1. The Three Pillars of Payroll Deductions

Each pay run in Canada includes three key deduction categories:

• Income Tax (federal and provincial): This is withheld from the employee’s gross pay.
• Canada Pension Plan (CPP): Both the employer and employee contribute equally.
• Employment Insurance (EI): Both share the cost, but the employer pays 1.4 times the employee’s contribution.

Every pay period, the employer must collect these deductions, match their portion, and remit the total to the CRA.

2. How to Calculate Them Accurately

You don’t need to manually calculate each deduction — payroll software like Wagepoint or QuickBooks handles it for you.
However, it helps to understand the basics:

• CPP contributions are a percentage (currently 5.95%) of pensionable earnings, up to an annual maximum.
• EI premiums are 1.66% of insurable earnings, also capped annually. The employer’s share is 2.324%, or 1.4 times the employee’s rate.
• Income tax is based on current federal and provincial tax tables and the employee’s TD1 forms.

Make sure your payroll software is using the most recent CRA rates, which are updated each January.

3. Employer Contributions — The Hidden Cost

Beyond matching CPP and EI, employers also need to account for other obligations such as vacation pay accruals, statutory holiday pay, and any group benefits or bonuses.

These costs can add roughly 8–12% on top of gross payroll. Planning for this ensures you’re never surprised when CRA remittances or benefits bills come due.

4. When to Remit to the CRA

Your remittance frequency depends on your total payroll size:

New or small employers (with annual payroll under $25,000) usually remit monthly — by the 15th of the following month.
Medium-sized employers may remit twice monthly, while large employers often remit up to four times monthly or even on the same day.

Your CRA “remitter type” determines your specific schedule, and you can confirm it in your CRA My Business Account.

5. How to Make the Payment

CRA remittances can be paid in several ways:

• Through your business bank’s online bill payment system
• Directly through your CRA My Business Account under the Payroll section
• By your accountant or bookkeeper if they handle remittances on your behalf

Always ensure the payment references the correct remittance period (for example, “October 1–31, 2025”) so CRA applies it properly.

6. Year-End Implications

Every payroll deduction and employer contribution is summarized on each employee’s T4 slip at year-end.
If CRA’s records don’t match the amounts you’ve remitted, it can trigger a variance notice or penalties.

To avoid this, keep a clear audit trail — payroll registers, CRA statements, and your T4 summaries should all reconcile cleanly.

Final Thought

Payroll is one of the easiest things to automate, but one of the hardest to fix if done incorrectly.
By understanding how deductions and contributions flow to the CRA, you’ll avoid most compliance headaches long before they start.

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