Global Payroll Services in Canada | Payroll Services

Canada payroll at a glance

Canadian payroll spans two layers of government and a distinct system in Quebec. From federal and provincial income tax to CPP, EI, QPP/QPIP and CRA remittances, compliance is detailed and jurisdiction-specific. We handle every filing to the CRA, Service Canada and Revenu Québec so your people are paid right, on time, every time.

5.95 %

CPP rate (employee & employer, each)

1.63 %

EI employee premium (1.30% in Quebec)

$ 18.15 /hr

Federal minimum wage (from 1 Apr 2026)

4 %

Minimum vacation pay (2 weeks)

Federal income tax brackets

Canadian payroll withholds income tax at source. Tax has two layers: federal tax (below) plus a separate provincial or territorial tax that every province sets itself — so the total rate depends on where the employee lives. Employers determine deductions from the employee’s federal and provincial TD1 forms.

The Basic Personal Amount (BPA) — up to $16,452 in 2026 — is the income everyone can earn tax-free. The federal brackets below are for the 2026 tax year.

The lowest federal rate, reduced to 14% for 2026. Applies after the Basic Personal Amount. A separate provincial tax is added on top.

Federal rate on the slice of taxable income in this band. Combined with provincial tax, effective rates are meaningfully higher.

Applies to income within this band. Thresholds are indexed annually to inflation (2.0% federal indexation for 2026).

Federal rate on income in this band. The Basic Personal Amount phases out across the top of the income scale.

Top federal rate on income above $258,482. With provincial tax and surtaxes, top combined marginal rates reach the high 40s to mid-50s percent depending on province.

Employment Cost Calculator

*Indicative figures only and not definitive legal advice. Local regulations change frequently. Consult an expert

Canada

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CPP & EI — the core payroll deductions

Alongside income tax, every Canadian pay run withholds two statutory deductions: the Canada Pension Plan (CPP) and Employment Insurance (EI). Employers match CPP and pay 1.4× the employee EI premium.

CPP — 5.95% each

Employees and employers each contribute 5.95% of pensionable earnings between the $3,500 basic exemption and the year’s maximum (YMPE), which is $74,600 for 2026. Maximum base contribution is $4,230.45 each.

CPP2 — second contribution

An additional 4% (employee and employer each) applies to earnings between the YMPE ($74,600) and the upper ceiling YAMPE ($85,000) for 2026 — up to $416 each. No basic exemption applies to CPP2.

EI — 1.63% employee

Employees pay 1.63% of insurable earnings up to the Maximum Insurable Earnings of $68,900 (2026) — a maximum premium of $1,123.07. In Quebec the rate is lower at 1.30%.

EI — 1.4× employer

Employers pay 1.4 times the employee premium — 2.282% outside Quebec — up to a maximum of $1,572.30 per employee for 2026.

Basic exemption — $3,500

The first $3,500 of annual earnings is exempt from CPP contributions. EI has no exemption but is capped at the Maximum Insurable Earnings.

Quebec runs its own (QPP)

Employees in Quebec contribute to the Quebec Pension Plan (QPP) instead of CPP, at a higher combined rate, plus the Quebec Parental Insurance Plan — see the Quebec card below.

2026 contribution ceilings & rates

$ 74,600

CPP max pensionable earnings (YMPE)

$ 85,000

CPP2 upper ceiling (YAMPE)

$ 68,900

EI max insurable earnings (MIE)

$ 4,230

Max CPP contribution (each side)

4 %

CPP2 rate (earnings $74.6k–$85k)

$ 3,500

CPP annual basic exemption

Provincial tax, Quebec & minimum wage

Payroll in Canada is run jurisdiction by jurisdiction. Provincial income tax, minimum wage and Quebec’s separate system all depend on where the employee works — these vary across the country.

Provincial / territorial tax

Each province and territory levies its own income tax with its own brackets on top of federal tax (e.g. Ontario runs 5.05% to 13.16% plus surtaxes). Employers apply the relevant provincial TD1 to calculate combined deductions.

Quebec — QPP, QPIP & RL-1

Quebec workers contribute to the Quebec Pension Plan (QPP) at a higher combined rate than CPP, plus the Quebec Parental Insurance Plan (QPIP: 0.430% employee / 0.602% employer for 2026). Quebec tax is remitted to Revenu Québec with a separate RL-1 slip.

Minimum wage — by jurisdiction

The federal minimum wage is $18.15/hour from 1 April 2026 (federally regulated sectors). Each province and territory sets its own minimum wage, adjusted on its own schedule — employers pay whichever is higher.

Remittance & reporting calendar

Canadian payroll runs on the Canada Revenue Agency (CRA) source-deduction system: employers withhold income tax, CPP and EI and remit them on a schedule set by the size of their payroll. Quebec employers remit provincial deductions separately to Revenu Québec.

Missing a remittance triggers CRA penalties, so the calendar below is the backbone of a compliant Canadian payroll.

Most employers remit source deductions (income tax + CPP + EI) by the 15th of the month following the pay. Quarterly remittance is available to small, compliant employers (due 15 Apr, 15 Jul, 15 Oct, 15 Jan).

Larger employers remit faster: Threshold 1 (average monthly withholding $25k–$100k) twice a month, and Threshold 2 (≥$100k) within three working days of each pay date.

Employers file T4 slips and the T4 Summary with the CRA and give T4s to employees by the last day of February following the tax year. For 2026 the deadline falls on Monday 2 March.

Quebec employers also file the RL-1 slip with Revenu Québec by the last day of February, reporting Quebec salary, QPP, QPIP and provincial tax separately from the federal T4.

An ROE must be issued to Service Canada whenever an employee has an interruption of earnings (the 7-day rule) — on termination, leave or layoff — usually within 5 calendar days via ROE Web. It drives the employee’s EI eligibility.

Canada’s payroll tax year is the calendar year (1 January to 31 December). CPP, EI and tax ceilings reset each January, and annual T4/RL-1 reporting keys off year-end.

Vacation, holidays & workers’ comp

Beyond pay and statutory deductions, Canadian employers must fund vacation pay, statutory holidays and workers’ compensation. Entitlements are largely set by each province or territory’s employment standards, so they vary by where the employee works.

The standard minimum is 2 weeks’ vacation (4% of earnings), rising to 3 weeks (6%) after five years, and 4 weeks (8%) after ten years under federal standards. Provincial minimums follow a similar pattern with local variations.

Paid statutory holidays vary by jurisdiction — typically 9 in Ontario and Alberta, 10 in the federally regulated sector and BC, fewer in some provinces. Holiday pay rules and eligibility differ by province.

Workers’ compensation is 100% employer-funded with no employee deduction. It is administered provincially (WSIB in Ontario, WorkSafeBC in BC, CNESST in Quebec, WCB elsewhere) at rates that vary by province and industry risk.

Quebec funds parental benefits through QPIP rather than EI, with 2026 rates of 0.430% (employee) and 0.602% (employer) on insurable earnings up to $103,000 — which is why Quebec’s EI rate is lower than the rest of Canada.

Statutory leaves — maternity, parental, sick and others — are set by federal or provincial employment standards depending on the sector, and payroll must track entitlements and any top-up arrangements.

Employers operating in Quebec must be able to issue payslips and communicate in French, and handle the parallel federal/provincial reporting — a practical reason many companies outsource Canadian payroll.

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Talk to a TopSource expert about running accurate, compliant payroll across Canada — federal and provincial tax, CPP, EI, Quebec QPP/QPIP and CRA reporting handled end to end.

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The Canadian labor market is governed by comprehensive payroll laws that emphasize employee rights and benefits. TopSource offers expert guidance and solutions for businesses managing their workforce in Canada. We assist with payroll processing, legal compliance, and human resource management, ensuring that businesses can focus on their core operations while maintaining a compliant and efficient workforce in Canada.

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Canada payroll: frequently asked questions

The questions our customers ask most often when setting up or switching their Canadian payroll. For anything specific to your business, our Canada payroll specialists are a phone call away.

Payroll outsourcing in Canada means handing the full run to a specialist provider — calculating salaries, withholding federal and provincial income tax, deducting CPP (or QPP in Quebec) and EI, remitting source deductions to the CRA (and Revenu Québec for Quebec employees) on schedule, issuing T4 and RL-1 slips by the end of February, and producing Records of Employment. A good provider is your interface to the CRA, Service Canada and Revenu Québec so you avoid remittance penalties. TopSource runs Canadian payroll under your existing entity, or pairs it with our EOR service if you don’t have one.

Canada has two layers of income tax withheld at source: federal tax and a separate provincial or territorial tax. For 2026 the federal brackets are 14% up to $58,523, 20.5% to $117,045, 26% to $181,440, 29% to $258,482 and 33% above. Each province adds its own brackets on top, so total tax depends on where the employee lives. The Basic Personal Amount (up to $16,452 in 2026) is tax-free, and deductions are set from the employee’s federal and provincial TD1 forms.

Canada Pension Plan (CPP): employee and employer each contribute 5.95% of pensionable earnings between the $3,500 exemption and the $74,600 ceiling (YMPE), to a maximum of $4,230.45 each. CPP2 adds 4% on earnings from $74,600 to $85,000 (up to $416 each). Employment Insurance (EI): employees pay 1.63% up to $68,900 of insurable earnings (max $1,123.07), and employers pay 1.4× that. Quebec rates differ — see below.

Quebec runs a parallel system. Employees contribute to the Quebec Pension Plan (QPP) instead of CPP, at a higher combined rate, and to the Quebec Parental Insurance Plan (QPIP: 0.430% employee / 0.602% employer for 2026). Because QPIP funds parental benefits, Quebec’s EI rate is lower (1.30%). Quebec income tax and source deductions are remitted to Revenu Québec, and employers issue a separate RL-1 slip alongside the federal T4.

Regular remitters send source deductions (tax + CPP + EI) to the CRA by the 15th of the following month; larger employers remit twice monthly or within three working days of payday. T4 slips and the T4 Summary must be filed with the CRA and given to employees by the last day of February — 2 March for 2026. Quebec employers file the RL-1 with Revenu Québec on the same deadline.

A Record of Employment is the form employers must issue whenever an employee has an interruption of earnings — a termination, layoff or leave triggering the 7-day rule. It is filed with Service Canada (usually within five calendar days via ROE Web) and determines the employee’s eligibility for EI benefits. It must report insurable earnings including vacation and statutory holiday pay.

Under federal standards, employees get 2 weeks’ vacation (4% vacation pay), rising to 3 weeks (6%) after five years and 4 weeks (8%) after ten. Statutory holidays range from about 6 to 10 paid days depending on the jurisdiction (10 in the federal sector and BC, 9 in Ontario and Alberta). Exact entitlements are set by each province’s employment standards.

To open a CRA payroll account (and a Revenu Québec account for Quebec) and act as the legal employer, you need a Canadian entity or a partner that already holds these registrations. A Global Payroll provider like TopSource can run compliant payroll under your existing Canadian entity. If you don’t have one, pair it with our Canada Employer of Record service to hire and pay staff with no entity setup.

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Canada payroll at a glance