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Payroll Guide  ·  2026 Rates

Employer Payroll Deductions: CPP, EI, Tax Tables 2026

Every 2026 rate, maximum and threshold an Ontario employer needs, taken from the CRA's own T4032 tables: CPP at $74,600, CPP2 to $85,000, EI at $68,900, the new 14% bottom federal bracket, remitter types, remittance deadlines and the penalty grid that starts at 3% on day one.

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2026 Payroll Deductions at a Glance

Three amounts come off every employee's pay and go to the CRA: Canada Pension Plan contributions, Employment Insurance premiums, and federal and provincial income tax. You match the CPP dollar for dollar, you pay 1.4 times the EI, and you remit the whole package against your payroll account on the schedule the CRA assigns you.

Here is every 2026 number in one place. These figures are drawn from the CRA's T4032 Payroll Deductions Tables effective January 1, 2026.

Item20262025Change
CPP maximum pensionable earnings (YMPE)$74,600$71,300Up $3,300
CPP basic exemption$3,500$3,500Unchanged
CPP maximum contributory earnings$71,100$67,800Up $3,300
CPP rate, employee and employer each5.95%5.95%Unchanged
CPP maximum contribution, each$4,230.45$4,034.10Up $196.35
CPP self-employed rate and maximum11.90% / $8,460.9011.90% / $8,068.20Up $392.70
CPP2 second ceiling (YAMPE)$85,000$81,200Up $3,800
CPP2 rate, employee and employer each4.00%4.00%Unchanged
CPP2 maximum contribution, each$416.00$396.00Up $20.00
EI maximum insurable earnings$68,900$65,700Up $3,200
EI employee rate$1.63 per $100$1.64 per $100Down 1 cent
EI employer rate (1.4 times)$2.282 per $100$2.296 per $100Down
EI maximum employee premium$1,123.07$1,077.48Up $45.59
EI maximum employer premium$1,572.30$1,508.47Up $63.83
Federal basic personal amount (maximum)$16,452$16,129Up $323
Ontario basic personal tax credit$12,989IndexedIndexed 1.9%

The Trap in These Numbers: The EI rate went down for 2026, so employers assume EI got cheaper. It did not. Maximum insurable earnings rose $3,200, so for every employee earning at or above $68,900 you pay $63.83 more in EI than in 2025, not less. Add the $196.35 CPP increase and each maxed-out employee costs you $260.18 more in 2026 before you account for EHT or WSIB.

The Three Deductions, and Who Pays What

MATCHED

CPP and CPP2

5.95% on earnings between $3,500 and $74,600, to a maximum of $4,230.45 each. Then CPP2 at 4% on earnings from $74,600 to $85,000, to a maximum of $416 each.

You match the employee dollar for dollar. Maximum combined employer CPP cost per employee: $4,646.45.

1.4 TIMES

Employment Insurance

$1.63 per $100 of insurable earnings up to $68,900, to an employee maximum of $1,123.07. No basic exemption, so EI comes off the first dollar.

You pay 1.4 times the employee rate, to a maximum of $1,572.30 per employee.

WITHHELD ONLY

Income Tax

Federal and provincial tax withheld based on the employee's TD1 claim codes and the CRA tax tables for their province of employment.

No employer share. You withhold and remit it, but it costs you nothing beyond the administration.

The Employer Share Is the Hidden Number: An employee earning $85,000 in Ontario sees $5,769.52 come off their pay in CPP, CPP2 and EI. What they do not see is that you paid $6,218.75 on top of their salary for the same three items. The true cost of an $85,000 salary is $91,218.75 before you add the Employer Health Tax or WSIB.

CPP and CPP2 for 2026: The Two-Ceiling System

CPP now has two ceilings. The first, the Year's Maximum Pensionable Earnings, is $74,600 for 2026. The second, the Year's Additional Maximum Pensionable Earnings, is $85,000. Earnings between the two are subject to CPP2 at a different rate. This has been in place since 2024 and it is still where payroll setups go wrong.

ComponentEarnings RangeRate (each)Maximum (each)
CPP base contribution$3,500 to $74,6004.95%$3,519.45
First additional CPP contribution$3,500 to $74,6001.00%$711.00
CPP total (what you withhold)$3,500 to $74,6005.95%$4,230.45
CPP2 second additional$74,600 to $85,0004.00%$416.00
Combined maximum per employeeEarnings of $85,000 or moreBlended$4,646.45
Self-employed CPP$3,500 to $74,60011.90%$8,460.90
Self-employed CPP2$74,600 to $85,0008.00%$832.00

The CRA's Own Warning on the Tables: The CRA specifically recommends using the Payroll Deductions Online Calculator rather than the printed T4032 tables once an employee reaches, or is annualising above, the YMPE of $74,600. Using the tables in that range can over or under deduct federal and provincial tax. If your payroll runs on software, this is handled. If someone is looking up tables manually for a higher earner, it is not.

EI Premiums for 2026

EI is simpler than CPP in one respect and harsher in another. Simpler, because there is one ceiling and no basic exemption. Harsher, because the employer pays 1.4 times whatever the employee pays.

ItemOutside QuebecQuebec
Maximum insurable earnings$68,900$68,900
Employee rate per $100$1.63$1.30
Employer rate per $100$2.282$1.82
Maximum employee premium$1,123.07$895.70
Maximum employer premium$1,572.30$1,253.98
Basic exemptionNoneNone
Maximum weekly benefit rate$729$729

Why Quebec Is Different: Quebec administers its own parental insurance plan (QPIP), so Quebec residents receive parental benefits through QPIP rather than EI and pay a reduced EI rate as a result. QPIP premiums are paid separately to Revenu Quebec. For a deeper breakdown of the 2026 EI rates, the three-year trend and the Premium Reduction Program, please see our EI Premium Rates 2026 guide.

2026 Income Tax Rates and Thresholds

2026 is the first full year of the reduced 14% bottom federal bracket. The rate was cut from 15% effective July 2025, so 2025 ran at an effective 14.5% blended rate. For 2026 it applies for the whole year.

Federal tax rates and thresholds for 2026

Annual taxable income fromToFederal rateConstant (K)
$0.00$58,523.0014.0%$0
$58,523.01$117,045.0020.5%$3,804
$117,045.01$181,440.0026.0%$10,241
$181,440.01$258,482.0029.0%$15,685
$258,482.01and over33.0%$26,024

Ontario tax rates and thresholds for 2026

Annual taxable income fromToOntario rateConstant (KP)
$0.00$53,891.005.05%$0
$53,891.01$107,785.009.15%$2,210
$107,785.01$150,000.0011.16%$4,376
$150,000.01$220,000.0012.16%$5,876
$220,000.01and over13.16%$8,076

Personal amounts and Ontario add-ons for 2026

Item2026 AmountNotes
Federal basic personal amount, maximum$16,452Reduced to $14,829 minimum for high earners
Federal indexing factor2.0%Applied to thresholds and personal amounts
Canada employment amount$1,501Maximum credit value $210.14. Built into the tables.
Ontario basic personal tax credit$12,989Ontario indexing factor 1.9%
Ontario surtax, first threshold$5,81820% of basic Ontario tax above this amount
Ontario surtax, second threshold$7,446Additional 36% of basic Ontario tax above this amount
Ontario health premium, maximum$900Where taxable income exceeds $200,000. Nil at $20,000 or less.
Ontario tax reduction, basic$300$575 per dependant under 18

Use PDOC, Not Mental Arithmetic: The constants (K and KP) in these tables exist because the CRA's formula applies the top applicable rate to all income and then subtracts the constant, rather than calculating each bracket separately. It gets to the same answer faster. You do not need to do this by hand: the CRA's free Payroll Deductions Online Calculator at canada.ca/pdoc uses exact figures and handles the surtax, health premium and tax reduction automatically.

Remitter Types and Deadlines

The CRA assigns your remitter type based on your average monthly withholding amount (AMWA) from two calendar years ago. You do not choose it. The CRA notifies you in writing when it changes, and the deadline that applies to you follows from that assignment.

Remitter TypeAMWA (two years ago)FrequencyDue Date
Quarterly (new small employer)Under $1,000 monthly withholding, perfect compliance4 times a yearApril 15, July 15, October 15, January 15
Quarterly (existing employer)Under $3,000, account open 12+ months, perfect compliance4 times a yearApril 15, July 15, October 15, January 15
RegularUnder $25,000Monthly15th of the month following the month you paid
Accelerated threshold 1$25,000 to $99,999.99Twice monthly25th of the same month (paydays 1st to 15th); 10th of the next month (paydays 16th to month end)
Accelerated threshold 2$100,000 or moreUp to 4 times monthlyWithin 3 working days after each period ends (1-7, 8-14, 15-21, 22 to month end)

Perfect Compliance Is a Real Condition: Quarterly remitter status requires a perfect compliance record across your payroll and GST/HST accounts over the previous 12 months. One late remittance and you lose it. The CRA's own example: a quarterly remitter that pays late in April may still remit for the second quarter by July 15, but must remit monthly from July onward. The privilege is withdrawn, not merely warned about.

Weekend and Holiday Rule: When a remittance due date falls on a Saturday, Sunday or CRA-recognised public holiday, your payment is on time if the CRA receives it, or a Canadian financial institution processes it, on the next business day. What counts is the date the financial institution credits the CRA, not the date you initiated the payment.

Late Remittance Penalties: No Grace Period

Payroll remittance penalties are not proportional to the delay. They start at 3% on the first day late and reach 10% within a week. There is no grace period and no warning.

How LatePenaltyOn Top
1 to 3 days3% of the amount dueCompound daily interest
4 to 5 days5% of the amount dueCompound daily interest
6 to 7 days7% of the amount dueCompound daily interest
More than 7 days, or not remitted10% of the amount dueCompound daily interest
Second failure in the same calendar year20% where the CRA determines it was knowing or grossly negligentCompound daily interest

Source Deductions Are Trust Funds: Amounts withheld from employees are held in trust for the Crown. They are not working capital and they should not sit in your operating account. Directors can be assessed personally for unremitted source deductions, and that liability survives the corporation. This is one of the few CRA debts that follows you personally, which is why a cash flow problem should never be solved with the remittance account.

Ontario Employer Costs Beyond the CRA Remittance

Your CRA remittance covers CPP, CPP2, EI and income tax. In Ontario there are two further employer obligations that go to different bodies on different schedules, and new employers routinely miss both.

ObligationPaid ToThresholdDeadline
CPP, CPP2, EI, income taxCanada Revenue AgencyAll employersPer your assigned remitter type
Employer Health Tax (EHT)Ontario Ministry of Finance$1,000,000 exemption for eligible employers with Ontario payroll under $5 millionAnnual return by March 15
WSIB premiumsWSIBDepends on your industry classificationPer your WSIB reporting schedule

EHT in Practice: Eligible Ontario employers claim a $1,000,000 exemption, so most small employers owe nothing but must still file the annual return by March 15 to claim it. The rate is based on total Ontario payroll before the exemption is deducted, rising to 1.95%. EHT remuneration is based on T4 Box 14, which means your taxable benefits are in the EHT base too. Employers with payroll of $5 million or more get no exemption at all.

What This Costs You: Worked Examples

Example 1: Employee Earning $60,000 in Ontario

CPP: ($60,000 minus the $3,500 exemption) at 5.95% equals $3,361.75 withheld from the employee, and $3,361.75 matched by you. No CPP2, because earnings are below $74,600.

EI: $60,000 at 1.63% equals $978.00 withheld from the employee. Your share at 2.282% is $1,369.20.

Income tax is withheld per the employee's TD1 claim codes and remitted, but costs you nothing beyond administration.

Your CPP and EI cost: $4,730.95. True cost of the salary: $64,730.95 before EHT and WSIB.

Example 2: Employee Earning $85,000 in Ontario (Both Ceilings Hit)

CPP: maximum reached at $4,230.45 from the employee, matched by you. CPP2 then applies on the $10,400 between $74,600 and $85,000 at 4%, adding $416.00 from the employee and $416.00 from you.

EI: maximum reached at $1,123.07 from the employee. Your share maxes at $1,572.30.

The employee sees $5,769.52 in deductions. You pay $6,218.75 on top of the salary for the same items.

True cost of an $85,000 salary: $91,218.75 before EHT and WSIB.

Example 3: What 2026 Added to a 10-Employee Payroll

A business with 10 employees all earning at or above $85,000. CPP maximum rose $196.35 per employee. EI employer maximum rose $63.83 per employee. CPP2 maximum rose $20.00 per employee.

Per employee, the employer cost increase for 2026 is $280.18. Across 10 employees that is $2,801.80 in additional payroll cost, before any raise, and before EHT.

2026 increase on a 10-person payroll: $2,801.80, entirely from indexed ceilings

The Ten Most Common Payroll Deduction Errors

#ErrorConsequence
1Rates not updated at the first January payrollUnder-deduction all year, PIER assessment at T4 time
2CPP basic exemption applied to the wrong number of pay periodsCPP shortfall, PIER assessment on both shares
3CPP2 not set up at allNo deduction on earnings from $74,600 to $85,000
4Deductions stopped before the annual maximum was reachedShortfall assessed to the employer
5Taxable benefits added at year-end instead of run through payrollNo CPP or EI withheld on them, PIER assessment follows
6EI withheld from an owner-manager who controls over 40% of voting sharesEI deducted where the employment was not insurable
7Wrong province of employment for a remote employeeWrong provincial tax withheld all year
8Source deductions used as operating cashPenalties from 3% to 10%, plus personal director liability
9Remitting on the wrong schedule after a remitter type changeLate penalties despite paying in full
10EHT annual return not filed because no tax was owingThe March 15 return is required even to claim the exemption

How We Prevent These: For every payroll client we update rates before the first January run, verify the exemption proration against the pay frequency, run taxable benefits through payroll as they arise, confirm insurability for owner-managers, remit on the assigned schedule, and reconcile the PD7A as it arrives rather than at year-end. When a PIER notice does land, we respond to it. Payroll Services →

Payroll Deductions Handled Properly by Gondaliya CPA

Gondaliya CPA runs your payroll, calculates CPP, CPP2, EI and income tax correctly, remits on your assigned CRA schedule, files your T4s and ROEs, and responds to PIER assessments, at flat-fee pricing for incorporated business clients across Ontario.

Frequently Asked Questions on Payroll Deductions

What are payroll deductions in Canada?
Payroll deductions are the amounts an employer withholds from an employee's pay and remits to the CRA: Canada Pension Plan contributions, Employment Insurance premiums and federal and provincial income tax. The employer also pays its own share of CPP and EI on top. All of it is remitted together against your payroll account on a schedule the CRA assigns you.
What are the CPP rates for 2026?
For 2026 the employee and employer contribution rate is 5.95% each. The Year's Maximum Pensionable Earnings is $74,600, the basic exemption stays at $3,500, and maximum contributory earnings are $71,100. The maximum contribution is $4,230.45 each for employee and employer. Self-employed individuals pay 11.90% to a maximum of $8,460.90.
What is the CPP maximum for 2026?
$4,230.45 each for the employee and the employer, up from $4,034.10 in 2025. On top of that, CPP2 applies to earnings between $74,600 and $85,000 at 4%, to a maximum of $416 each. So the full CPP cost for an employee earning $85,000 or more is $4,646.45 from the employee and the same again from you.
What is CPP2 and who pays it?
CPP2 is the second additional CPP contribution on pensionable earnings between the first ceiling ($74,600 for 2026) and the second ceiling, the Year's Additional Maximum Pensionable Earnings, of $85,000. The rate is 4% for both employee and employer, on $10,400 of earnings, so the maximum is $416 each. Self-employed individuals pay 8%, to a maximum of $832.
What is the EI rate for 2026?
The employee premium rate for 2026 is $1.63 per $100 of insurable earnings (1.63%) outside Quebec, a one-cent decrease from 2025. The employer rate is 1.4 times that, at $2.282 per $100. Maximum insurable earnings are $68,900. Our EI Premium Rates 2026 guide covers this in full.
What is the maximum EI premium for 2026?
$1,123.07 for the employee and $1,572.30 for the employer, per employee, outside Quebec. In Quebec the employee maximum is $895.70 because Quebec administers its own parental insurance plan. Note the rate went down for 2026 but the maximum went up, because maximum insurable earnings rose from $65,700 to $68,900.
Did payroll costs go down in 2026 because the EI rate dropped?
No, and this catches employers out. The EI rate fell one cent to $1.63, but maximum insurable earnings rose $3,200 to $68,900. For any employee earning at or above the maximum, the employer pays $63.83 more per year in EI than in 2025, not less. CPP costs also rose because the YMPE increased from $71,300 to $74,600.
What is the basic exemption for CPP?
$3,500 for 2026, unchanged. This is the annual amount of earnings on which no CPP is contributed. You prorate it across your pay periods, so on a weekly payroll it is $3,500 divided by 52 per period. Applying the exemption to the wrong number of pay periods is one of the most common causes of a PIER assessment.
What are the federal tax brackets for 2026?
14% on the first $58,523, 20.5% from $58,523 to $117,045, 26% from $117,045 to $181,440, 29% from $181,440 to $258,482, and 33% above $258,482. The lowest rate is 14% for the full year in 2026, down from an effective 14.5% in 2025 because the cut took effect mid-year.
What are the Ontario tax brackets for 2026?
5.05% on the first $53,891, 9.15% from $53,891 to $107,785, 11.16% from $107,785 to $150,000, 12.16% from $150,000 to $220,000, and 13.16% above $220,000. Ontario also applies a surtax and the Ontario health premium on top, which is why Ontario payroll tax is more involved than the headline rates suggest.
What is the basic personal amount for 2026?
The federal basic personal amount for 2026 is $16,452, reduced to a minimum of $14,829 for high earners. The Ontario non-refundable basic personal tax credit is $12,989. These flow into the claim codes on the TD1 forms, which is what determines the tax you actually withhold.
What is the Ontario surtax?
For 2026, where basic Ontario tax payable is $5,818 or less there is no surtax. Between $5,818 and $7,446 the surtax is 20% of the amount over $5,818. Above $7,446 it is 20% of the amount over $5,818 plus a further 36% of the amount over $7,446. The surtax is built into the CRA's Ontario tax tables.
What is the Ontario health premium?
A provincial premium collected through payroll withholding based on taxable income, ranging from $0 where taxable income is $20,000 or less up to a maximum of $900 where taxable income exceeds $200,000. It is not the same thing as the Employer Health Tax, which the employer pays separately to the Ontario Ministry of Finance.
How do I calculate payroll deductions?
The CRA's Payroll Deductions Online Calculator (PDOC) is the recommended method and it is free. The T4032 tables are the alternative, though the CRA specifically recommends PDOC once an employee approaches the YMPE of $74,600, because the tables can over or under deduct in that range. In practice, payroll software does this automatically.
What is a TD1 form?
The TD1 Personal Tax Credits Return is what an employee completes so you know which claim code to use when calculating their income tax withholding. There is a federal TD1 and a provincial one, such as the TD1ON in Ontario. If an employee does not complete a new TD1, you continue with the same claim code and the indexing is applied automatically.
When do I stop deducting CPP and EI?
You stop deducting CPP when the employee reaches the maximum annual contribution of $4,230.45 with your company, then CPP2 applies up to $416, and you stop EI at $1,123.07. The maximums apply per employer, so an employee with two jobs may over-contribute across both. They claim the refund on their return. You cannot.
What are the CRA remitter types?
The CRA assigns your type based on your average monthly withholding amount from two calendar years ago. Under $3,000 with a perfect compliance record is quarterly. Under $25,000 is regular, due the 15th of the following month. From $25,000 to $99,999.99 is accelerated threshold 1, twice a month. $100,000 or more is accelerated threshold 2, up to four times a month.
When are payroll remittances due?
Regular remitters remit by the 15th of the month following the month you paid employees. Quarterly remitters remit by April 15, July 15, October 15 and January 15. Accelerated threshold 1 remits by the 25th of the same month for paydays in the first half, and the 10th of the next month for the second half. Threshold 2 remits within three working days of each pay period end.
What is the penalty for late payroll remittances?
The CRA charges 3% if the amount is one to three days late, 5% for four to five days, 7% for six to seven days, and 10% for more than seven days. A second failure in the same calendar year, where the CRA determines it was made knowingly or through gross negligence, can attract a 20% penalty. Interest compounds daily on top. There is no grace period.
Are payroll deductions held in trust?
Yes, and this is the point employers most underestimate. Amounts withheld from employees are held in trust for the Crown and must be kept separate from your operating funds. They are not your working capital. Directors can be held personally liable for unremitted source deductions, and that liability survives the corporation.
Can I be personally liable for unremitted payroll deductions?
Yes. Director liability for unremitted source deductions is real and it is one of the few CRA debts that pierces the corporation. If the company fails to remit amounts withheld from employees, the CRA can assess the directors personally. This is why source deductions should never be treated as a cash flow buffer.
Do I have to run payroll if I am the only employee of my corporation?
If you pay yourself a salary, yes. Owner-manager salary requires a payroll account, source deductions, remittances and a T4. If you pay yourself only dividends, no payroll account is needed and you issue a T5 instead. Which mix is right depends on your situation and should be decided before the year starts.
Do owner-managers pay EI?
Generally not, if you control more than 40% of the voting shares of the corporation, because that employment is usually not EI-insurable. You would still pay CPP on the salary. Box 28 on the T4 is used to indicate the EI exemption. Withholding EI in error is a common owner-manager payroll setup mistake.
What is the Employer Health Tax in Ontario?
EHT is an Ontario payroll tax paid by the employer to the Ontario Ministry of Finance, not the CRA. Eligible employers with total Ontario payroll under $5 million claim a $1,000,000 exemption. The rate depends on total Ontario payroll before the exemption, up to 1.95%. The annual return is due March 15.
Is EHT part of my CRA remittance?
No, and this trips up new employers. EHT goes to the Ontario Ministry of Finance on its own schedule with its own annual return due March 15. Your CRA remittance covers only CPP, CPP2, EI and income tax. They are separate obligations to separate governments with separate deadlines.
What is a PD7A?
The PD7A is the CRA's statement of account for current source deductions, showing what you reported against what they received. Regular and quarterly remitters receive it; accelerated remitters get the PD7A(TM). Reconciling it as it arrives, rather than at year-end, is what stops a small remittance discrepancy becoming a year-end problem.
What happens if I under-remit?
You owe the shortfall plus penalties and interest, and if it is a CPP or EI shortfall the CRA generally assesses you for both the employee and the employer share. You are entitled to recover the employee portion from the employee, but by the time a PIER assessment arrives after year-end the person may have left. In practice the shortfall becomes yours.
Do taxable benefits need CPP and EI withheld?
Most taxable benefits paid in cash are both pensionable and insurable, and non-cash taxable benefits are generally pensionable but not insurable. The practical rule is to run benefits through payroll as they arise rather than adding them to Box 14 at year-end, because a year-end addition means CPP and EI were never withheld and a PIER assessment follows.
What is the difference between payroll deductions and payroll taxes?
Payroll deductions are the amounts withheld from the employee: CPP, EI and income tax. Employer payroll costs are the amounts you pay on top: your matching CPP, your 1.4 times EI, and in Ontario the Employer Health Tax and WSIB premiums where applicable. The employee sees the deductions; the employer carries both.
Can Gondaliya CPA handle our payroll deductions?
Yes. Payroll processing, CPP and EI calculations, income tax withholding, CRA remittances on your assigned schedule, taxable benefit calculations, T4s, ROEs and PIER responses are all part of our payroll service for incorporated business clients, at flat-fee pricing. Payroll Services →

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