help you avoid the possibility of receiving a Pensionable and insurable earnings review (PIER) report.

Calculation of CPP contributions

To calculate or verify deductions, follow these steps:

Step 1: Calculate the total earnings

Add the salary, wages, benefits, and allowances for the total period of employment from the employee's payroll master file that you will include in Box 14 – Employment income of the T4 slip.

Step 2: Calculate the total earnings from which the CPP deductions are not required

Add the following amounts:

• the amount the employee received before and including the month the employee turned 18;
• the amount the employee received after the month the employee turned 70;
• the amount the employee received after the effective date of the employee's completed and signed election Form (CPT30) to stop contributing to the CPP;
• the amount the employee received before and including the month in which the employee provided you with a completed and signed revocation Form (CPT30) to start contributing to the CPP;
• the amount the employee received during the months the employee was considered to be disabled under the CPP or QPP;
• any income from employment, benefits, and payments excluded from CPP contributions under the Special payments chart.

Step 3: Calculate the pensionable earnings for the period of employment

Subtract the result of step 2 from the amount in step 1 (to a maximum of $54,900 for 2016).

Step 4: Calculate the basic exemption that applies to the period of pensionable employment

Multiply the basic exemption for the pay period by the number of pay periods of pensionable earnings (related to the amount in step 3). Make sure not to include pay periods that apply to the earnings listed in step 2 above. The amount cannot be more than the maximum yearly basic exemption of $3,500.

Step 5: Calculate the CPP contributory earnings for the period of pensionable employment

Subtract the result of step 4 from the pensionable earnings for the period of employment found at step 3.

Step 6: Calculate the employee’s CPP contributions

Multiply the CPP contributory earnings for the period of pensionable employment of step 5 by the CPP employee contribution rate for the year (4.95% for 2016). The maximum employee’s CPP contributions for 2016 are $2,544.30.

Step 7: Compare the amount of CPP contributions due and deducted

Subtract the CPP contributions from the employee's payroll master file that you deducted for the period of pensionable employment from employee's required CPP contribution for the period of pensionable employment in step 6. The result should be zero.

If the result of step 7 is positive

If the result of step 7 is positive, you have underdeducted CPP contributions. If this is the case, add the result of step 7 to the total in Box 16 – Employee's CPP contributions of the T4 slip. For more information, see Recovering CPP contributions.

If the result of step 7 is negative

If the result of step 7 is negative, you have overdeducted CPP. If this is the case, check the employee's master file to make sure that the amounts in step 1 and step 3 are correct. For more information, see CPP overpayments.

Date modified:

2017-01-05