Employer CPP Contributions in Canada 2025

Updated for 2025 · CPP1 + CPP2 rates · Maximum contributions

The Canada Pension Plan (CPP) is a mandatory government retirement program that both employers and employees must contribute to. In 2024 and 2025, the CPP enhancement introduced a second earnings ceiling (CPP2), creating two tiers of contributions. Employers must match employee CPP contributions dollar for dollar, making this a significant payroll cost that affects compensation planning.

2025 CPP Contribution Rates and Limits

Component	Rate	Earnings Range	Max Employee	Max Employer
CPP1	5.95%	$3,500 - $71,300	$4,034.10	$4,034.10
CPP2	4.00%	$71,300 - $81,900	$396.00	$396.00
Total maximum	—	—	$4,430.10	$4,430.10

Note: Verify exact 2025 figures with CRA as the Year's Maximum Pensionable Earnings (YMPE) is indexed annually to wage growth.

The Basic Exemption

The first $3,500 of employment income is exempt from CPP contributions (the basic exemption). Both employer and employee contributions begin only on earnings above $3,500. The basic exemption is not prorated — the full $3,500 is available regardless of when employment starts or ends during the year.

Employer Obligations

Employers must:

• Deduct the employee's CPP contributions from each paycheque
• Match the employee deduction dollar for dollar (employer pays the same amount as the employee)
• Remit both the employer and employee portions to CRA on a regular remittance schedule
• Report employee CPP contributions in Box 16 and Box 16A of the T4 slip
• Report CPP pensionable earnings in Box 26 of the T4

Failure to remit CPP contributions on time results in penalties and interest. Directors of corporations can be personally liable for unremitted CPP/EI.

Who Is Exempt from CPP?

Not all workers require CPP contributions:

• Employees under age 18
• Employees who are receiving a CPP retirement pension and are over 70
• Employees who have submitted a CPT30 form electing to stop contributing after age 65 (if receiving CPP retirement pension)
• Employees in certain religious denominations approved by CRA
• Independent contractors (not employees) — however, misclassification is a CRA audit risk

Quebec residents contribute to the Quebec Pension Plan (QPP) rather than CPP. QPP contribution rates and rules are set by Revenu Quebec and are similar but not identical to CPP.

CPP2: Second Additional Contributions

Starting in 2024, CPP2 applies to earnings between the Year's Maximum Pensionable Earnings (YMPE, which is the CPP1 ceiling) and the Year's Additional Maximum Pensionable Earnings (YAMPE, the CPP2 ceiling). In 2025, this is approximately $71,300 to $81,900.

The CPP2 rate is 4% for both employer and employee on earnings in this band. Employees who earn above the YMPE will see CPP2 deductions on their paycheques, and employers must match these as well.

Payroll Cost Impact for Employers

For an employee earning $90,000 in 2025, the employer's CPP cost is approximately:

Component	Calculation	Employer Cost
CPP1	($71,300 - $3,500) x 5.95%	$4,034.10
CPP2	($81,900 - $71,300) x 4%	$424.00
Total CPP cost	—	$4,458.10

This is in addition to EI premiums (employer pays 1.4x employee EI), provincial health taxes (in Ontario, Quebec, Manitoba), and employer payroll costs.

CPP Contributions and Registered Pension Plans

CPP contributions do not reduce RRSP room — only Registered Pension Plan contributions (and their Pension Adjustment) affect RRSP room. CPP is a separate government program.

However, employees in defined benefit pension plans that provide a high benefit may find their combined CPP and pension income more than adequate in retirement, potentially allowing reduced RRSP saving during working years.

CPP Retirement Benefits: What Contributions Buy

CPP contributions build entitlement to a CPP retirement pension. Key facts for employees:

• The maximum 2025 CPP retirement pension at age 65 is approximately $1,433/month (for those with 39+ years of maximum contributions)
• CPP2 enhanced contributions build additional CPP2 benefits on top of CPP1
• You can start CPP as early as age 60 (at a reduction) or defer to age 70 (at an enhancement)
• CPP retirement benefits are taxable income in the year received

Frequently Asked Questions

Do employers get a tax deduction for CPP contributions?

Yes. Employer CPP contributions are a deductible business expense for income tax purposes. The combined employer CPP, EI, and provincial payroll taxes are deductible when calculating business income.

What if an employer over-deducts CPP?

Over-deductions are refunded to the employee through the T1 tax return. The employer must still remit the full withheld amount to CRA; the employee receives the over-deduction as a tax refund when filing their return.

Are CPP contributions different for self-employed people?

Yes. Self-employed individuals pay both the employee and employer portions — effectively double the employee rate — since they have no employer to match their contributions. For CPP1, a self-employed person pays 11.9% on pensionable earnings rather than 5.95%.

This guide is for informational purposes. Verify current rates with CRA. Consult a payroll professional for employer obligations.