CPP, CPP2 and EI Rates for 2026: What Toronto Employers Need to Update in Payroll

Every January 1, the Canada Pension Plan and Employment Insurance contribution rates and earnings ceilings reset, and January 1, 2026 was no exception. For a Toronto-area employer, the reset again involves two separate CPP calculations on the same pay stub — the base contribution and the second-tier "CPP2" contribution — on top of a higher Employment Insurance earnings ceiling. If your payroll software updated automatically, the numbers are already correct. If you run payroll manually, or you are checking a provider's output, here is exactly what changed and what the new maximums mean for a typical Toronto payroll.

What changed on January 1, 2026

The Canada Revenue Agency sets the Year's Maximum Pensionable Earnings (YMPE), the CPP2 ceiling (YAMPE), and the EI maximum insurable earnings annually, based on average wage growth. For 2026:

Source: Canada Revenue Agency — CPP contribution rates, maximums and exemptions, Canada Revenue Agency — Canada Pension Plan (CPP) and the CPP enhancement, and Canada Revenue Agency — EI premium rates and maximums.

The pattern continues from last year: the YMPE rose by $3,300 in a single year, and the CPP2 band widened again, from a $9,900 window in 2025 ($71,300–$81,200) to a $10,400 window in 2026 ($74,600–$85,000). That widening pushed the maximum CPP2 employee contribution from $396.00 to $416.00, on top of the higher base CPP maximum.

Why CPP2 still catches employers off guard

CPP2 — the second additional CPP contribution — has now been in force since January 1, 2024, but it continues to trip up payroll processes built around a single CPP ceiling. It only applies to earnings between the YMPE and the higher YAMPE ceiling, it is calculated and reported separately from base CPP, and it stops the moment an employee's year-to-date pensionable earnings cross the YAMPE — not the YMPE. For a Toronto business with employees earning above $74,600 a year, payroll now tracks two separate CPP stop-points per employee, and both need to reset correctly for every employee on January 1.

The most common error at year-start is a payroll system or spreadsheet that carried over 2025's YMPE and YAMPE figures instead of updating to 2026's $74,600 and $85,000 — which either stops CPP and CPP2 deductions too early (under-remitting to CRA, a liability that surfaces at year-end reconciliation) or continues deducting past the correct ceiling (over-deducting from the employee, which then has to be refunded).

The EI side moved the other direction on the rate, but not the ceiling

Unlike CPP, the EI employee premium rate dropped slightly for 2026, from 1.64% to 1.63%. But because the maximum insurable earnings ceiling rose from $65,700 to $68,900, the maximum dollar amount an employee pays in EI premiums still increased, from $1,077.48 to $1,123.07. The employer EI rate remains 1.4 times the employee rate, so employer-side EI premiums rose by the same proportion — a detail worth flagging if your 2026 payroll budget was built off last year's per-employee cost figures.

A payroll checklist for the first quarter

• Confirm your payroll software's YMPE, YAMPE and EI maximum insurable earnings figures match the CRA table above. A misconfigured system will keep running with the wrong ceilings all year until someone notices the T4 totals don't reconcile.
• Check that CPP2 is being calculated as a separate deduction from base CPP, not blended into a single CPP line — CRA reporting on the T4 requires them separately (Box 16 for CPP, Box 16A for CPP2).
• Recalculate your 2026 total payroll cost estimate using the new employer-side maximums, particularly if you have several employees earning above $74,600 — the combined CPP + CPP2 employer cost per high earner rose again year over year.
• Watch year-to-date deduction totals through Q1 for any employee who changed employers mid-year in 2025 — CPP and EI ceilings reset per employer, not per employee across jobs, so this is a routine but easy-to-miss reconciliation point.
• If you run instalment-based budgeting for the year, fold the higher statutory deduction maximums into your labour cost projections now rather than discovering the variance at T4 season.

What Toronto-area owners should do

For a small or mid-sized Toronto business running payroll in-house, the practical task in January is narrow but consequential: verify the four numbers — YMPE, YAMPE, EI maximum insurable earnings, and the (unchanged) CPP/CPP2 rates — against a current CRA source, not last year's spreadsheet. For businesses using a payroll provider, the task is to confirm the provider applied the update, not assume it. Either way, this is a five-minute check in January that prevents a T4-season reconciliation problem in February 2027.

If you are budgeting labour costs for the rest of 2026, our employer payroll cost calculator reflects the updated CPP, CPP2 and EI figures and is a faster way to model total employer cost per employee than rebuilding the calculation in a spreadsheet. For Toronto businesses that are also tracking their Employer Health Tax exposure alongside these payroll changes, our Ontario Employer Health Tax guide covers the exemption threshold and rate bands.

Key takeaways

• The CPP earnings ceiling (YMPE) rose from $71,300 to $74,600 on January 1, 2026; the CPP2 ceiling (YAMPE) rose from $81,200 to $85,000.
• CPP and CPP2 rates themselves are unchanged (5.95% and 4% respectively), but the maximum CPP2 employee contribution rose from $396.00 to $416.00.
• The EI maximum insurable earnings rose from $65,700 to $68,900; the employee premium rate dropped slightly to 1.63%, but the maximum dollar premium still rose to $1,123.07.
• CPP2 is reported separately from base CPP on the T4 (Box 16A vs Box 16) and stops at a different earnings threshold — a common source of payroll misconfiguration.
• Confirm your payroll software or provider applied all four 2026 figures before your first January pay run, not after.

If you want your Toronto payroll setup checked against the current CPP, CPP2 and EI figures — or built out as part of a broader bookkeeping and payroll engagement — RN Canada works with Ontario employers remotely from our Edmonton and Vancouver offices.