CPP and CPP2 explained

The Canada Pension Plan (CPP) is a retirement pension that replaces part of your income once you retire. It is funded by contributions made by employees, employers and self-employed people through deductions on earnings. 

Each year, the CRA sets:

• The maximum pensionable earnings threshold – earnings over this threshold do not have CPP contributions deducted. For 2024 it is $68,500.
• The basic exemption amount – how much an individual can earn before having to pay CPP contributions. For 2024 it is $3,500.
• The contribution rate – the percentage of an employee’s earnings that both the employee and employer contribute. Self-employed people must pay both contributions.  For 2024 it is 5.95% (11.9% for self-employed people)

CCP2

In 2024, CRA launched the CPP enhancement, commonly referred to as CPP2. This is an additional CPP contribution on earnings above the maximum pensionable earnings of $68,500 up to $73,200.

The CPP2 contribution rate for employers and employees is 4% (8% for self-employed people), with a maximum CPP2 contribution of $188 ($376 for self-employed people). 

FAQ

My employee has reached the maximum contribution for the year, what do I do?
You can stop making the deductions. It’s important to keep track of this; although the employee will be able to claim a refund from CRA for overpaid contributions, you as the employer will not. 

My employee has two jobs, how do I calculate CPP?
The maximum pensionable earnings apply to each job an individual has. You will need to keep making deductions until the employee has reached the maximum contribution, regardless of contributions being made through other jobs. 

What do I do with CPP2 contributions? 
CPP2 contributions should be remitted the same way as CPP contributions. 

Do I have to report CPP2 contributions on an employee’s T4?
Yes. Employee’s CPP contributions should be reported in Box 16 of the T4, and any CPP2 contributions should be reported in Box 16a. If you did not deduct CPP2, then do not report an amount in Box 16a. 

I have employees in Quebec – is it the same for them?
Yes, but those employees will be making contributions to the QPP and QPP2. Note that the contribution rate is slightly higher under the QPP:

• Employee and Employer contribution rate: 6.4%
• Self-employed: 12.8%

The QPP2 rates and thresholds are the same as for the CPP2. The contribution rate for employers and employees is 4% (8% for self-employed people), with a maximum QPP2 contribution of $188 ($376 for self-employed people).