Income tax gets all the attention, but for most Canadians earning under six figures, the deductions that make a pay stub confusing are the other three: CPP, CPP2 and EI. They behave nothing like income tax. They are flat-rate rather than progressive, they are capped, and once you hit the cap they simply stop — which is why a lot of people notice their September paycheque is bigger than their March one and assume payroll made a mistake.
Here is what each one is, what it costs in 2026, and why the timing works the way it does.
Canada Pension Plan (CPP)
CPP is a mandatory contributory pension. You pay in while you work, and you draw a monthly benefit in retirement based on how much and how long you contributed. It is not a tax in the ordinary sense — it buys you a specific future entitlement — but it comes off your pay the same way.
For 2026 the employee contribution works like this:
- The first $3,500 of annual earnings is exempt. This is the "basic exemption" and it has not moved in decades.
- Above that, you contribute 5.95% of earnings up to the first ceiling, the Year's Maximum Pensionable Earnings (YMPE), which is $74,600 for 2026.
- That produces a maximum employee contribution of $4,230.45 for the year.
Your employer pays an identical amount alongside you — so the true cost of your CPP coverage is roughly double what appears on your stub. If you are self-employed you pay both halves yourself, which is the single biggest financial surprise for new contractors.
CPP2: the second ceiling
CPP2 is the newer piece and the one that catches people out. As part of the CPP enhancement, a second earnings ceiling was introduced above the YMPE. Earnings between the first ceiling and the second are subject to an additional contribution.
For 2026:
- The second ceiling — the Year's Additional Maximum Pensionable Earnings (YAMPE) — is $85,000.
- Earnings between $74,600 and $85,000 attract a 4% contribution.
- That is a maximum of $416.00 for the year, again matched by your employer.
So if you earn $85,000 or more in 2026, your total CPP-family contribution is $4,230.45 + $416.00 = $4,646.45. If you earn $74,600 or less, you pay no CPP2 at all.
The point of CPP2 is that the enhanced CPP aims to replace a larger share of pre-retirement income than the original plan did, and that requires collecting on a band of earnings the original plan ignored. You are paying more, but you are also accruing a larger future benefit. Whether that is a good trade depends on how long you live and what else you would have done with the money — which is a genuine open question, not one we will pretend to settle here.
Employment Insurance (EI)
EI funds unemployment benefits, plus sickness, maternity, parental and compassionate-care benefits. For 2026:
- The employee premium rate is 1.63% of insurable earnings.
- Maximum insurable earnings are $68,900.
- The maximum employee premium is therefore $1,123.07.
- There is no basic exemption — EI applies from the first dollar.
Employers pay 1.4 times the employee premium, so the employer side is larger than the employee side. Note that the EI ceiling ($68,900) is lower than the CPP ceiling ($74,600); the two stop at different points in the year, which is part of why the arithmetic feels arbitrary.
Quebec is different
If you work in Quebec, three of these numbers change. You contribute to the Québec Pension Plan (QPP) rather than CPP, at a slightly higher rate of 6.3%. You also pay a separate premium to the Québec Parental Insurance Plan (QPIP), which funds the province's own parental leave. Because Quebec funds parental benefits itself, your EI rate drops to 1.30% instead of 1.63%. The three changes partly offset each other. Our Quebec take-home pay calculator applies all of them, along with the federal abatement.
Why your deductions stop partway through the year
This is the mechanic that generates the most confusion. CPP and EI are annual maximums collected through the year, not fixed percentages of every cheque forever. Once you have contributed the maximum, contributions stop until January.
Suppose you earn $110,000. Your EI maximum ($1,123.07) is reached once you have been paid $68,900 — a little over seven months in. Your CPP and CPP2 maximums are reached once you have been paid $85,000, around the start of October. From that point your take-home pay jumps, because roughly $5,769 of annual deductions have finished coming off. Then in January it resets and your net pay drops again.
Nothing has gone wrong. But if you budget from a single autumn pay stub, you will overestimate your income by a meaningful margin. This is also why "what is my monthly take-home pay" does not have one answer for higher earners — it genuinely varies across the year. Our take-home calculators show the annual average per period, which is the right number for budgeting, not the amount on any specific cheque.
What this costs at different salaries
| Salary | CPP | CPP2 | EI | Total |
|---|---|---|---|---|
| $40,000 | $2,171.75 | $0 | $652.00 | $2,823.75 |
| $60,000 | $3,361.75 | $0 | $978.00 | $4,339.75 |
| $74,600 | $4,230.45 | $0 | $1,123.07 | $5,353.52 |
| $85,000 and above | $4,230.45 | $416.00 | $1,123.07 | $5,769.52 |
Above $85,000 the total stops growing. That is a meaningful part of why average tax rates rise more slowly at higher incomes than headline bracket rates suggest — the payroll deductions are regressive in structure even though income tax is progressive.
Are these deductible?
Partly, and the treatment differs. The enhanced portion of CPP (including CPP2) is claimed as a deduction from income, while the base portion of CPP and your EI premiums generate non-refundable tax credits. A deduction reduces the income you are taxed on; a credit reduces the tax itself at the lowest bracket rate. This is handled automatically when you file, and it is one of the reasons a simple "salary minus deductions minus bracket tax" estimate never quite matches a real return.
The practical takeaways
- Budget from your annual take-home, not from a single pay stub, especially if you earn over about $69,000.
- If you crossed $74,600 in 2026, you paid CPP2 — check that your employer applied it, because it is still relatively new.
- If you changed jobs mid-year, both employers may have restarted the maximums from zero, meaning you over-contributed. Over-contributed CPP and EI are refunded when you file. It is worth checking; it is not automatic in the sense of being flagged to you.
- If you are self-employed, budget for both halves of CPP. That is the number that surprises people.
You can see all of this applied to your own salary with our CPP & EI contribution calculator, or in the full picture including income tax on the take-home pay calculators.
Frequently asked questions
Do I have to pay CPP2 in 2026?
Only if you earn more than $74,600. CPP2 applies at 4% to earnings between $74,600 and $85,000, for a maximum of $416.00 in 2026. Below the first ceiling you pay no CPP2 at all.
Why did my take-home pay increase in the autumn?
You almost certainly hit the annual CPP and EI maximums. Once you have contributed the maximum for the year, those deductions stop until January, so your net pay rises for the remaining cheques and then falls again in the new year.
Can I opt out of CPP or EI?
Not as a regular employee. CPP and EI are mandatory on employment income. Employees aged 65 to 70 who are already receiving a CPP retirement pension can elect to stop contributing by filing form CPT30 with their employer. Self-employed people are not covered by regular EI but can opt into EI special benefits.
What happens if I changed jobs and paid CPP twice?
Each employer withholds as though it were your only job, so you can exceed the annual maximum. The over-contribution is credited or refunded when you file your tax return. Check your T4s against the annual maximums if you had more than one employer in a year.
Sources
- Canada Revenue Agency — CPP contribution rates, maximums and exemptions — CPP and CPP2 rates, YMPE and YAMPE
- Canada Revenue Agency — EI premium rates and maximums — EI rate and maximum insurable earnings
- Retraite Québec — QPP contributions — QPP rate and Quebec-specific treatment
Written by the Calcova team and last checked against the sources above on 9 September 2026. This is general information about how the rules work, not personal tax or financial advice — see our disclaimer.
Related
CPP & EI calculator · CPP2 calculator · Marginal vs average tax rate · Ontario take-home pay