It’s a new tax year and your tax return has now been filed. That means ç
Canada Pension Plan
The Canada Pension Plan (CPP) is a pension program that provides partial replacement of earnings to contributors and their families during retirement, or in case of disability or death.
For many years, the rate held steady at 4.95% but starting in 2019, it was decided that enhancements would be made to the Canada Pension Plan (CPP). This change was made to increase the retirement benefit so it would replace one third of average work earnings Vs. one quarter of earnings for previous years. As a result, the contribution rate for both the employer and employee will be increasing gradually each year until 2023, when it will hit 5.95%.
In 2021, the employer and employee contributions increased from 5.25% to 5.45%.
Other changes were also made.
The maximum pensionable earnings have increased from $58,700 to $61,600. The original estimated increase was set at $1,500, but the pandemic's effect on the labour market increases the maximum pensionable earnings by $2,900.
The basic exemption amount remains $3,500.
Yearly contributions are maxed out at $3,166 for employers and employees. Last year the maximum was $2,898. This means the maximum contribution for self employed individuals has increased from $5,796 to $6,332.
CPP Calculation for 2021 = (Pensionable Earnings up to 61,600 – 3,500) x 0.0545
Employment Insurance
Rates for Employment Insurance remain unchanged for employees and employers. Employees will continue to pay 1.58% and employers will pay 1.4 times this amount at 2.21%
The maximum insurable earnings have increased from $54,200 to $56,300. This means the maximum premium for employees is $889.54 and the maximum premium for employers is $1,245.36.
- Employee EI Calculation for 2021 = Insurable Earnings up to $56,300 x 0.0158
- Employer EI Calculation for 2021 = Insurable Earnings up to $56,300 x 0.0221
Employer Health Tax
Employers who pay remuneration greater than $1,000,000 a year are required to pay an Employer Health Tax (EHT). The rate paid is dependent on the total remuneration paid.
- Up to $2,000,000 0.98%
- $200,000.01 to $230,000.00 1.101
- $230,000.01 to $260,000.00 1.223%
- $260,000.01 to $290,000.00 1.344%
- $290,000.01 to $320,000.00 1.465%
- $320,000.01 to $350,000.00 1.586%
- $350,000.01 to $380,000.00 1.708%
- $380,000.01 to $400,000.00 1.829%
- Over $400,000.00 1.95%
For help with payroll deductions or other payroll questions, please contact our team today.
