What happens if I remit late?

Penalties: 3% (1-3 days), 5% (4-5 days), 7% (6-7 days), 10% (7+ days or repeat). Directors personally liable under Section 227.1.

Should I pay salary or dividends?

Combination usually optimal. Salary for RRSP room ($32,490 for 2026 max) and CPP. Dividends for remainder to avoid CPP/EI.

Payroll Guide · Canada 2026

Payroll Tax Calculator Canada 2026

Q: What payroll deductions must a Canadian employer withhold?

CPP contributions, EI premiums and federal/provincial income tax. Employer also pays matching CPP and 1.4x employee EI.

Q: What is the CPP rate for 2026?

5.95% for employee and employer on earnings between $3,500 and $73,200. Maximum $4,150.80. CPP2 at 4% on $73,200-$81,300, maximum $324.

Q: What is the EI rate for 2026?

1.64% employee on earnings up to $65,700. Maximum $1,077.48. Employer pays 1.4x (2.296%), maximum $1,508.47.

Q: When must I remit payroll deductions?

Regular remitters by the 15th of following month. Threshold 1 twice monthly. Threshold 2 within 3 business days. Late penalties 3%-10%.

Q: How much does payroll processing cost?

Included in Gondaliya CPA flat-fee bookkeeping engagements. Covers CPP/EI/tax calculations, CRA remittances, T4s and ROEs. 60-Day Fees-Matching.

Free Canadian payroll tax calculator with 2026 CPP, EI and federal/provincial income tax rates. Includes employer cost tables, remittance deadlines, worked dollar examples and CRA penalty rules. Written by a licensed Ontario CPA.

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2026 Canadian Payroll Tax Rates — CPP, CPP2, EI and Income Tax

The following rates are effective January 1, 2026. These are the rates used by CRA's Payroll Deductions Online Calculator (PDOC) and by every Canadian payroll system.

Deduction	Employee Rate	Employer Rate	Maximum Insurable / Pensionable	Annual Maximum Contribution
CPP (first ceiling)	5.95%	5.95%	$73,200	$4,150.80 (employee)
CPP2 (second ceiling)	4.00%	4.00%	$81,300	$324.00 (employee)
CPP basic exemption	$3,500 per year (prorated per pay period)
EI	1.64%	2.296% (1.4x employee rate)	$65,700	$1,077.48 (employee) / $1,508.47 (employer)
Federal income tax — lowest bracket	14% on first $57,375	N/A	Basic personal amount: $16,129
Federal income tax — second bracket	20.5% on $57,376 – $114,750	N/A	—
Federal income tax — third bracket	26% on $114,751 – $158,468	N/A	—
Federal income tax — fourth bracket	29% on $158,469 – $221,708	N/A	—
Federal income tax — top bracket	33% on $221,709+	N/A	—

2026 Change — Lowest Federal Bracket: The lowest federal tax bracket rate changed from 15% to 14% effective for 2026. This reduces federal income tax for every Canadian employee at all income levels.

2026 Ontario Provincial Income Tax Rates for Payroll

Taxable Income Bracket	Ontario Rate	Combined Federal + Ontario
First $52,886	5.05%	19.05%
$52,887 – $105,775	9.15%	29.65%
$105,776 – $150,000	11.16%	37.16%
$150,001 – $220,000	12.16%	41.16%
Over $220,000	13.16%	46.16% – 53.53%

Ontario also applies the Ontario Health Premium (OHP) on taxable income above $20,000. The OHP is calculated separately and ranges from $300 to $900 per year. It is not deducted at source by the employer — it is assessed on the employee's T1 personal return.

True Employer Cost Per Employee — Ontario 2026

When you hire an employee, the gross salary is not your total cost. The employer pays CPP (matching the employee contribution), EI (at 1.4x the employee rate), WSIB premiums (industry-specific) and any benefits. The following table shows the total employer payroll cost at common salary levels in Ontario.

Annual Salary	Employer CPP + CPP2	Employer EI	Total Payroll Taxes (Employer)	True Cost to Employer
$40,000	$2,172	$656	$2,828	$42,828
$60,000	$3,362	$984	$4,346	$64,346
$80,000	$4,475	$1,312	$5,787	$85,787
$100,000	$4,475	$1,509	$5,984	$105,984
$130,000	$4,475	$1,509	$5,984	$135,984

WSIB Not Included: The table above does not include WSIB premiums, which vary by industry classification. Construction trades in Ontario pay $2.00–$6.00 per $100 of insurable earnings. Office-based professional services pay $0.18–$0.50 per $100. WSIB premiums are an additional employer cost on top of CPP and EI.

CRA Payroll Remittance Deadlines 2026

Employers must remit CPP, EI and income tax deductions to CRA based on their remitter type. CRA assigns your remitting frequency based on your average monthly withholding amount (AMWA).

Remitter Type	AMWA Threshold	Remittance Deadline
Regular remitter (new employers default)	Under $25,000	15th of the month following the pay date
Quarterly remitter	Under $1,000 (and qualifying conditions)	15th of the month following the quarter-end
Accelerated remitter — Threshold 1	$25,000 – $99,999.99	Twice monthly: 25th for first 15 days, 10th of next month for remaining
Accelerated remitter — Threshold 2	$100,000+	Within 3 business days of each pay date

Late Remittance Penalties: CRA charges escalating penalties for late payroll remittances: 3% (1–3 days late), 5% (4–5 days), 7% (6–7 days) and 10% (more than 7 days or repeat offences). Directors are personally liable for unremitted payroll deductions under Section 227.1 of the Income Tax Act — even if the corporation is insolvent. This is one of the few corporate liabilities that pierces the corporate veil.

Worked Payroll Examples — Ontario 2026

Item	Employee A — $60,000/yr Bi-Weekly	Employee B — $100,000/yr Bi-Weekly
Gross pay per period	$2,307.69	$3,846.15
CPP (employee)	$129.30	$172.14
EI (employee)	$37.85	$41.45
Federal income tax	$165.42	$383.28
Ontario income tax	$83.18	$214.62
Total deductions	$415.75	$811.49
Net pay (take-home)	$1,891.94	$3,034.66
Employer CPP	$129.30	$172.14
Employer EI (1.4x)	$52.99	$58.03
True employer cost per period	$2,489.98	$4,076.32

Salary vs. Dividends for Owner-Managers — Payroll Implications

Incorporated business owners in Canada can pay themselves salary, dividends or a combination. The payroll tax implications differ significantly.

Factor	Salary	Dividends
CPP contributions	Yes — employer + employee portions both paid by the corporation	No CPP on dividends
EI premiums	Yes — unless owner with >40% control opts out (employer portion still due if opted in)	No EI on dividends
Income tax at source	Yes — deducted from each paycheque	No withholding at source — reported on T5
RRSP contribution room	Yes — 18% of T4 salary creates RRSP room	No — dividends do not create RRSP room
Corporate deduction	Yes — salary is a deductible expense	No — dividends paid from after-tax earnings
Payroll processing required?	Yes — T4, ROE, CRA remittances, year-end filing	No payroll processing — T5 slip only

Our Recommendation: Most owner-managers benefit from a combination — salary sufficient to maximise RRSP room ($32,490 for 2026 maximum) and to fund CPP (retirement and disability benefits), with the remainder as dividends. We model the optimal split for every corporate client annually. Get CPA Advice →

Let Gondaliya CPA Handle Your Payroll

We process payroll, calculate CPP/EI/tax deductions, remit to CRA, prepare T4s and ROEs, and file year-end payroll returns for Ontario businesses at flat-fee pricing. Your corporate tax return is included FREE with every bookkeeping and payroll engagement.

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Frequently Asked Questions — Payroll Tax Calculator Canada

What payroll deductions must a Canadian employer withhold?

Canadian employers must deduct three items from every employee paycheque: Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums and federal/provincial income tax. The employer must also contribute the matching CPP amount and 1.4x the employee EI amount. All deductions must be remitted to CRA by the applicable deadline. Payroll Services →

What is the CPP rate for 2026?

The 2026 CPP contribution rate is 5.95% for both the employee and employer on pensionable earnings between $3,500 and $73,200. The maximum annual employee contribution is $4,150.80. CPP2 applies at 4% on earnings between $73,200 and $81,300, with a maximum of $324. The employer matches both the CPP and CPP2 contributions.

What is the EI rate for 2026?

The 2026 EI premium rate is 1.64% for employees on insurable earnings up to $65,700. The maximum annual employee premium is $1,077.48. The employer pays 1.4 times the employee rate (2.296%), for a maximum of $1,508.47 per year.

When must I remit payroll deductions to CRA?

Regular remitters (most small businesses) must remit by the 15th of the month following the pay date. Accelerated Threshold 1 remitters ($25K–$100K AMWA) remit twice monthly. Threshold 2 remitters ($100K+ AMWA) remit within 3 business days of each pay date. Late remittance penalties range from 3% to 10%.

What happens if I remit payroll deductions late?

CRA charges escalating penalties: 3% (1–3 days late), 5% (4–5 days), 7% (6–7 days) and 10% (more than 7 days or repeat offences within the same year). Directors are personally liable for unremitted payroll deductions under Section 227.1 — CRA can assess directors personally even if the corporation is bankrupt.

Can a business owner opt out of EI?

Shareholders who control more than 40% of voting shares can opt out of EI — meaning neither the employee nor employer EI premiums are required. However, opting out means the owner-manager is not eligible for EI benefits (including maternity, parental and sickness benefits). CPP cannot be opted out of for employees receiving T4 salary.

Should I pay myself salary or dividends from my corporation?

Salary creates RRSP room and CPP contributions (retirement and disability). Dividends avoid CPP and EI but do not create RRSP room. Most owner-managers benefit from a combination — enough salary for RRSP maximisation ($32,490 for 2026) plus CPP, with the remainder as dividends. We model the optimal split for every corporate client annually. Get CPA Advice →

How much does payroll processing cost for a small business?

Gondaliya CPA provides payroll processing for Ontario businesses as part of our flat-fee bookkeeping and tax engagements. Processing includes CPP/EI/tax calculations, CRA remittances, T4 preparation, ROE filing and year-end payroll reconciliation. Under our 60-Day Fees-Matching Policy, we match any lower written quote from a licensed Ontario CPA firm. Know Your Exact Fee →