Hiring and paying teams in Canada just got a little more complex. If you’re leading People Ops, HR, or talent acquisition at a fast-scaling company, or overseeing payroll for a global team, understanding the latest changes to CPP and EI payroll rates is non-negotiable. Not only do these annual updates impact your payroll budget, but they’re also a compliance minefield if you miss the details.

Let’s break down what’s changed for 2025, what it means for your team, and how you can stay ahead, whether your workforce is in Toronto, Vancouver, Montreal, or scattered across the globe.

2025 at a Glance: What’s New for CPP and EI Payroll Rates?

Every January, the Government of Canada revises the Canada Pension Plan (CPP) and Employment Insurance (EI) rates along with the maximum earnings thresholds. For 2025, both CPP and EI payroll rates have increased, and the updated thresholds mean higher contributions for both employers and employees.

Here’s the quick view:

  • CPP contribution rate: 5.95% (up from 5.70% in 2024)
  • EI premium rate (outside Quebec): 1.70% (up from 1.66%)
  • Employer EI rate: 2.38% (1.4x employee rate)
  • Maximum CPP pensionable earnings: $68,500
  • Maximum EI insurable earnings: $63,200

Annual maximum contributions now hit:

  • CPP (per employee/employer): $3,867.50
  • EI (per employee): $1,074.40
  • EI (per employer): $1,504.16

If you’ve got remote or hybrid teams, these changes apply to everyone on Canadian payroll, no matter where they work from.

Why Should HR and People Ops Care?

You need to move fast, stay compliant, and forecast accurately. Missing a payroll rate update can mean costly penalties, frustrated employees, and messy reconciliations at year-end. For HR leaders scaling globally, the complexity multiplies: every province, every remote worker, and every policy tweak adds a new layer.

Deep Dive: CPP Payroll Rates and Basic Exemption Explained

The Canada Pension Plan is the backbone of retirement, disability, and survivor benefits for Canadian workers. Both employees and employers contribute to CPP through payroll deductions.

The basics for 2025:

  • Basic exemption amount: $3,500 (applies to all employees)
  • Contribution rate: 5.95% (both employees and employers)
  • Self-employed rate: 11.90% (must pay both portions)

The basic exemption means the first $3,500 of annual income is CPP-free. This is prorated across pay periods:

  • Weekly: $67.31
  • Bi-weekly: $134.62
  • Semi-monthly: $145.83
  • Monthly: $291.67

Example:
If your employee earns $1,200 bi-weekly, only $1,065.38 ($1,200 - $134.62) is subject to CPP. Multiply that by 5.95% for both the employee and employer contribution.

Pro tip:
Automated payroll platforms help, but understanding the mechanics keeps you in control—especially if you’re onboarding new hires or managing terminations mid-year.

The CPP Enhancement: What’s Different in 2025?

Since 2019, CPP has been undergoing a phased enhancement, designed to provide greater retirement security. In 2025, two things matter:

  • Base CPP: Applies from $3,500 up to the Year’s Maximum Pensionable Earnings (YMPE), now $68,500.
  • CPP2 (“second additional contribution”): Applies to earnings above the YMPE, up to the Year’s Additional Maximum Pensionable Earnings (YAMPE), which sits at $78,090 for 2025. The CPP2 rate is 4.00%.

How does this play out?
If an employee earns $75,000, you calculate:

  • Base CPP up to $68,500.
  • CPP2 on $6,500 ($75,000 - $68,500) at 4.00%.

Employers and employees both contribute, and self-employed individuals pay both shares.

EI Payroll Rates: What’s Changed and How to Calculate

Employment Insurance (EI) provides a safety net for workers facing job loss, illness, or parental leave. For 2025:

  • Employee EI rate (outside Quebec): 1.70% of insurable earnings (up to $63,200)
  • Employer EI rate: 2.38% (1.4x employee rate)

Quebec is different:
Because Quebec has its own parental insurance plan (QPIP), EI rates are lower:

  • Employee: 1.35%
  • Employer: 1.89%

Example calculation:
On a $5,000 monthly salary (outside Quebec):

  • Employee EI: $85.00 ($5,000 x 1.70%)
  • Employer EI: $119.00 ($85.00 x 1.4)

Annual maximums:

  • Employee (outside Quebec): $1,074.40
  • Employer (outside Quebec): $1,504.16
  • Employee (Quebec): $853.20
  • Employer (Quebec): $1,194.48

Step-by-Step: How to Calculate CPP and EI Payroll Deductions

Even with modern payroll software, knowing the steps means you can spot errors before they cost you.

CPP Calculation:1. Find the employee’s gross pay for the period.2. Subtract the prorated basic exemption.3. Multiply by 5.95%.4. If applicable, add CPP2 for earnings above $68,500 (up to $78,090) at 4.00%.

EI Calculation:1. Take gross insurable earnings.2. Multiply by 1.70% (or 1.35% in Quebec).3. Employer contributes 1.4x the employee amount.4. Stop deductions when the annual maximum is hit.

Example (bi-weekly, $4,000 salary):

  • CPP: $4,000 - $134.62 = $3,865.38 → $3,865.38 x 5.95% = $229.99 (each for employee and employer)
  • EI: $4,000 x 1.70% = $68.00 (employee); $68.00 x 1.4 = $95.20 (employer)

Remittance Schedules: Staying Compliant (and Out of Trouble)

The CRA assigns your remittance frequency based on your average monthly withholdings from two years prior. Here’s what to know:

  • New/Regular employers: Remit by the 15th of the next month.
  • Accelerated threshold 1: Remit twice monthly.
  • Accelerated threshold 2: Remit up to four times monthly.

Late remittances bring penalties (3% to 10% plus interest). Payments can be made online, at your bank, or by mail—no excuses for missing a deadline.

Payroll Mistakes to Avoid: Hard Lessons, Soft Landings

Payroll compliance is unforgiving. Here are the tripwires:

Overcontributions:
Common when employees work multiple jobs or change employers. Employees can claim back excess on their tax return, but employers rarely recoup their share.

Calculation errors:

  • Forgetting the basic CPP exemption.
  • Using last year’s rates (easy to do, costly to fix).
  • Continuing deductions after the annual maximum is reached.

Poor record-keeping:
Keep everything for at least six years: calculations, adjustments, remittance forms, and payment confirmations.

Budgeting for 2025: The Real Impact for Employers

Rising CPP and EI payroll rates mean higher costs, especially for teams with many high earners.

Example:
A company with 50 employees, all above the max thresholds, will pay:

  • CPP: $193,375 (50 x $3,867.50)
  • EI: $75,208 (50 x $1,504.16)
  • Total: $268,583 in employer contributions

That’s about 4.5% more than in 2024. Multiply this by your headcount and those “small” rate increases start to sting.

Managing Payroll Across Provinces and Remote Teams

Canada keeps you on your toes. While CPP rates are national (except for Quebec’s QPP), EI rates shift if your team is in Quebec or other provinces.

Key rules:

  • Apply rates based on where the employee physically works, not where the company is based.
  • Remote workers follow the rules of their work location.
  • Configure your payroll system for province-specific rates, especially for Quebec.

If you hire across provinces, this nuance is mission-critical. Miss it, and you risk under- or over-contributing, a headache no one needs.

Global Expansion? Streamline Your Payroll Compliance

If you’re hiring globally, managing payroll gets exponentially harder. Every country has its own version of CPP and EI payroll rates, with unique contribution rules and deadlines.

How to stay sane (and compliant):

  • Use integrated payroll systems that handle multi-country needs.
  • Lean on local experts—regulations change fast.
  • Standardize your processes but allow for local differences.
  • Review compliance regularly, especially if you’re scaling up or entering new markets.

At Borderless AI, we manage payroll across 170+ countries, including Canada, with tech that flexes to local requirements, so you don’t have to lose sleep over regulatory shifts.

Move Forward With Confidence

Staying ahead of CPP and EI payroll rates isn’t just about ticking compliance boxes. It’s about building trust with your team, protecting your company from avoidable costs, and freeing up bandwidth to focus on what really matters: growing your business and unlocking opportunities for talent everywhere.

Update your payroll systems. Monitor contribution limits. Stay curious about the rules, because in the world of global work, the only constant is change.

FAQs About CPP and EI Payroll Rates

How do CPP and EI rates differ across Canadian provinces?
CPP rates are the same everywhere except Quebec (which uses the QPP with slightly different rates). EI rates are lower in Quebec due to its own parental insurance plan.

What happens if an employer overcontributes to CPP or EI?
Employees can recover their portion via their tax return. Employers generally can’t recover their matching share unless they file a formal CRA request—and even then, it’s rare.

How should employers handle CPP and EI for remote workers in different provinces?
Apply rates based on where the employee physically works. Quebec-based employees use QPP and Quebec EI rates; others use standard CPP and EI rates.

When must employers implement the new 2025 CPP and EI rates?
With the first payroll that covers earnings in January 2025. No grace period, plan ahead.

How do rising CPP and EI payroll rates affect payroll budgeting for 2025?
Expect about a 4.5% increase in employer contributions compared to 2024. Adjust your budgets, especially if you have many high earners.

Ready to Simplify Global Payroll?

Borderless AI was built for HR leaders, founders, and People Ops teams like yours—ambitious, resourceful, and determined to hire the best talent, no matter where they live. We believe in a world where opportunity isn’t limited by geography, and we’re here to take the pain out of global compliance.

Need help navigating Canadian payroll or scaling your team internationally? Let’s talk.

Empowering global teams. Unlocking opportunity. Shaping the future of work, without borders.

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