2025–2026 Payroll Updates: Keep Your Team Paid Right and Happy

If you are business owner with at least one employee on payroll, understanding Canada’s payroll contributions — particularly CPP (Canada Pension Plan), EI (Employment Insurance)— is essential for accurate payroll and financial planning. Each year, contribution rates, salary maximums, and wage requirements are adjusted. Keeping up with these changes helps you manage payroll costs, plan your cash flow, and remain compliant.

Here’s a breakdown of what to expect for 2025 versus the upcoming 2026 updates.

Canada Pension Plan (CPP)

CPP contributions are calculated as a percentage of an employee’s annual salary, but only up to a certain limit. Once this cap is reached, no further contributions are required for the calendar year.

2025 CPP Rates:

• 5.95 percent on annual salary up to $71,300 (gross salary)

• 4 percent on salary between $71,300 and $81,000

2026 CPP Forecast:

• Exact numbers will be announced in November, but historically, the annual salary cap increases slightly each year.

• The contribution percentage is unlikely to change significantly.

Key Point: Once the salary cap is reached, no further contributions are required for that calendar year.

Employment Insurance (EI)

EI contributions are also calculated as a percentage of an employee’s annual salary, with a maximum limit per year.

2025 EI Rates:

• 2.296 percent on annual salary up to $65,700

2026 EI Forecast:

• Expected to decrease slightly to 2.282 percent on an annual salary up to $68,900

Key Point: Similar to CPP, once the EI contribution cap is reached, no additional deductions are taken for the year.

Minimum Wage Increase

Beginning October 27, 2025, the minimum wage will rise to $18.50 per hour nationwide. This increase, announced jointly by federal and provincial authorities, is designed to help workers cope with inflation, reduce income inequality, and support low-income households struggling with high living costs.

What this means for your business:

• Ensure all employees are paid at least the new minimum wage starting on the effective date.

• Update payroll systems to reflect the change and avoid compliance issues.

• Factor the increase into project budgets, labour costs, and overall business planning.

What This Means for Your Business

1. Plan Payroll Accurately: Make sure your payroll calculations reflect the updated rates, salary caps, and minimum wage changes. This avoids over- or under-paying contributions.

2. Monitor Caps: Both CPP and EI contributions stop once the annual limits are reached. Tracking this helps you avoid unnecessary deductions.

3. Prepare for Wage Increases: The higher minimum wage may affect labour budgets, especially for hourly employees. Planning ahead ensures smooth cash flow management.

   
   

Keeping up with these annual changes ensures your business remains compliant, your employees’ contributions are accurate, and you’re paying at least the new minimum wage. If you’re unsure about how to apply these rates or calculate maximum contributions, consulting a bookkeeping or accounting professional can save you time and prevent errors.