For the 2026 tax year, an employee's three statutory payroll deductions are CPP at 5.95% on earnings between the $3,500 basic exemption and the $74,600 Year's Maximum Pensionable Earnings (YMPE), CPP2 at 4% on earnings between $74,600 and the $85,000 second ceiling, and EI at 1.63% on insurable earnings up to $68,900. Employers match CPP and CPP2 dollar-for-dollar and pay 1.4 times the employee EI premium. These deductions are federal and identical across Canada (Quebec excepted, which runs its own QPP and parental plan).
This guide explains each deduction, who pays what, the 2026 numbers in full, and how the maximums stack up for a high earner — so owner-managers and new employers can budget payroll accurately.
The three deductions at a glance (2026)
| Deduction | 2026 rate | Earnings band | Max contribution (each) | Employer multiple |
|---|---|---|---|---|
| CPP (base + first additional) | 5.95% | $3,500 exemption up to $74,600 (YMPE) | $4,230.45 | 1.0x (matched) |
| CPP2 (second additional) | 4.00% | $74,600 up to $85,000 (YAMPE) | $416.00 | 1.0x (matched) |
| EI | 1.63% | $0 up to $68,900 (MIE) | $1,123.07 | 1.4x |
A fully maxed-out employee in 2026 pays $4,230.45 + $416.00 + $1,123.07 = $5,769.52 in combined statutory deductions. The employer pays $4,230.45 + $416.00 + $1,572.30 = $6,218.75 per employee — a useful number when you are pricing the true cost of a hire.
Canada Pension Plan (CPP): the 5.95% base
CPP is a contributory, earnings-related public pension. Contributions are mandatory for most workers aged 18 to 70 (you can stop at 65 if you are receiving a CPP retirement pension and elect out).
The contribution is calculated on pensionable earnings — your employment income between the basic exemption of $3,500 and the YMPE. For 2026 the YMPE is $74,600, up from $71,300 in 2025. The rate is 5.95% for both employee and employer.
- Maximum pensionable earnings subject to base CPP: $74,600 − $3,500 = $71,100
- Maximum employee contribution: 5.95% × $71,100 = $4,230.45
- Employer contribution: identical, $4,230.45
The 5.95% rate reflects the "base" CPP plus the "first additional" CPP that was phased in between 2019 and 2023 to gradually enhance future benefits. For payroll purposes it is a single 5.95% line.
CPP2: the second contribution on higher earnings
CPP2 is the second additional CPP contribution, introduced in 2024 as the final piece of the CPP enhancement. It applies a separate 4% rate to earnings above the YMPE, up to a second ceiling called the Year's Additional Maximum Pensionable Earnings (YAMPE).
For 2026 the YAMPE is $85,000. So CPP2 applies to the band between $74,600 and $85,000:
- CPP2 earnings band: $85,000 − $74,600 = $10,400
- Maximum employee CPP2: 4% × $10,400 = $416.00
- Employer CPP2: identical, $416.00
CPP2 only affects employees who earn more than the YMPE. A worker earning $70,000 pays no CPP2 at all. A worker earning $85,000 or more pays the full $416.00. CPP2 is reported separately from base CPP on the T4 (box 16A for employee CPP2), and it is tracked in its own box because it has its own ceiling.
Employment Insurance (EI): 1.63% with an employer premium
EI funds temporary income support — regular benefits for job loss, plus special benefits (maternity, parental, sickness, caregiving). Premiums are based on insurable earnings up to the Maximum Insurable Earnings (MIE).
For 2026:
- MIE: $68,900
- Employee premium rate: 1.63%
- Maximum employee premium: 1.63% × $68,900 = $1,123.07
- Employer premium: 1.4 × the employee rate, so a maximum of $1,572.30 per employee
Two points trip people up. First, EI has no basic exemption — unlike CPP, premiums apply from the very first dollar of insurable earnings. Second, the employer pays more than the employee: the 1.4x multiple is built into the program. An employer with a qualifying short-term disability (wage-loss) plan can apply for a reduced employer rate through the EI Premium Reduction Program, lowering the 1.4 multiple.
Who pays — employee, employer, and self-employed
| Contributor | CPP base (5.95%) | CPP2 (4%) | EI |
|---|---|---|---|
| Employee | Yes | Yes | Yes (1.63%) |
| Employer | Yes (matched) | Yes (matched) | Yes (1.4x employee) |
| Self-employed | Both shares = 11.90% | Both shares = 8% | Optional (special benefits only) |
Self-employed individuals — including many owner-managers who draw salary or who operate as sole proprietors — pay both the employee and employer share of CPP and CPP2 because there is no separate employer. That is 11.90% base CPP (max $8,460.90 in 2026) and 8% CPP2 (max $832.00). They claim the employer-equivalent half as a deduction and the employee half as a tax credit. The self-employed do not pay regular EI but may opt into EI special benefits.
This CPP cost is a central factor in the salary-versus-dividend decision for incorporated owner-managers: paying yourself a salary triggers CPP (building future pension entitlement but costing both halves through the corporation), while dividends do not attract CPP at all. See our pillar on salary vs dividends in Canada for the full trade-off.
What an employee actually costs in 2026
The employer's mandatory, on-top-of-wages cost for a high earner in 2026 is roughly:
- CPP employer share: $4,230.45
- CPP2 employer share: $416.00
- EI employer share (max): $1,572.30
- Total statutory employer cost: about $6,218.75 per maxed-out employee
In Alberta there is nothing further at the provincial level — no provincial payroll tax and no employer health tax. In British Columbia, an employer above the Employer Health Tax exemption threshold also pays EHT on payroll on top of these federal amounts. For the Alberta-specific picture, see our Alberta payroll guide; to model the all-in cost of a hire, use our employer payroll cost calculator. Employees can estimate net pay with the take-home pay calculator.
Remitting to the CRA
Employers withhold the employee share of CPP, CPP2, EI and income tax, add the employer share of CPP/CPP2/EI, and remit the total to the CRA on a schedule set by your average monthly withholding amount (AMWA). New and small employers are usually regular (monthly) remitters, due by the 15th of the following month. Larger payrolls move to quarterly or accelerated (threshold-1/threshold-2) schedules. Late remittances draw penalties of 3% to 10%. After the calendar year you file T4 slips and a T4 Summary by the last day of February.
How RN Canada helps
RN Canada runs payroll and payroll-tax compliance for owner-managed companies across Alberta and British Columbia. We set up your CRA payroll (RP) account, calculate and remit CPP, CPP2, EI and income-tax withholdings on the right schedule, file your T4s and T4 Summary, and model the true employer cost of each hire — including the salary-versus-dividend CPP trade-off for owners. If you are deciding how to compensate yourself or onboarding your first employee, our bookkeeping and tax filing service and our fractional CFO advisory cover both the mechanics and the strategy. See our payroll FAQ for quick answers.
Frequently asked questions
CPP (base plus first additional) is the 5.95% contribution on pensionable earnings between the $3,500 basic exemption and the $74,600 Year's Maximum Pensionable Earnings (YMPE). CPP2 is a separate 4% contribution that applies only to earnings above the YMPE, up to a second ceiling of $85,000 (the YAMPE). CPP2 was phased in from 2024 and is fully in effect for 2026.
For 2026, the maximum base CPP contribution is $4,230.45 for an employee (5.95% of $74,600 minus the $3,500 exemption), matched by the employer. The maximum CPP2 contribution is $416.00 each (4% of the $10,400 band between $74,600 and $85,000). A maxed-out employee therefore pays up to $4,646.45 in combined CPP and CPP2, and the employer pays the same.
For 2026 the employee EI premium rate is 1.63% on insurable earnings up to a maximum of $68,900, giving a maximum employee premium of $1,123.07. Employers pay 1.4 times the employee rate, so the maximum employer premium is $1,572.30 per employee. Quebec uses different EI and parental-insurance rates; the figures here are for the rest of Canada.
Employment Insurance has always required employers to contribute more than employees. For every dollar an employee pays in EI, the employer pays $1.40. So at the 2026 maximum employee premium of $1,123.07, the employer share is $1,572.30. CPP and CPP2, by contrast, are matched dollar-for-dollar between employee and employer.
Self-employed individuals pay both the employee and employer share of CPP and CPP2 — 11.90% base plus 8% CPP2 — because there is no employer to match them. EI is optional: the self-employed do not pay regular EI but can opt into EI special benefits (maternity, parental, sickness, caregiving) by registering with the Canada Employment Insurance Commission.
No. CPP has a $3,500 basic exemption, so contributions only start on pensionable earnings above that amount. EI has no basic exemption — premiums apply from the first dollar of insurable earnings up to the $68,900 annual maximum. This is a common payroll error: applying the CPP exemption logic to EI understates the premium owed.