Every year, the government announces the current rates for Employment Insurance (EI) and Canada Pension Plan (CPP) for both employees and employers. Below are the 2022 rates and maximums.
Canada Pension Plan (CPP) contributions
The Canada Pension Plan (CPP) provides partial replacement of earnings to contributors and their families during retirement, or in case of disability or death.
Since 2019 the CPP rate has been gradually increasing, with the plan of having a rate of 5.95% in 2023. In 2022 rates have increased from 5.45% to 5.7% for both the employee and employer.
The 2022 maximum pensionable earnings are $64,900, with a basic exemption of $3,500. Any amounts over the maximum pensionable amount will not be subject to CPP.
The maximum possible contribution for an employer and employee is $3,499.80 each ([$64,900-$3,500] x 5.7%). Self-employed individuals will have to contribute both the employee and employer portion for a total of $6,999.60.
Employment Insurance (EI) premiums
Employment Insurance (EI) provides temporary income support to unemployed Canadians. EI contributions are made by both the employee and the employer.
The EI premium for employees will remain at 1.58% of earnings in 2022. This will be paid on income of up to $60,300 with a maximum contribution of $952.74 ($60,300 x 1.58%). Any income over $60,300 will not be subject to EI premiums.
The employer EI premium remains unchanged at 1.4 times the employee contribution, resulting in a maximum premium of $1,333.84 ($952.74 x 1.4).
Self-employed individuals are not subject to EI premiums on their own income, unless they opt into the program to access special benefits - such as benefits for those who take time off for:
- Maternity leave up to 15 weeks for birth mothers.
- Parental leave up to 61 weeks for biological or adoptive parents.
- Sick leave for up to 15 weeks when ill, injured or quarantined.
- Compassionate care leave for up to 26 weeks to care for someone who is at a significant risk of death.
- Caregiver leave for up to 35 weeks to care for a critically ill.
If you choose to make contributions as a self-employed individual, you will only have to pay the employee portion of EI premiums to access these benefits. It is important to note, however, that you cannot opt out of the program after you receive benefits.
For more information on changes to EI premiums and CPP contributions and how they will affect you as an employee or employer, contact us today! We look forward to helping you strategize your 2022 tax plan.
