If you have ever looked at your payslip and wondered why the number at the bottom is so much less than your actual salary, you are not alone. Besides income tax, there are two other big deductions that come off every paycheque: CPP (Canada Pension Plan) contributions and EI (Employment Insurance) premiums.
Most people know these exist but have no idea how they are calculated, when they stop, or what they actually get in return. Let us fix that.
What Is CPP and Why Do You Pay It?
The Canada Pension Plan is a mandatory retirement savings programme for nearly all working Canadians. Every time you get paid, a percentage of your earnings is deducted and sent to the CPP fund. Your employer pays an equal amount. When you retire (as early as age 60 or as late as 70), you receive a monthly pension based on how much you contributed during your working years.
Think of it as a forced savings plan for retirement. The government takes the money now so that you have guaranteed income later. The amount you receive in retirement depends on how much you earned and contributed over your career, and when you start collecting.
For 2025, the numbers work like this:
- Basic exemption: $3,500 per year — you do not pay CPP on the first $3,500 you earn
- First earnings ceiling (YMPE): $71,300 — you pay CPP1 contributions on earnings between $3,500 and $71,300
- CPP1 employee rate: 5.95%
- Maximum CPP1 employee contribution: approximately $4,034
- Second earnings ceiling (YAMPE): $81,200 — you pay CPP2 contributions on earnings between $71,300 and $81,200
- CPP2 employee rate: 4%
- Maximum CPP2 employee contribution: approximately $396
Your employer matches every dollar of your contributions. So if you pay the maximum of about $4,430 (CPP1 + CPP2 combined), your employer also pays $4,430. The total going into CPP on your behalf is nearly $8,860 a year.
Once you hit the maximum contribution for the year, CPP deductions stop and your take-home pay goes up for the rest of the year. If you are paid biweekly, you might notice your paycheque gets a bit bigger sometime around October or November. That is because you have maxed out your CPP for the year.
You can see exactly how much CPP comes off your specific salary using our CPP calculator.
What Is CPP2?
CPP2 is relatively new — it started in 2024 as part of the CPP enhancement programme. It is an additional contribution on earnings between the first ceiling ($71,300) and the second ceiling ($81,200). The rate is 4%, and both employees and employers pay it.
If you earn $75,000, for example, you pay CPP1 contributions on income from $3,500 to $71,300, and then CPP2 contributions on income from $71,300 to $75,000. The CPP2 portion would be about $148 for the year.
If you earn less than $71,300, CPP2 does not affect you at all. It only kicks in above the first ceiling.
What Do You Actually Get From CPP?
The maximum CPP retirement pension for someone starting at age 65 in 2025 is about $1,364 per month (roughly $16,375 per year). However, most people do not receive the maximum because you need to have contributed at or near the maximum for most of your working life.
The average CPP retirement pension is closer to $830 per month. That is not enough to live on by itself, which is why financial advisors always recommend having other savings like RRSPs and TFSAs as well.
You can start collecting CPP as early as age 60, but your payments will be permanently reduced by 0.6% for each month before your 65th birthday. If you start at 60, that is a 36% reduction. On the flip side, if you delay until 70, your payments increase by 0.7% per month, for a total increase of 42%.
CPP also provides disability benefits if you become unable to work, and survivor benefits for your spouse and children if you pass away. It is more than just a retirement plan.
What Is EI and Why Do You Pay It?
Employment Insurance is a programme that provides temporary income if you lose your job through no fault of your own. It also covers maternity and parental leave, sickness benefits, and compassionate care leave. Every employee in Canada pays EI premiums, and your employer pays 1.4 times what you pay.
For 2025, the EI numbers are:
- Maximum insurable earnings: $65,700
- Employee premium rate: 1.64%
- Maximum annual employee premium: approximately $1,077
- Employer rate: 2.296% (1.4 times the employee rate)
Like CPP, once you have paid the maximum for the year, EI deductions stop. If you earn over $65,700, you will hit the cap before the year is over and see a bump in your take-home pay.
If you live in Quebec, EI premiums are slightly lower because Quebec runs its own parental insurance plan (QPIP). Quebec employees pay a separate QPIP premium instead of the parental portion of EI.
Check your exact EI deductions with our EI premium calculator.
What Do You Get From EI?
If you lose your job and qualify for EI, you can receive up to 55% of your average insurable earnings, to a maximum of about $695 per week in 2025. Benefits typically last between 14 and 45 weeks, depending on the unemployment rate in your region and how many hours you worked before losing your job.
To qualify for regular EI benefits, you generally need between 420 and 700 insurable hours in the past 52 weeks, depending on your region's unemployment rate. Areas with higher unemployment have lower hour requirements.
EI also covers:
- Maternity benefits: up to 15 weeks for the birthing parent
- Parental benefits: up to 35 weeks (standard) or 61 weeks (extended) that can be shared between parents
- Sickness benefits: up to 26 weeks if you cannot work due to illness, injury, or quarantine
- Compassionate care: up to 26 weeks to care for a gravely ill family member
If you are planning for parental leave, our maternity and parental leave calculator can help you estimate your EI payments and plan your finances.
For general EI benefit estimates, use our EI benefits calculator.
How These Deductions Show Up on Your Pay Stub
Your pay stub should show separate line items for CPP contributions and EI premiums. If you are paid biweekly, you might see something like:
- CPP: $155.00
- EI: $41.50
- Federal Tax: $350.00
- Provincial Tax: $200.00
These are just examples — your actual amounts depend on your salary and province. If you want to verify that your deductions are correct, our payroll calculator lets you enter your gross pay and see exactly what should be deducted.
Can You Get Any of This Money Back?
Sort of. Both CPP and EI contributions generate tax credits on your return. The employee portion of CPP contributions qualifies for a non-refundable tax credit at the lowest federal rate (15%). The same goes for EI premiums. So while you do not get all the money back, you do get a partial tax benefit that reduces your income tax owing.
If you overpay CPP or EI — which can happen if you have multiple employers in a year — the CRA will refund the excess when you file your tax return.
The Bottom Line
CPP and EI are not just random deductions that shrink your paycheque. CPP builds your retirement income, and EI provides a safety net if you lose your job, get sick, or take parental leave. Understanding how they work helps you make sense of your pay and plan your finances better.
Want to see a full breakdown of every deduction on your pay? Use our free salary calculator to see exactly how much CPP, EI, federal tax, and provincial tax come off your gross income. It takes about thirty seconds and gives you a clear picture of where your money goes.