The Canada Pension Plan (CPP)

It is an insurance program designed to help Canadians provide income for their retirement and it can also provide them with income if they become disabled.

CPP contributions are deducted from an employee's remuneration if that employee:

• is 18 years or older, but younger than 70;
• is in pensionable employment during the year; and
• does not receive a CPP or QPP the Quebec Pension Plan) retirement or disability pension.

Canada Pension Plan contributions are directly related to annual earnings. Each year, the basic exemption, maximum contribution limit, and benefits are adjusted according to the cost of living.

If you make less than the maximum annual pensionable earnings you can use the CPP contributions rates, maximums and exemptions chart, to determine how much CPP contributions to deduct.

If you're an employer:

• Canada Pension Plan (CPP) is one of the things you must deduct from employees' pay cheques.
• If you're a sole proprietor, you pay your Canada Pension Plan contribution as part of your income tax.
• As an employer, you must also contribute the same amount of CPP that you deduct from your employees' remuneration.

Employment Insurance (EI)

This insurance provides:

• temporary financial assistance to unemployed Canadians who have lost their job through no fault of their own, while they look for work or upgrade their skills.
• may provide assistance to Canadians who are sick, pregnant, or caring for a newborn or adopted child, as well as those who must care for a family member who is seriously ill with a significant risk of death

Types of Employment Insurance benefits

• Employment Insurance Regular Benefits
  - are available to individuals who lose their jobs through no fault of their own (for example, due to shortage of work, seasonal layoffs, or mass layoffs), or who upgrade their skills or are available for and able to work, but can’t find a job.
• Employment Insurance Maternity and Parental Benefits
  - provide support to individuals who are pregnant, have recently given birth, are adopting a child, or are caring for a newborn.
• Employment Insurance Sickness Benefits
  - are for individuals who are unable to work because of sickness, injury, or quarantine.
• Employment Insurance Compassionate Care Benefits
  - are available to people who have to be away from work temporarily to provide care or support to a family member who is gravely ill with a significant risk of death.
• Employment Insurance Fishing Benefits
  provide support to qualifying, self-employed fishers who are actively seeking work.

Manual calculation for EI

For the Employer:

a) To calculate the employee's EI premiums using the manual calculation method, follow these steps:

Step 1: Enter the employee's insurable earnings $_____
Step 2: Enter EI premium rate for the year (Go to EI Contribution rates and maximums chart for current and prior year rates)
Step 3: Multiply Step 1 by Step 2 = $_____

The result is the EI premium to be deducted for your employee.

b) The employer stops deducting EI premiums when the employee reaches the maximum insurable earnings ($42,300 for 2009) or the maximum employee premium for the year ($731.79 for 2009).

c) As an employer you must pay an EI premium payable that is 1.4 times the EI premium payable by each employee.

Example
EI premiums you deducted from your employees in the month $195.50
Your share of EI premiums (× 1.4) $273.70
Total amount you remit for EI premiums = $469.20