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 both Canada Pension Plan (CPP) and Employment Insurance (EI) contribution rates and maximums rise. These 2026 payroll tax increases Canada workers face mean higher contributions throughout the year, with workers earning $85,000 potentially paying up to $262 more annually. Understanding these changes helps you plan your budget and maximize your benefits.
Why These Changes Matter
The 2026 payroll tax increases Canada workers face reflect ongoing enhancements to CPP benefits and adjustments to EI premiums. While higher deductions reduce take-home pay, they also increase future CPP retirement benefits and maintain EI coverage. For a worker earning $85,000, the combined increase of approximately $262 per year translates to about $5 per week less in take-home pay, but provides enhanced retirement security and unemployment protection.
2026 CPP Contribution Changes
The Canada Pension Plan continues its multi-year enhancement program, with 2026 bringing increases to both contribution rates and maximum pensionable earnings:
CPP Contribution Rate
Increase: The employee contribution rate rises from 5.95% to 6.00% (employers match this rate).
CPP Maximum Pensionable Earnings
Increase: Maximum earnings subject to CPP rise by $1,600, increasing maximum contributions.
CPP Enhancement (Year 2 Maximum)
Increase: The second earnings ceiling for CPP enhancement also increases, affecting higher earners.
2026 EI Premium Changes
Employment Insurance premiums also increase in 2026, affecting all workers:
EI Premium Rate
Increase: Employee EI rate rises from 1.58% to 1.62% (employers pay 1.4x this rate).
EI Maximum Insurable Earnings
Increase: Maximum insurable earnings rise by $1,800, increasing maximum EI premiums.
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 | $2,975 | $3,000 | +$25 | $790 | $810 | +$20 | +$45 |
| $65,000 | $3,868 | $3,900 | +$32 | $1,027 | $1,053 | +$26 | +$58 |
| $70,100 (max CPP) | $4,075 | $4,206 | +$131 | $1,107 | $1,136 | +$29 | +$160 |
| $85,000 | $4,075 | $4,206 | +$131 | $1,107 | $1,136 | +$29 | +$160 |
| $100,000 | $4,075 | $4,206 | +$131 | $1,107 | $1,136 | +$29 | +$160 |
Note: CPP contributions are capped at maximum pensionable earnings ($70,100 in 2026). EI contributions are capped at maximum insurable earnings ($65,000 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 increases Canada workers face by pay frequency helps understand weekly or bi-weekly impact:
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
The CPP enhancement program, which began in 2019, continues to phase in through 2025. The 2026 payroll tax increases Canada workers face are part of this broader enhancement:
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 $15-16 less per month in net pay.
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 6.00% and EI at 1.62% on the appropriate earnings bases.
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 (1.62% × 1.4 = 2.27%). For a worker earning $85,000, employers pay approximately $160 more in 2026, matching the employee increase.
Frequently Asked Questions
The 2026 payroll tax increases Canada workers face take effect January 1, 2026. Your first paycheque of 2026 will reflect the new CPP rate (6.00%) and EI rate (1.62%). Employers must update their payroll systems to ensure correct deductions from the first pay period of 2026.
The increase depends on your income. Workers earning $85,000 will pay approximately $160 more annually ($131 CPP + $29 EI). Lower earners pay less, while higher earners pay the same maximum amounts due to contribution caps. Use the income table above to estimate your specific increase.
For most workers, the impact is modest. A $85,000 earner will see about $3-4 less per week in take-home pay. However, these contributions increase your future CPP retirement benefits and maintain your EI coverage, providing value for the higher 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 (12.00% total in 2026), 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. The higher contributions increase your future CPP retirement benefits.
CPP enhancement rates are now stable at 6.00% (phased in through 2025), but maximum pensionable earnings typically increase annually with inflation. EI rates are reviewed annually and can change based on the EI Operating Account balance. 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 increases Canada workers face affect your paycheque and planning accordingly is important for financial management. 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
Let's discuss how the 2026 payroll tax increases affect you and develop a plan to manage the impact
Need help with other payroll matters? We also assist with payroll processing, personal tax preparation, and tax planning. Schedule an appointment with our Vancouver accounting team today.
