Clients sometime ask why their take home income increases later in the year when they haven’t received a pay raise.
The answer is CPP (Canada Pension Plan) and EI (Employment Insurance) contributions.
CPP
As Canadians, anyone who earns employment income is required to contribute to the CPP program.
If you are an employee, your CPP contributions are deducted at source from your payroll until the maximum annual amount is reached. Once this maximum is reached, the deductions stop and your take-home pay will increase.
For 2023 the ‘maximum annual pensionable earnings’ is $66,600.00, less a basic exemption of $3,500. The CPP contribution rate for 2023 is 5.95% or a maximum of $3,754.45.
If you are self-employed, you must contribute both the employee portion (5.95%) and the employer portion (5.95%) to a maximum of $7,508.90 per year.
EI
The ‘maximum annual insurable earnings’ for EI is $61,500 and the EI rate is 1.63% or a maximum of $1,002.45 in contributions per year.
When CPP/EI contributions reset every January, you will see your take-home pay once again reduced until you have paid the current year’s annual premiums for CPP & EI. The more you earn, the sooner you reach your maximum annual amount and the sooner your pay increases.
For example: If your annual salary is $110,000 you will reach your maximum contributions for CPP & EI in July. This means you will have an extra $312/month available from August to December.
At an annual salary of $150,000 your contributions will be maximized by May, and you will enjoy an extra $429/month from June to December.
Extra Cash! What’s the Plan?
At Money Coaches Canada, we generally recommend that you learn to live on your lower income all year and treat the extra money as a welcome “bonus” to pay off debt or to save for something you really want.
In the $150,000 income example, you could put the $429/month extra that you’ll receive for 7 months towards repaying consumer debt (i.e. credit card or line of credit). This will bring you over $3,000 closer to being debt free!
Or how about making extra contributions to your mortgage? With the massive mortgages many of us have and higher interest rates these days, making pre-payments towards mortgage principal (to the extent that your mortgage agreement permits) can help pay your mortgage off years early and save you thousands in interest!
RSP contributions are another good option, helping you prepare for an earlier (or more fabulous!) retirement while saving you tax now.
A fun way to use the extra cash is to start saving for a specific goal, like next year’s vacation or holiday season. Open up a free savings account and “nickname” it with the goal you have in mind to stay focused on what you are saving for. Next, set up an automated transfer to move the extra cash into the savings account each payday till the end of the calendar year. Then sit back and enjoy the great feeling watching your savings grow.
Or you can mix it up and use some of the extra cash to pay down debt and some to put towards a goal. Either way, make sure you have a plan and a system in place so the extra money doesn’t just disappear into day-to-day spending!
Readers are invited to share their comments; however, the author is not able to address questions regarding an individual’s specific financial situation. If you have a technical question regarding your CPP, please contact Service Canada or your H.R. Department. If you would like to discuss cash flow or retirement planning needs, we encourage you to book a complimentary initial consultation with one of our Money Coaches.
This post first appeared in 2012. It has been updated with current data and/or new information and republished.
Can a person request they take more cpp so you pay the max every year? A person who retired quite awhile ago told me I should so I get more when I retire.
Hi Deb,
There are currently no options to increase your CPP contribution, although
changes will be phased in as of 2019.
Your CPP contribution depends on your income. If you are employed, your
employer contributes 4.95% of your salary and you contribute 4.95% of your
salary, which is deducted from your paycheque until you reach the maximum
contribution of $2,564.10 a year (for 2017). Your annual income needs to be $55,300
in 2017 to contribute the maximum.
To see your personal lifetime contributions and your estimated CPP pension,
you can register at ‘My service Canada’:
https://www.canada.ca/en/employment-social-development/services/my-account.html
or
call 1-800-277-9914 and ask for your ‘CPP Statement of Contributions’.
If you would like to increase your retirement savings and you earn less than
$50,000 a year, I suggest you save a certain amount from every pay to a TFSA
(Tax free savings account).
I hope this answers your questions.
Sabine
Is there anyway I can opt out of paying my cpp or e.I or both ??
Hello Martin,
If you are employed, your employer is responsible for collecting CPP and EI from you and remitting it to the government. CPP contributions are the same for the employee and employer, but the employer pays 1.4 x the amount of EI contributions as the employee.
There is no option to opt out, unless you are 70 years old, which is when CPP contributions will stop or if you are 65 and already collecting a CPP retirement or disability pension, you can elect to stop making further contributions to the CPP.
I hope this answers your question.
Sabine
Is EI contribution for self-ekployed optional unlike CPP?
If not, is it beneficial to pay EI vountarily?
Hello Pwede,
EI premiums for self-employed people are voluntary. Benefits include: maternity benefits, parental/adoptive benefits, sickness benefits, compassionate care benefits and benefits for parents of critically ill children.
Whether it is beneficial to pay EI depends on your individual circumstances and whether you might require some of the above mentioned benefits in the future.
For more detailed information please go to:
https://www.canada.ca/en/employment-social-development/programs/ei/ei-list/reports/self-employed-special-benefits.html
I hope this answers your question.
Sabine Lay
If I worked at at job that maxed out my contributions, then took another job later in the year, is there a way to stop the deductions on my new salary?
Hello Rick,
No, there is no option to stop the deductions. Your new employer is required to make CPP and EI contributions without taking into consideration any premiums you paid at your previous job. When you file your tax return, CRA automatically calculates any overpayment and refunds it to you.
I hope this answers your question.
Sabine
Assuming the 4.95 and 1.83 percent deductions are taken each pay, so June they would end for someone making 100K. If that person were to defer a Dec year end bonus to Jan of the new year, would that be subject to the 4.95 and 1.83 in January as well? Consequence is less of the bonus is received, but in the end they may reduce the timeline for paying CPP and EI by a month or two?
– Eg., 20K bonus hit the pay in January (so your 100K employee earning 8300/month) now earns in January 28,300. They would pay 1400 in CPP and 517 in EI?
This a recommended strategy?
Hi Steven,
You are correct, if a person who had already paid the maximum contributions for the year received a bonus, say in December, they would not have CPP or EI contributions deducted from it. If they deferred the bonus until the first pay of January, they would pay CPP and EI and be that much closer to maxing out for the year.
As to whether it is recommended to do this or not depends on what your plan is to do with the money. Someone making $100,000 will end up paying $2,564.10 in CPP and $836.19 in EI (2017 maximums) regardless of the timing of the payments. So the question to ask yourself is what would you do with the extra money in a lump sum in December, as opposed to what you would do with the extra money spread out over a few months? If you don’t have an answer to this question a Money Coach can help you align your expenses and goals with the timing of your income.
All the best
Christine
Hi
I’m at 61,000 YTD Amount. I still get deducted 836.19, is this right if not the extra deducted that has been made , will I get it back?
Hello Pablo,
I am afraid I can’t answer your question without seeing your pay stub. I suggest you contact your HR department and have them explain your pay stub and the deductions to you.
The maximum CPP your employer should deduct off your paycheque in 2017 is $2,564.10. If you have overpaid to your CPP yes, you will get it back when you file your taxes.
If you would like to plan how to use the extra cash once your CPP and EI contributions stop – a money coach can help. Click on the ‘Contact us for a free consultation’ button above.
All the best,
Sabine
Hello Sabine,
I am earning 100,000 annually. I plan to go for a paid compassionate leave to take care of my father who have cancer. How much would I be receiving if I apply for an EI for Compassionate leave?
Hello William,
First of all, I am very sorry to hear about your father’s illness; this must be a difficult time and taking compassionate leave will allow you to be with him during his final weeks.
Before you consider taking compassionate leave, it is important that you confirm with your employer, and the provincial/territorial government, that you have job protection for compassionate care leave. Otherwise you might be placing your employment at risk.
There are a few rules and regulations around compassionate leave benefits and I would like to point you to the CRA website for more detailed information.
https://www.canada.ca/en/services/benefits/ei/ei-compassionate.html
Generally you can receive compassionate care benefits for up to 26 weeks. The basic rate is 55% of your average insurable earnings, up to a maximum insurable amount of $51,300 in 2017, which means the maximum you can receive is $543 per week for 26 weeks in 2017 (55% of $51,300 divided by 52 weeks) – a total of $14,118 for 26 weeks. This is a taxable benefit, meaning federal and provincial/territorial taxes will be deducted.
You would need to contact CRA to receive your personal amount.
This is quite a significant reduction in your income and if you would like to understand what impact this has on your overall finances and cash-flow, a money coach can help. You can click on the ‘Contact’ button to request an initial consultation.
Best regards,
Sabine Lay
So If I Maxed out in 2017 , and I worked Dec 18- 24th , my invoice was dated Dec 29th but I was paid on January 6th Via EFT … would I pay EI and CPP or am i still maxed out ?
Hi Michele,
May I suggest you contact the HR or Payroll department and ask your question. They will be able to answer specifically to your circumstance.
If you would like help creating a cash-flow plan taking CPP and EI contributions into consideration,
click on the ‘contact us for a free consultation’ button below.”
Best regards,
Sabine
Thanks for the great article. My questions are if I own more than 40% of the Corporation that is paying me a salary and dividend annually:
1. Are both CPP and EI required on the salary amount?
2. Can the corporation pay the maximum CPP if my salary is below the $51,300?
Thanks.
Hi Chris,
These are both great questions and we recommend you contact an accountant in your area to get the best answers. If you find you need more comprehensive advice and a financial plan we would be happy to get you in touch with one of our coaches.
Hello and thanks a lot for the great article! :)
I Have a question about CPP – I was recently laid off (end of June). I have applied for EI and most likely will be eligible to collect the EI benefits. I cannot find anywhere how about CPP – is it something I’m suppose to pay ever month even if I’m not employed? Let’s say I will not find a job for the next 6 months – am I suppose to make CPP contributions on my own from my pocket? (Assuming I will be also not self employed – pretty much only income will be EI Benefits)
Thanks in advance for your reply!
Hi Peter,
I am sorry to hear that you were laid off and I hope you will find other employment soon.
CPP contributions are made while you are employed (or self-employed) and are split between the employer and employee (self-employed people have to pay the full amount). You do not contribute while you are receiving a CPP Disability benefit, or during periods when you have no earnings or when your earnings are below the $3,500 minimum amount.
For more information please go to this link:
https://www.canada.ca/en/services/benefits/publicpensions/cpp/contributions.html
If you would like help determining how you can save for retirement yourself, a Money Coach can help. Please click on the ‘Contact’ button to schedule a consultation.
All the best,
Sabine
Hi is there a way to pay off the cpp/ei faster like in one or two payments
Hi Jimmy,
No, there isn’t. CPP and EI contributions are deducted from each pay until your maximum is reached. Your employer’s payroll department calculates the amounts based on Payroll Legislation.
To see your personal contributions you can register for a ‘My Service Canada’ account.
Best regards,
Sabine
Hello,
I will be leaving my job in September to move to another country. When it comes to filing my taxes I will be reporting approx. $52,500 for my 2018 taxable income this year. I was wondering, when I do file, if I may elect to make a voluntary payment to my CPP to make up the shortfall for both my contributions and my employers contributions? I would like to report the MAX CPP contribution for 2018. Thanks!
Hi Chris,
Unfortunately there is no option to make voluntary contributions to your CPP.
Good luck with your move.
Sabine
I am a 65 year old person , still working and I have asked payroll to stop CPP contribution, is it possible to stop EI contribution through payroll just like CPP?
Hello AG,
No, your employer is required to deduct EI as long as you are employed. There is no age limit.
You might want to consider hiring a Money Coach to help you figure out how long you have to work for and when to take CPP and OAS.
Please click on the ‘contact’ button at the top of the page to book a complimentary initial consultation with me.
Best regards,
Sabine
I have a full time job and just got a part time job as well, I max out on my CCP and EI deductions through my full time job. Can my part time employer not take CPP and EI off my cheques?
Dear Julie,
Each employer is required to make the mandatory CPP and EI deductions from your paycheque. Any over payment will be refunded when you file your 2019 income taxes.
To adjust the tax that is withheld from your 2nd job, you can complete form TD1 (Personal Tax Credits Return).
You might benefit from a cash-flow management plan for your hard earned money. Please click on the ‘Contact’ button in the top right hand corner to book a complimentary initial consultation.
Best regards,
Sabine
If I pay double the CPP and EI because of taking a new job will the extra $3609.12 I paid be refunded in full or will it be used as a deduction on my tax form next year?
Dear BW,
when you file your income taxes for 2019, CRA will calculate any CPP and EI over payment and will refund it to you.
The maximum contribution in 2019 for CPP is $2,748.90 and for EI is $860.22.
I hope this answers your question.
Best regards,
Sabine
An employee works under 2 different company under a group. His CPP contribution in company A reached the maximum. He requests to stop his CPP contribution also in Company B. Could the employer do so?
Hello CC,
If you receive 2 paycheques from 2 different employers, each employer is required to make CPP contributions based on your income. Should this result in contributing more than the maximum of $2,748.90 (in 2019), the over payment will be refunded with your tax return.
I hope that answers your question.
Best regards,
Sabine
Pay final pay of the year Dec 16-31st was paid in the new year. The payroll deducted the EI and CPP amount from this pay. my question is why, those earning are all from the previous year.
My payroll department said it because the pay was payable in the new year.
Is this correct or not ?
Hi Trudy, the author is not able to address questions regarding an individual’s specific financial situation. If you have a technical question regarding your CPP, please contact Service Canada. If you would like to discuss your retirement planning needs, we encourage you to book a free, initial consultation with one of our Money Coaches.
If I max out on CPP and EI in late April, will the extra monthly amount I start receiving be subject to further income tax, or will it be the full amount I was paying monthly?
Hi Peter, the author is not able to address questions regarding an individual’s specific financial situation. If you have a technical question regarding your CPP, please contact Service Canada. If you would like to discuss your retirement planning needs, we encourage you to book a free, initial consultation with one of our Money Coaches.
I am age 64 and receive CPP. I have income from self-employment and from employment. I pay CPP on my self-employment income. My employment income is less than the $3500 per year basic personal exemption for CPP. Does my self-employed income contribute to exceeding the CPP basic personal exemption so that my employer must pay CPP on my employment income? If so, what form would I submit to my employer to document this?
Hi Daniel. No your employer is not responsible for paying for the CPP on his additional self-employed income.
I just want my employer to pay CPP on my employment income.
If I am employed and have incorporated a business on the side as well, would I need to pay CPP and EI on both sides? (ie: through my employer and in my own business as well)
If you have both employment and self-employment earnings, your total required CPP (or QPP) contribution will be based on your total earnings from both sources, subject to the maximum contribution. See this link to taxtips.ca for an example calculation.
Self-employed workers do not pay EI premiums unless they opt into the EI program for the self-employed. You can register for this program if you’re self-employed and also an employee.
This is a misleading way of looking at it. In fact the experience is of LOSING the extra income as the deductions are made, not gaining it. We struggle during the EI months, those few hundred dollars are deeply felt. I wish these deductions were taken evenly throughout the year.
Thanks for your sharing your thoughts Sara.
It certainly is a valid perspective to view the situation as a loss of income in the first part of the year, especially if one is already struggling financially. However equally valid is the perspective of the client at the start of the article, who regarded it as an increase in income in the latter part of the year.
For many who are making good incomes, the increase in take home pay when CPP and EI contributions hit their maximum really can be seen as a “bonus” of sorts.
From our perspective as Money Coaches, if possible it is healthier – both financially and mentally – to plan one’s life to manage on a lower income throughout the year, then allocate one’s mid-year “raise” or “bonus” (when CPP and EI contributions end) to one’s priority goals.
In both cases the reality of the situation is the same, but the perspective and strategy is flipped from one of dealing with loss to managing gain… and experience has shown that change in perspective can lead to more positive, empowering changes in one’s financial life!
Hi I max out my Ei and cpp in august every year. Am I able to request that my payment be averaged out over the full year? Lowering my payment but making it more consistent?
Hi Anthony,
Your employer is required to deduct CPP & EI contributions from your pay at the current government-specified rate, so unfortunately the deductions cannot be lowered and spread out over the full calendar year.
Hi
I came to Canada in July 2022
My Gross income was 57k CAD
These were my deductions
Federal Tax $14,640.63
EI $916.03
CPP $3,213.14
What is the refund I can expect?
Hi Jaspartap,
For 2022, the maximum employee CPP contribution was $3,499.80 and EI contribution was $952.74. Since your contributions to these programs for the year were below these maximums, I would not expect any refund of CPP or EI premiums for 2022.
When your CPP and EI are maxed out, like in the $100k example above, do you pay income tax on the additional amount.
Ex: If I’m contributing $400 a paycheque to CPP and $100 a paycheque to EI, when I max them out, and I going to get $500 more net pay, or gross pay? How does the income tax work on that if that’s the case.
Hello Craig,
CRA includes the amount for CPP contributions and EI premiums when calculating income tax on a paycheque, so your income tax amount will remain the same before and after maxing out annual payments to CPP and EI.
In your example, you would therefore receive $500 more net pay.
Is it possible to increase my CPP and EI contributions each paycheque so I max out sooner in the year, (and then it’s easier to budget for the rest of the year once I’ve maxed out)?
Hi Mark,
Your employer is responsible for deducting your CPP and EI contributions at the current government-specified rates. Unfortunately, there is no ability to increase your deductions to maximize your contributions earlier in the year.
Hi, what if I am employed and the company changed ownership in July 2022, I realize now the accounting dept. did not max out my CPP and EI in Sept like usual I am guessing by mistake, I just want to confirm if i paid over the 2022 CPP of $3,499.80 and EI $952.74 that the company owes me that difference in monies back its approximately $2000. Bascially when i got my new company pay stub , the cpp and ei payments look like a first of year paycheque.
thanks for any help
Hi Jud,
This happens when you change employers mid-year. Your new employer is required to remit your CPP and EI contributions, even if you have already maxed out your contributions for that year through your previous employer. When Canada Revenue Agency (CRA) receives your tax return, it automatically calculates any overpayment to CPP and EI and refunds that amount to you.