What is CPP (Canada Pension Plan)?
The Canada Pension Plan is Canada's mandatory public pension scheme for employed and self-employed workers. In 2026, both employer and employee each contribute 5.95% on earnings between CAD 3,500 and CAD 74,600 (the Year's Maximum Pensionable Earnings). A second tier (CPP2) applies 4% on earnings between CAD 74,601 and CAD 85,000. Self-employed individuals pay both sides.
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Current Rate (Calendar year (1 January to 31 December))
CPP1: 5.95% employer + 5.95% employee (YMPE CAD 74,600, basic exemption CAD 3,500). CPP2: 4% on earnings CAD 74,601 to CAD 85,000 (2026).
Example
An employee earning CAD 90,000 in 2026 pays: CPP1 employee contribution of 5.95% x (CAD 74,600 minus CAD 3,500) = CAD 4,230.45, plus CPP2 of 4% x (CAD 85,000 minus CAD 74,600) = CAD 416. Their employer matches the CPP1 amount. Total CPP1 cost to employer: CAD 4,230.45.
How CPP (Canada Pension Plan) works in Canada
The Canada Pension Plan (CPP) is a mandatory contributory pension programme that provides retirement, disability, survivor, and death benefits to contributors. CPP contributions are required for all employees and self-employed individuals aged 18 to 70 who earn above the basic exemption amount, unless they are receiving a CPP or Quebec Pension Plan retirement pension and have elected to stop contributing.
**CPP1 and CPP2**
CPP was enhanced in 2019 with a gradual increase in contribution rates and a second earnings ceiling. CPP1 covers earnings from the Year's Basic Exemption (YBE) of CAD 3,500 to the Year's Maximum Pensionable Earnings (YMPE). For 2026, the YMPE is CAD 74,600 and the contribution rate is 5.95% for both employer and employee. CPP2 was introduced in 2024 and applies a 4% rate (both employer and employee) to the additional earnings ceiling above the YMPE, up to the Year's Additional Maximum Pensionable Earnings (YAMPE) of CAD 85,000 for 2026.
**Self-employed individuals**
Self-employed people must pay both the employee and employer portions of CPP, totalling 11.9% on CPP1 (or CAD 8,460.90 at the 2026 YMPE) plus 8% on CPP2 earnings. This is reported and paid on the personal T1 income tax return (Schedule 8), not through a payroll account. Self-employed CPP contributions are partially deductible (the employer-equivalent portion is deductible from net income; the employee portion generates a tax credit).
**Quebec Pension Plan (QPP)**
Employees and self-employed people in Quebec contribute to the Quebec Pension Plan (QPP) instead of CPP. The QPP is administered by Retraite Quebec and has slightly different contribution rates and ceilings. Employers with employees in both Quebec and other provinces must administer both CPP and QPP.
**Remittance frequency**
Employers deduct CPP contributions along with EI premiums and income tax from each employee's pay and remit these source deductions to CRA. Remittance frequency depends on the average monthly withholding amount: new employers are regular remitters (15th of the following month), accelerated remitters (biweekly or weekly) apply to larger payrolls. Missing remittance deadlines attracts penalties starting at 3% for 1-3 days late, scaling to 10% for more than 7 days late.
Related terms
Employment Insurance is Canada's federal programme providing temporary income support to workers who lose their jobs or cannot work due to illness, pregnancy, or caregiving. Employees pay 1.63% on insurable earnings up to CAD 68,900 (2026), and employers pay 1.4 times the employee rate (2.282%). Quebec employees pay a reduced rate due to the Quebec Parental Insurance Plan.
The T4 slip is issued by employers to each employee and to CRA by the last day of February following the taxation year. It summarises employment income, CPP contributions, EI premiums, and income tax withheld during the year. Employers who pay 5 or more employees must file T4s electronically. Late filing attracts penalties of CAD 25 per day up to CAD 2,500.
A Business Number is a unique 9-digit identifier issued by the Canada Revenue Agency to identify a business or legal entity. The BN is the root identifier to which CRA program accounts are added: RC (corporation income tax), RT (GST/HST), RP (payroll deductions), and RM (import/export). All CRA business filings and remittances use the BN and program account suffix.
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