The Canada Pension Plan touches almost every payroll, and incorporated owners feel it twice: as the employee and as the employer. Here is how it works and why it belongs in your salary planning.
Two tiers of CPP
- Base CPP applies to earnings up to the year's maximum pensionable earnings (YMPE), after a basic exemption.
- CPP2, the additional tier, applies to earnings between the YMPE and a higher second ceiling.
For 2026, the employee and employer base rate is 5.95% each, and CPP2 is 4.00% each. The YMPE rises to roughly $74,600 and the CPP2 ceiling to roughly $85,000. Always confirm the current figures on the CRA website before running payroll.
What it means in dollars
A higher earner reaches the maximums for both tiers. As an employee, you pay the employee share. If you are paid through your own corporation, the corporation also pays the matching employer share, so the combined cost is roughly double what shows on the employee's pay stub.
Why owners should care
If you pay yourself a salary from your corporation, you create CPP costs on both sides. That is not automatically bad: CPP contributions build your retirement benefit, and salary also creates RRSP contribution room. But it does raise the cost of paying yourself through salary compared with dividends, which do not attract CPP.
Choosing between them, or using a mix, depends on your income needs, your other retirement savings and your family situation. See our related article on salary versus dividends.
Other payroll items to keep in view
CPP is only one part. Payroll also involves:
- Employment Insurance (EI) premiums
- Income tax withholding
- Remittance deadlines to the CRA
- T4 slips and year-end reporting
Late or incorrect remittances draw penalties and interest, so it is worth having a system.
Quick checklist
- Update your payroll software with the current-year rates and limits.
- Review owner salary against your retirement and RRSP goals.
- Confirm remittance frequency with the CRA.
- Keep records for every employee and for yourself.
Our payroll service handles setup, remittances and T4s, and we can help you decide how much salary to draw.
This article is general information, not tax advice. Rates and limits change each year.
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