Statutory (or legislated) deductions
Statutory deductions are also called legislated deductions as they represent the payroll deductions that are mandatory. The following is a list of mandatory deductions that you need to be aware of when paying your employees.
Canada Pension Plan (CPP)
The Canada Pension Plan (CPP) is a retirement savings plan in which contributions are deducted from the income of employees between the ages of 18 and 69. Anyone over the age of 65 can choose to opt out of the program but otherwise employers must make the appropriate deductions for all their employees. The amount paid is based on the employee’s annual income. The following are the CPP rates for 2021:
- 5.45% of yearly income
- maximum employee and employer contributions: $3166.45 (each)
- maximum self-employed contributions: $6332.90
Quebec has its own system called the Quebec Pension Plan (QPP), which has the following rates:
- 5.90% of yearly income
- maximum employee and employer contributions: $3427.90 (each)
- maximum self-employed contributions: $6855.80
Employment Insurance (EI)
Employment insurance (EI) provides employees with temporary assistance if they find themselves without a job or need a leave of absence from work due to pregnancy, sickness, or caring for a family member. EI comes out of each pay cheque and is calculated according to income. In order to properly apply source deductions, you need to know the key rates for 2021:
- employee contribution: $1.58 per $100 earned
- maximum contribution: $56,300
Quebec also has a special EI program for parents called Quebec Parental Insurance Plan (QPIP), which is a program specifically for parents who need to take time off work for childcare. The rates for contributions were reduced in 2021 so that employees pay $1.18 per $100 earned towards QPIP (versus $1.20 per $100 in 2020). Employer contribution rates were also reduced to $1.65 per $100 earned (down from $1.67 per $100). Knowing these rates is very important as it is the employer’s responsibility to make sure that they are paid on time and in the correct amount.
Federal and provincial income taxes
Both federal and provincial income tax are statutory deductions that you, as the employer, have to submit for each employee. These payroll source deductions are mandatory, so making sure you understand the numbers is essential for your business. The federal income tax rates for 2021 are as follows:
- 15% on the first $49,020 of taxable income, plus
- 20.5% on the next $49,020 of taxable income (on the portion of taxable income over $49,020 up to $98,040), plus
- 26% on the next $53,939 of taxable income (on the portion of taxable income over $98,040 up to $151,978), plus
- 29% on the next $64,533 of taxable income (on the portion of taxable income over $151,978 up to $216,511), plus
- 33% of taxable income over $216,511
Provincial income tax rates for 2021 are as follows: Newfoundland and Labrador
- 8.7% on the first $38,081 of taxable income +
- 14.5% on the next $38,080 +
- 15.8% on the next $59,812 +
- 17.3% on the next $54,390 +
- 18.3% on the amount over $190,363
Prince Edward Island
- 9.8% on the first $31,984 of taxable income +
- 13.8% on the next $31,985 +
- 16.7% on the amount over $63,969
Nova Scotia
- 8.79% on the first $29,590 of taxable income +
- 14.95% on the next $29,590 +
- 16.67% on the next $33,820 +
- 17.5% on the next $57,000 +
- 21% on the amount over $150,000
New Brunswick
- 9.68% on the first $43,835 of taxable income +
- 14.82% on the next $43,836 +
- 16.52% on the next $54,863 +
- 17.84% on the next $19,849 +
- 20.3% on the amount over $162,383
Quebec
- 15% $45,105 or less
- 20% on more than $45,105 but not more than $90,200
- 24% on more than $90,200 but not more than $109,755
- 75% on more than $109,755
Ontario
- 5.05% on the first $45,142 of taxable income +
- 9.15% on the next $45,145 +
- 11.16% on the next $59,713 +
- 12.16% on the next $70,000 +
- 13.16% on the amount over $220,000
Manitoba
- 10.8% on the first $33,723 of taxable income +
- 12.75% on the next $39,162,
- 17.4% on the amount over $72,885
Saskatchewan
- 10.5% on the first $45,677 of taxable income +
- 12.5% on the next $84,829 +
- 14.5% on the amount over $130,506
Alberta
- 10% on the first $13,220 of taxable income +
- 12% on the next $26,244 +
- 13% on the next $52,488 +
- 14% on the next $104,976 +
- 15% on the amount over $314,928
British Columbia
- 5.06% on the first $42,184 of taxable income, +
- 7.7% on the next $42,185, +
- 10.5% on the next $12,497, +
- 12.29% on the next $20,757, +
- 14.7% on the next $41,860, +
- 16.8% on the next $62,937, +
- 20.5% on the amount over $222,420
Yukon
- 6.4% on the first $49,020 of taxable income +
- 9% on the next $49,020 +
- 10.9% on the next $53,938 +
- 12.8% on the next $348,022 +
- 15% on the amount over $500,000
Northwest Territories
- 5.9% on the first $44,396 of taxable income +
- 8.6% on the next $44,400 +
- 12.2% on the next $55,566 +
- 14.05% on the amount over $144,362
Nunavut
- 4% on the first $46,740 of taxable income +
- 7% on the next $46,740 +
- 9% on the next $58,498 +
- 11.5% on the amount over $151,978
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