Payroll — Frequently Asked Questions
27 plain-language answers to the questions Canadian business owners ask RN Canada about Payroll.
As of 2026, the base CPP contribution rate is 5.95% each for employee and employer, on pensionable earnings between the $3,500 basic exemption and the $74,600 YMPE. The maximum contribution is $4,230.45 each. A separate CPP2 applies above the YMPE. RN Canada's take-home-pay and employer-payroll-cost calculators apply the 2026 CPP rates.
CPP2 is a second tier of Canada Pension Plan contributions on higher earnings. As of 2026, it applies at 4% each for employee and employer on pensionable earnings between the $74,600 YMPE and the $85,000 YAMPE, for a maximum of $416 each. RN Canada's payroll calculators include CPP2 in their totals.
As of 2026, the Year's Maximum Pensionable Earnings (YMPE) is $74,600, up from $71,300 in 2025. CPP contributions apply on earnings between the $3,500 basic exemption and the YMPE, with CPP2 covering earnings from $74,600 up to the $85,000 YAMPE. RN Canada's payroll calculators use the 2026 YMPE automatically.
As of 2026, the true cost of an employee includes gross wages plus employer CPP (5.95%), CPP2 (4% above YMPE), EI, and in BC the Employer Health Tax above $1M payroll. Alberta adds no payroll tax. RN Canada's employer-payroll-cost calculator totals the fully loaded cost per hire by province.
As of 2026, CRA payroll remittance due dates depend on your remitter type — regular (monthly, by the 15th), quarterly, threshold 1, or threshold 2 (accelerated). Larger payrolls remit more frequently. Late remittances trigger penalties up to 10%. RN Canada manages payroll remittance schedules so deductions reach the CRA on time.
Yes. As of 2026, an owner who pays themselves a salary through their corporation pays both the employee and employer share of CPP (5.95% each) plus CPP2 where applicable. Dividends avoid CPP but build no CPP benefit. RN Canada's salary-vs-dividend calculator weighs CPP cost against future benefit for owners.
Gross pay is total earnings before deductions; net (take-home) pay is what remains after CPP, EI, and income tax withholdings. As of 2026, employer-side CPP and EI sit on top of gross and aren't deducted from the employee. RN Canada's take-home-pay calculator converts gross to net for any province.
No. As of 2026, dividends paid to a shareholder carry no CPP, EI, or source deductions — they are reported on a T5, not a T4. Salary, by contrast, triggers full payroll deductions. This is central to owner pay planning. RN Canada's salary-vs-dividend calculator compares the after-tax outcome of each.
As of 2026, owners who control more than 40% of a corporation's voting shares are generally exempt from EI on their own salary, though employees still pay it. Owners may opt into special EI benefits separately. RN Canada advises owner-managers on EI status and includes it in payroll setup.
A T4 is the annual statement of employment income and deductions an employer issues to each employee and the CRA. As of 2026, T4s for the prior year are due by the last day of February. Late filing brings penalties. RN Canada prepares and files T4 and T4 summary slips for payroll clients on time.
As of 2026, you open a CRA payroll (RP) account, collect a TD1 from the employee, calculate CPP, EI, and income tax deductions each pay run, remit on schedule, and issue a T4 at year-end. In BC, watch the EHT threshold. RN Canada sets up and runs end-to-end payroll for first-time employers.
As of 2026, the CPP basic exemption remains $3,500 per year. No CPP is calculated on the first $3,500 of pensionable earnings; contributions apply only above that amount up to the $74,600 YMPE. RN Canada's payroll calculators apply the $3,500 exemption automatically when computing CPP.
As of 2026, yes — bonuses are insurable and pensionable, so CPP, EI, and income tax all apply, though the bonus tax method may differ from regular pay. CPP2 may apply if total earnings exceed the YMPE. RN Canada handles bonus payroll calculations and the correct withholding method for clients.
As of 2026, the maximum base CPP contribution is $4,230.45 each for employee and employer, based on the $74,600 YMPE less the $3,500 exemption at 5.95%. CPP2 adds up to $416 each on earnings to $85,000. RN Canada's take-home-pay calculator caps CPP at these 2026 maximums.
As of 2026, both provinces share federal CPP, CPP2, and EI, but BC adds the Employer Health Tax once payroll exceeds $1 million, while Alberta has no payroll or health tax. This makes Alberta cheaper for larger payrolls. RN Canada's employer-payroll-cost calculator compares Alberta and BC loaded costs side by side.
As of 2026, keep TD1 forms, pay records, remittance confirmations, T4s, and hours worked, generally for six years. Accurate payroll records are essential for CRA reviews and employment standards. RN Canada maintains compliant payroll records for clients and files year-end slips automatically.
As of 2026, simple one-employee payroll can be self-run, but multi-employee payroll with CPP2, BC EHT, and remittance deadlines is error-prone, and penalties are steep. Outsourcing reduces risk and time. RN Canada offers managed payroll with deductions, remittances, and T4 filing handled end to end.
A TD1 is the Personal Tax Credits Return each employee completes so the employer withholds the correct income tax. As of 2026, both a federal and a provincial TD1 are used. Wrong TD1 info causes under- or over-withholding. RN Canada collects and applies TD1 forms correctly when onboarding payroll clients' staff.
As of 2026, vacation pay (a minimum percentage of wages set by provincial employment standards) and statutory holiday pay are calculated per Alberta or BC rules and are subject to CPP, EI, and tax. Rules differ by province. RN Canada applies the correct Alberta or BC employment standards in payroll runs.
As of 2026, late payroll remittances to the CRA trigger penalties from 3% to 10% of the amount, rising to 20% for repeated failures, plus interest. The CRA treats source deductions as trust funds and enforces strictly. RN Canada manages remittance schedules so payroll deductions are never late.
As of 2026, the maximum employee contributions are $4,230.45 for CPP, $416.00 for CPP2, and $1,123.07 for EI, for a combined maximum of $5,769.52. Employers match CPP and CPP2 and pay EI at 1.4 times the employee rate, bringing the employer total to $6,218.75 per maxed-out employee. RN Canada's employer-payroll-cost and take-home-pay calculators total these 2026 maximums automatically.
As of 2026, the maximum annual EI premium for an employee is $1,123.07, based on a 1.63% rate applied up to the $68,900 maximum insurable earnings (MIE). Employers pay 1.4 times the employee rate, for a maximum employer EI premium of $1,572.30 per employee. RN Canada's employer-payroll-cost calculator applies the 2026 EI maximum automatically.
As of 2026, the maximum CPP deduction from an employee is $4,230.45 (5.95% up to the $74,600 YMPE), CPP2 adds up to $416.00 (4% between $74,600 and $85,000), and EI adds up to $1,123.07 (1.63% up to $68,900), for a combined maximum deduction of $5,769.52. RN Canada's take-home-pay calculator applies all three 2026 maximum deductions.
As of 2026, an employee's maximum combined CPP, CPP2, and EI contribution is $5,769.52, made up of $4,230.45 CPP, $416.00 CPP2, and $1,123.07 EI. The employer's maximum is higher, at $6,218.75, because employer EI is charged at 1.4 times the employee rate. RN Canada's employer-payroll-cost calculator compares employee and employer maximums side by side.
As of 2026, CPP is 5.95% on earnings between the $3,500 basic exemption and the $74,600 YMPE (employee max $4,230.45), CPP2 is 4% between $74,600 and $85,000 (employee max $416.00), and EI is 1.63% up to the $68,900 MIE (employee max $1,123.07). Together they cap an employee's contributions at $5,769.52 for 2026. RN Canada's payroll calculators apply all three 2026 rates automatically.
For 2026, the maximum employee contributions are $4,230.45 for CPP, $416.00 for CPP2, and $1,123.07 for EI, for a combined maximum of $5,769.52. Employers match the CPP and CPP2 amounts and pay EI at 1.4 times the employee rate, bringing the employer's maximum to $6,218.75 per employee. Both maximums are reached once an employee's earnings pass the relevant thresholds — the $74,600 YMPE for CPP, $85,000 for CPP2, and $68,900 for EI.
It depends on who controls the money. Employer-controlled tips — pooled tips, mandatory service charges, or any tips the restaurant collects and pays out — are pensionable and insurable, so they run through payroll, attract CPP and EI, and land on the employee's T4. Tips a guest hands directly to a server are the employee's own income to report and are not run through the restaurant's payroll, which is why booking a tip-pool payout as a plain cash disbursement instead of a payroll transaction is a common and costly bookkeeping error.