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Canada Pension Plan Premiums

Does a company have any flexibility with how it charges CPP to its employees?
No. The Canada Pension Plan (CPP) rates, and how they are applied, are determined by the federal government. A company must adhere to the requirements.

Do I still have to pay if I've paid my maximum CPP contributions for the year at another company?
Yes. Even if an employee has paid CPP in full for the current calendar year at another company, deductions must still be taken. Only when the employee has reached the year's maximum contributions on a company's own payroll, can CPP deductions be discontinued. Any CPP overpayment by an individual is reconciled and refunded by the government upon T4 filing.

What is the basic exemption?
The basic exemption is an amount set out by the federal government that CPP is not charged against. It is still included in the year's pensionable earnings amount, however it is excluded from the CPP deduction calculation. The basic exemption amount set by the federal government is divided by the number of pay periods during the year, dependent on pay frequency.

Example: If the basic exemption is $3,500.00

  • $3,500.00 divided by 12 pays for a monthly payroll is $291.66. If an employee earns $3000.00 for one month's work, the CPP deduction is calculated as 4.3% x (3000.00-291.66) = $116.45.
  • $3,500.00 divided by 26 pays for a bi-weekly payroll is $134.61. If an employee earns $1000.00 for two weeks' work, the CPP deduction is calculated as 4.3% x (1000.00-134.61) = $37.21.
  • $3,500.00 divided by 52 pays for a weekly pay is $67.30. If an employee earns $1000.00 for one week's work, the CPP deduction is calculated as 4.3% x (1000.00-67.30) = $40.10


Is there a set maximum amount per pay that a company can deduct?
No. There are no longer any pay period maximums upon which to calculate the CPP deduction. The calculation is based upon every dollar of pensionable earnings paid out, less the basic exemption, until the maximum deduction is reached.

If I am receiving Canada Pension Plan payments from the federal government, but I am still working and receiving an income, should I still be paying CPP payments on my earnings?
No. Once CPP payments are being paid out from the federal government, no further contributions to CPP are allowed at any place of employment.


Canada Pension Plan Rates
For more information about the Canada Pension Plan, please visit the Government of Canada HRSDC website at:

http://www.hrsdc.gc.ca/en/gateways/topics/cpr-gxr.shtml

 

 

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