CPP2 Employer Cost Calculator
Above the first earnings ceiling a second band of CPP applies, at 4% from the employee and another 4% from you. Work out what CPP2 adds per employee and across the payroll, where each salary crosses the ceilings, and what goes on the T4.
total employer CPP
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Employer Cost by Group
| Group | People | Base CPP Each | CPP2 Each | Group Total |
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The Two Bands, Per Employee at the Maximum
| Band | Earnings Range | Rate | Maximum Each Side |
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The Owner-Manager’s Salary Through the Year
| Item | Basis | Amount |
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Where It Is Reported
| Amount | Where | Total |
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Points That Decide This
What to Do Next
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Disclaimer: Under the Canada Pension Plan, employee and employer contributions are each payable on pensionable earnings between the basic exemption and the year’s maximum pensionable earnings at the base contribution rate, and from 2024 a second additional contribution, commonly called CPP2, is payable by each of the employee and the employer on pensionable earnings between the year’s maximum pensionable earnings and the year’s additional maximum pensionable earnings. The basic exemption is not deducted in computing the second additional contribution. The ceilings, the basic exemption and the contribution rates used in this calculator are defaults for 2026 that should be confirmed against the figures published by the Canada Revenue Agency before being relied on, as the ceilings change annually. Each employer calculates contributions on the earnings it pays, so an employee with more than one employer in a year may contribute above the annual maximum and recover the excess on their return, while the employer contributions are not refunded. The employee’s base CPP contributions are reported in box 16 and the employee’s second additional contributions in box 16A of the T4 slip; boxes 17 and 17A report the Quebec Pension Plan equivalents. The employer’s share is not reported on individual T4 slips but in total on the T4 Summary. The pay period in which deductions begin or end is estimated on the assumption of equal pay in every period and will differ where pay is uneven, where bonuses are paid, or where the employee starts or leaves part way through the year, in which case the ceilings are prorated. Employer contributions are deductible in computing the employer’s income. This page is general information, not tax or payroll advice.
A Second Band Above the First Ceiling
Until 2024, CPP stopped at one ceiling. Once an employee’s earnings passed the year’s maximum pensionable earnings, no further contributions were deducted and the employer’s share stopped too. Anything paid above that line carried no CPP at all.
CPP2 adds a second band above it. Earnings between the first ceiling and a second, higher ceiling now attract a further 4 per cent from the employee and a matching 4 per cent from the employer. Above the second ceiling, contributions stop again.
| Earnings | What Applies |
|---|---|
| Up to the basic exemption | Nothing |
| From the exemption to the first ceiling | Base CPP at 5.95% each side |
| From the first ceiling to the second | CPP2 at 4% each side |
| Above the second ceiling | Nothing further |
The basic exemption does not come off the CPP2 band. It is deducted once, from the bottom of the base band. CPP2 is simply the rate on the slice between the two ceilings, so it is the easier of the two to calculate.
Who It Actually Affects
Only employees paid above the first ceiling contribute to CPP2. For a payroll made up mostly of staff below that line, the change is small or nothing at all. It concentrates on senior staff, professionals and, very often, the owner-manager of an incorporated business paying themselves a salary.
That concentration is why the effect on a small payroll can look disproportionate. A business with ten employees where only two earn above the first ceiling sees all of its CPP2 cost come from those two, and the owner is frequently one of them.
Why Employer CPP Jumped
A business comparing this year’s T4 Summary with an older one will see employer CPP higher than the change in wages alone explains. Three things are usually driving it together.
- The base rate rose through the enhancement phase-in, reaching 5.95 per cent
- The first ceiling rises every year, so more of each senior salary falls into the base band
- CPP2 is new, adding a band that did not exist before 2024
Each is modest on its own. Together, on a salary above the second ceiling, they add up to a noticeably larger employer bill than a few years ago, and it lands on exactly the people whose salaries are usually the largest line in the budget.
It Starts and Stops Part Way Through the Year
Payroll deducts CPP on each pay as it happens. For a salary above the first ceiling, base CPP runs until cumulative earnings reach that ceiling, then stops. CPP2 starts at that point and runs until earnings reach the second ceiling, then stops as well.
So a well-paid employee sees their net pay change twice during the year: once when base CPP stops and CPP2 begins, and again when CPP2 stops. For an owner-manager watching their own pay, that is often the first time CPP2 becomes visible.
Payroll software set up before 2024 may not handle this correctly. CPP2 requires the software to track a second ceiling and switch rates at the first one. Where it has not been updated, contributions can be under-deducted, and the shortfall then appears on the PIER report with the employer liable for both shares.
The Owner-Manager Question
An owner of an incorporated business who pays themselves a salary pays both halves of CPP2, the employee share out of their pay and the employer share out of the company. On a salary above the second ceiling that is the full CPP2 maximum twice over.
Dividends carry no CPP at all, which is one reason the salary and dividend mix is worth revisiting. It is not a simple saving though: CPP contributions build pension entitlement, salary creates RRSP room, and the right mix depends on the whole picture rather than on CPP2 alone.
Two Employers, Two Sets of Contributions
Each employer calculates CPP on the earnings it pays, without regard to what the employee earns elsewhere. An employee with two jobs can therefore contribute above the annual maximum, and recovers the excess when filing their return.
The employer contributions are not refunded. Where the same person is paid by two related corporations, both corporations pay employer CPP on each salary, which is a cost worth knowing about before splitting one salary across two companies.
What This Calculator Does Not Cover
- Uneven pay, bonuses and commissions, which change when the ceilings are reached
- Part-year employees, for whom the ceilings are prorated
- Quebec employees, who contribute to the Quebec Pension Plan instead
- Exempt employment, such as certain related-party and casual arrangements
- EI and employer health tax, which are separate payroll costs
- The full salary and dividend comparison, which depends on much more than CPP
CPP2 is where under-deduction most often shows up on the PIER report. Our payroll service runs both ceilings correctly, remits on time and reconciles the T4 Summary so the employer share is right before it is filed rather than after.
Frequently Asked Questions
Common questions on CPP2 for employers.
Related Calculators and Guides
More tools for employer payroll costs.
Budget the Second Ceiling Before It Hits the PIER Report
Send us the payroll register and last year’s T4 Summary. We will confirm CPP2 is being deducted and matched correctly on every salary above the first ceiling, budget the employer cost for the year, and reconcile the T4 boxes before they are filed.