Did your payroll cost just go up without anyone in your British Columbia business deciding it should? For employers with higher-earning staff, the answer is yes. Effective January 2024, a second additional CPP contribution — "CPP2" — applies to earnings above the long-standing pensionable ceiling. It is a small per-employee amount, but it is automatic, it lands on both the employee and the employer, and it requires a new T4 box and a payroll system update. Multiply it across a workforce and it becomes a real line in your labour budget. This post explains exactly what CPP2 is, what it costs in 2024, and what you must do operationally before your first run of the year.
What is CPP2, and why does it exist?
CPP2 is the final stage of the multi-year CPP enhancement that began in 2019. The enhancement is raising the share of pre-retirement earnings the CPP replaces, and it does so in two layers:
- The first ceiling — YMPE (Year's Maximum Pensionable Earnings): for 2024, $68,500. Standard CPP contributions apply on earnings between the $3,500 basic exemption and this ceiling.
- The second ceiling — YAMPE (Year's Additional Maximum Pensionable Earnings): new for 2024, $73,200. Earnings between the first and second ceilings are now subject to CPP2.
In other words, 2024 introduces a second band of pensionable earnings — roughly $68,500 to $73,200 — that was never subject to CPP before. Earnings in that band attract the CPP2 contribution.
What does CPP2 cost in 2024?
The numbers, verified against the CRA's 2024 rates:
- CPP2 band: $68,500 to $73,200 — a $4,700 slice of earnings.
- CPP2 rate: 4% for the employee and 4% for the employer.
- Maximum CPP2 contribution: $188 for the employee and $188 for the employer (4% of $4,700).
- Self-employed: 8%, to a maximum of $376, since the self-employed pay both halves.
For context, the base CPP for 2024 sits at a 5.95% rate on earnings between $3,500 and $68,500, for a maximum base contribution of $3,867.50 each side. CPP2 is layered on top of that for employees who earn above $68,500.
So the most any single employee adds to your employer cost via CPP2 in 2024 is $188. Modest per head — but it applies to every employee earning above $68,500, and it is matched, dollar for dollar, by your business.
Who is actually affected?
Only employees whose earnings exceed the first ceiling of $68,500 trigger CPP2. An employee earning $60,000 is unaffected. An employee earning $73,200 or more hits the full $188 employer cost. An employee earning $71,000 attracts CPP2 only on the $2,500 above the first ceiling — about $100 employer cost.
Practically, this means CPP2's budget impact scales with how many of your people sit in the upper earnings band. A professional services firm or a skilled-trades employer with many staff above $68,500 feels it more than a business whose wages cluster below the ceiling.
Worked example: budgeting CPP2 across a BC workforce
Consider Coquitlam Controls Ltd., a BC employer with 30 staff. Suppose 10 employees earn above $73,200 (each triggering the full $188 employer CPP2), 5 employees earn between $68,500 and $73,200 (averaging, say, $110 employer CPP2 each), and the remaining 15 earn below $68,500 (no CPP2).
Scenario A — Ignore it. Coquitlam budgets payroll as if 2024 looks like 2023. The CPP2 cost arrives unbudgeted across the year:
- 10 × $188 = $1,880
- 5 × $110 = $550
- Total new employer CPP2 cost: $2,430 — plus the matching $2,430 borne by employees, which shows up as a deduction they will ask about.
Scenario B — Plan for it. Coquitlam adds $2,430 to its 2024 employer payroll-cost budget, updates its payroll software to calculate CPP2 and populate the new T4 box, and briefs staff so the extra deduction on January cheques is expected rather than a surprise.
The dollar amount is not large for a 30-person firm — but the difference between the two scenarios is whether the cost is managed or discovered. And note: this is the first year of CPP2. The second ceiling rises in subsequent years, so the band widens and the cost grows. Treating 2024 as the baseline to plan from is the disciplined move.
The operational checklist for your first 2024 payroll run
CPP2 is not just a budget line — it is a process change. Before your first run:
- Confirm your payroll software handles CPP2. Reputable cloud payroll providers built this in, but verify it is enabled and calculating the second band correctly.
- Update T4 reporting. CPP2 is reported in the new box 16A on T4 slips, starting with 2024 slips (filed by the end of February 2025). Box 16A was left blank for 2023 and is left blank for any employee with no CPP2 contribution.
- Check employees with multiple roles or mid-year changes. Staff who switch jobs or hold concurrent employment can over-contribute; the reconciliation happens on their personal return, but accurate slips matter.
- Brief affected employees. Higher earners will see a new deduction in 2024. A short, plain explanation prevents a wave of payroll questions.
- Add CPP2 to your labour-cost model. Fold the employer share into your fully loaded cost-per-employee so pricing and hiring decisions reflect the true number.
CPP2 and the salary-versus-dividend decision for owner-managers
CPP2 also nudges the perennial owner-manager question: how should I pay myself? For a BC owner-manager drawing a salary above $68,500, CPP2 adds a new cost layer to the salary route — the owner pays the employee CPP2 (up to $188) and the corporation pays the matching employer CPP2 (up to $188), for up to $376 in combined cost on the top slice of salary.
Dividends, by contrast, attract no CPP or CPP2 at all. That does not automatically make dividends the better choice — salary builds CPP entitlement and RRSP room, and the CPP enhancement increases the future benefit those contributions buy. But CPP2 does shift the arithmetic at the margin, and it is a reason to re-run the salary/dividend mix for 2024 rather than repeat last year's split by default. The right answer depends on your personal cash needs, your retirement strategy, and your corporation's income — a calculation worth doing deliberately with your accountant.
A simple way to estimate your firm's total CPP2 cost
You do not need payroll software to get a planning estimate. For each employee earning above $68,500:
- Take the lesser of their annual earnings or $73,200.
- Subtract $68,500.
- Multiply the result by 4%.
That is the employee CPP2; the employer owes the same amount, so double it for your fully loaded cost per head. An employee at $73,200 or above hits the cap: $4,700 × 4% = $188 each side, $376 combined. An employee at $70,500 attracts $2,000 × 4% = $80 each side. Sum the employer side across your above-ceiling staff and you have your 2024 employer CPP2 budget line in a few minutes — useful for a quick check even before your payroll system confirms it.
How CPP2 fits the wider 2024 cost picture
CPP2 does not arrive in isolation. BC employers entering 2024 are also watching the base CPP increase, EI premiums, the EHT, and a minimum wage that will move again in June. None of these is large on its own; together they raise the statutory floor under every payroll dollar. The right response is not to react to each in turn but to build a single, fully loaded employer-cost figure and budget from it — which is exactly the kind of forward-looking payroll planning that separates a managed labour budget from a reactive one.
Key takeaways
- CPP2 applies in 2024 to earnings between $68,500 (YMPE) and $73,200 (YAMPE), at 4% each for employee and employer.
- The maximum 2024 CPP2 cost is $188 per side per employee ($376 self-employed) — modest per head, but matched by the employer and scaled across your higher earners.
- Only employees earning above $68,500 are affected; the budget impact depends on how many of your staff sit in the upper band.
- CPP2 is reported in the new T4 box 16A, starting with 2024 slips — confirm your payroll software is ready and brief affected staff.
- This is the first year; the band widens going forward, so plan from 2024 as a baseline, not a one-off.
A payroll cost you did not plan for is still a cost you pay — the only choice is whether you saw it coming.
If you want your full 2024 employer-cost stack — CPP2, EI, EHT, and minimum wage — modelled into one labour budget that drives pricing and hiring, RN Canada provides fractional CFO and payroll-planning support to established BC employers.