5 February 2026
CPP & EI Increases: Understanding 2026 Payroll Tax Changes
Effective January 1, 2026, Canadian workers will see increased deductions from their paycheques as CPP maximum pensionable earnings rise and EI maximum insurable earnings increase. While the CPP contribution rate remains at 5.95%, higher maximums mean workers earning above certain thresholds will pay more. The EI premium rate actually decreases slightly, but higher maximum insurable earnings result in increased maximum premiums. Understanding these changes helps you plan your budget and maximize your benefits.
Why These Changes Matter
The 2026 payroll tax changes Canada workers face reflect increases to maximum pensionable earnings for CPP and maximum insurable earnings for EI. While the CPP rate stays at 5.95%, the maximum pensionable earnings increase from $71,300 to $74,600, meaning higher earners pay more. EI premiums actually decrease slightly (from $1.64 to $1.63 per $100), but the maximum insurable earnings increase from $65,700 to $68,900, resulting in higher maximum premiums. For a worker earning $85,000, the combined increase is approximately $196 per year, translating to about $3.77 per week less in take-home pay.
2026 CPP Contribution Changes
The Canada Pension Plan continues its multi-year enhancement program, with 2026 bringing increases to maximum pensionable earnings while the contribution rate remains unchanged:
CPP Contribution Rate
No Change: The employee contribution rate remains at 5.95% (employers match this rate). The rate stays the same as 2025.
CPP Maximum Pensionable Earnings
Increase: Maximum earnings subject to CPP rise by $3,300 (4.6% increase), increasing maximum contributions.
CPP2 (Second Additional Contribution)
Increase: The second earnings ceiling for CPP2 increases, affecting earnings between $74,600 and $85,000 at 4.00% rate.
2026 EI Premium Changes
Employment Insurance premiums see mixed changes in 2026, with the rate decreasing slightly but maximum insurable earnings increasing:
EI Premium Rate
Decrease: Employee EI rate decreases from $1.64 to $1.63 per $100 of insurable earnings (employers pay 1.4x this rate).
EI Maximum Insurable Earnings
Increase: Maximum insurable earnings rise by $3,200 (4.9% increase), increasing maximum EI premiums despite the rate decrease.
Real-World Impact: How Much More Will You Pay?
Understanding the actual dollar impact of the 2026 payroll tax increases Canada workers face helps with budgeting:
Annual Contribution Increases by Income Level
| Annual Income | 2025 CPP | 2026 CPP | CPP Increase | 2025 EI | 2026 EI | EI Increase | Total Increase |
|---|---|---|---|---|---|---|---|
| $50,000 | $2,767.50 | $2,767.50 | $0 | $820.00 | $815.00 | -$5.00 | -$5.00 |
| $65,000 | $3,659.25 | $3,659.25 | $0 | $1,077.48 | $1,059.50 | -$17.98 | -$17.98 |
| $74,600 (max CPP) | $4,034.45 | $4,230.45 | +$196.00 | $1,077.48 | $1,123.07 | +$45.59 | +$241.59 |
| $85,000 | $4,034.45 | $4,230.45 | +$196.00 | $1,077.48 | $1,123.07 | +$45.59 | +$241.59 |
| $100,000 | $4,034.45 | $4,230.45 | +$196.00 | $1,077.48 | $1,123.07 | +$45.59 | +$241.59 |
Note: CPP contributions are capped at maximum pensionable earnings ($74,600 in 2026). Workers earning between $74,600 and $85,000 also pay CPP2 contributions at 4.00%. EI contributions are capped at maximum insurable earnings ($68,900 in 2026). Workers earning above these thresholds pay the same maximum amounts regardless of higher income.
Per-Paycheque Impact
Breaking down the 2026 payroll tax changes Canada workers face by pay frequency helps understand weekly or bi-weekly impact. Note that lower earners may see a slight decrease due to the EI rate reduction, while higher earners see increases:
Weekly Paycheques
Income: $85,000/year ($1,635/week)
Bi-Weekly Paycheques
Income: $85,000/year ($3,269/bi-weekly)
Monthly Paycheques
Income: $85,000/year ($7,083/month)
Understanding CPP Enhancement and CPP2
The CPP enhancement program, which began in 2019, continues with a second tier (CPP2) for higher earners. The 2026 payroll tax changes Canada workers face reflect increases to maximums while rates remain stable:
CPP Enhancement Overview
Planning Strategies for 2026 Payroll Tax Increases
While the 2026 payroll tax increases Canada workers face reduce take-home pay, there are strategies to minimize impact and maximize benefits:
Budget Adjustment
Plan for the reduced take-home pay by adjusting your monthly budget. For a $85,000 earner, expect approximately $20 less per month in net pay. Lower earners may see a slight decrease due to the EI rate reduction.
Maximize Retirement Savings
Since CPP contributions increase retirement benefits, view the higher contributions as forced retirement savings that will pay off in retirement.
Review Pay Stubs
Verify your employer has correctly implemented the 2026 rates. Check that CPP is calculated at 5.95% (unchanged) on earnings up to $74,600, CPP2 at 4.00% on earnings $74,600-$85,000, and EI at $1.63 per $100 on earnings up to $68,900.
Tax Planning
CPP and EI contributions are tax-deductible, reducing your taxable income. The higher contributions mean larger tax deductions, partially offsetting the impact.
Employer Impact: What Businesses Need to Know
Employers also face increased costs from the 2026 payroll tax increases Canada workers face, as they match CPP contributions and pay higher EI premiums:
Employer Contribution Increases
Employee Contributions
Employer Contributions
Note: Employers pay 1.4x the employee EI rate ($1.63 × 1.4 = $2.28 per $100). For a worker earning $85,000, employers pay approximately $241.59 more in 2026 (matching the employee increase), plus CPP2 contributions if applicable.
Frequently Asked Questions
The 2026 payroll tax changes Canada workers face take effect January 1, 2026. Your first paycheque of 2026 will reflect the new CPP maximum ($74,600), CPP2 ceiling ($85,000), and EI maximum ($68,900). Note that the CPP base rate remains 5.95% (unchanged) and the EI rate actually decreases slightly to $1.63 per $100. Employers must update their payroll systems to ensure correct deductions from the first pay period of 2026.
The change depends on your income. Workers earning $85,000 will pay approximately $241.59 more annually ($196 CPP + $45.59 EI). Lower earners may actually see a slight decrease due to the EI rate reduction. Higher earners pay maximum amounts due to contribution caps. Workers earning between $74,600 and $85,000 also pay CPP2 contributions. Use the income table above to estimate your specific change.
For most workers, the impact varies by income level. A $85,000 earner will see about $4.65 less per week in take-home pay. Lower earners may see a slight decrease due to the EI rate reduction. However, these contributions increase your future CPP retirement benefits (including CPP2 benefits) and maintain your EI coverage, providing value for the contributions.
Yes, both CPP and EI contributions are tax-deductible, reducing your taxable income. The higher contributions in 2026 mean larger tax deductions, which partially offsets the impact on your take-home pay. Your T4 slip will show these deductions, and they're automatically factored into your tax return.
Self-employed individuals pay both the employee and employer portions of CPP (11.9% total for base CPP in 2026, plus 8% for CPP2 on earnings between $74,600 and $85,000), but they're not required to pay EI premiums unless they opt in. The CPP contribution is calculated on net self-employment income, and you can claim a tax credit for the employer portion. Maximum self-employed contributions: $8,460.90 base CPP + $832.00 CPP2. The higher contributions increase your future CPP retirement benefits.
CPP base rates are now stable at 5.95% (phased in through 2025), but maximum pensionable earnings typically increase annually with inflation. CPP2 rates are stable at 4.00% with ceilings that increase annually. EI rates are reviewed annually and can change based on the EI Operating Account balance. The 2026 EI rate actually decreased slightly. Expect small annual increases to maximums, but major rate changes are less likely now that CPP enhancement is complete.
Get Expert Help with 2026 Payroll Tax Increases
Understanding how the 2026 payroll tax changes Canada workers face affect your paycheque and planning accordingly is important for financial management. While CPP maximums increase and EI maximums rise, the CPP rate stays the same and EI rates actually decrease slightly. J. Wang Chartered Professional Accountant offers payroll services and tax planning to help individuals and businesses navigate these changes, ensure correct deductions, and optimize their tax situation.
Schedule Your Payroll Tax Consultation
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