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Chapter 11 Appendix
Payroll
For example, if an employee earned $4,500 gross pay each month this is how to calculate how
much CPP to deduct from the employee’s pay in January.
(Gross Pay − Pay Period Exemption) x CPP Rate = CPP Deduction
($4,500 − $291.66) x 4.95% = $208.31 CPP Deduction
By the end of November, the employee would have earned $49,500 ($4,500 x 11 months) and have
had $2,291.41 ($208.31 x 11 months) deducted for CPP. December’s pay will bring the total gross
earnings to $54,000 which is more than the maximum earnings for deducting CPP.The employee’s
CPP deductions for December will be slightly less than they were for every other month. We
simply find the difference between the maximum that should be deducted this year and what has
already been deducted from the employee.
$2,479.95 − $2,291.41 = $188.54 CPP deduction for December
Since there is less of a deduction in December, the employee will have a higher net pay in that
month.
EI Calculations
Employment Insurance deduction amounts
can be easily calculated manually if software
or tax tables provided by the CRA are not
used. There are two basic values that must
be known.
1. Maximum insurable earnings is $49,500
2. EI rate is 1.88%
The amounts given are for 2015.They can change every year. In Quebec, employees also have the
Quebec Parental Insurance Plan (QPIP) in addition to EI, thus the EI rate in Quebec is less than
the rate used in the rest of the country.
The maximum insurable earnings means the employer must deduct EI on gross pay up to the
maximum for the year. Any gross pay received above the maximum is exempt fromEI.Employment
Insurance does not have a basic exemption like CPP does, which means EI will be calculated on
the entire amount of gross pay, up to the maximum.
The EI rate of 1.88% is applied to the gross pay of the employee. Thus the most any employee
should have deducted from their pay for 2015 is
Maximum Insurable Earnings x EI Rate = Maximum EI Deductions
$49,500 x 1.88% = $930.60 Maximum EI Deductions
If an employee works for multiple employers
during the year, each employer is responsible
for CPP and EI deductions. This may lead to
an overpayment for the employee at year end. Any
extra deduction will be refunded when completing
their personal tax return.
INTHE REAL WORLD
