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CPP and EI are the two mandatory contributions on every Canadian paycheque, alongside tax. Unlike tax, both fund specific programs you’ll draw benefits from later. This guide explains what each one actually does, how much you’ll eventually receive, and what changes if you’re self-employed or switch jobs.
CPP, Your Future Retirement Pension
The Canada Pension Plan is a contribution toward your own retirement income. You contribute 5.95% of earnings between $3,500 and $74,600 (base CPP), plus an additional 4% on earnings between $74,600 and $85,000 (CPP2, introduced in 2024). Your contributions build toward a monthly pension you can start collecting as early as age 60.
When to Start Collecting CPP
You can start as early as age 60, but your monthly amount is permanently reduced by roughly 0.6% for every month before age 65, taking it at 60 means a substantially smaller monthly pension for life. Waiting past 65, up to age 70, permanently increases your monthly amount instead, by roughly 0.7% per month. The right choice depends on your health, other retirement income, and how long you expect to need the pension. There’s no universally correct answer.
EI, Short-Term Income Protection
Employment Insurance provides temporary income if you lose your job, take parental/maternity leave, get sick, or care for a critically ill family member. You pay 1.63% of insurable earnings up to $68,900, a maximum of $1,123.07 a year. Unlike CPP, EI has no equivalent long-term payout; it’s designed purely as short-term income replacement during specific qualifying situations.
Quebec: QPP and QPIP Instead
Quebec runs its own versions: QPP (at a slightly higher 6.30% base rate) replaces CPP, and QPIP (Quebec Parental Insurance Plan) is a separate premium (0.430%) covering parental/maternity/paternity leave, which is why Quebec’s EI rate is reduced (1.30%) compared to the rest of Canada. This split exists because Quebec opted out of the federal EI program’s parental benefits and runs its own dedicated system instead.
What Your Employer Contributes
Employers match your CPP/QPP contribution dollar-for-dollar, and pay EI at 1.4× your rate (2.282% outside Quebec). This is a real cost to your employer but doesn’t come out of your paycheque. On a $75,000 salary in Ontario, that’s roughly $5,819 in combined employer contributions, money that goes toward your CPP record and the EI fund, but appears nowhere on your own pay stub.
CPP and EI for the Self-Employed
Self-employed individuals pay both the employee and employer portions of CPP, effectively double the rate, since there’s no separate employer to match it. EI works differently: it’s entirely optional for the self-employed. You can opt in specifically for special benefits (parental, maternity, sickness, or caregiving leave), but you won’t qualify for regular job-loss benefits, since by definition you can’t be “laid off” from your own business.
Where to Go Next
- Want CPP specifically? See our Calculate CPP Deductions.
- Want EI specifically? See our Estimate EI Premiums.
- Want both calculated together? Use our CPP & EI Calculator.
- New to payroll overall? Start with our Canadian Payroll Guide.
Frequently asked questions
Do I get my CPP contributions back if I never claim benefits?
No, CPP is a pension plan, not a personal savings account. Benefits are paid out as a monthly pension starting at retirement age (as early as 60, or as late as 70 for a higher amount), not as a lump-sum refund of what you contributed.
What happens if I switch jobs partway through the year?
CPP and EI deductions restart with your new employer, since they have no automatic way to know what you already contributed at a previous job. If this results in overpaying beyond the annual maximum across both employers, you can claim the excess back when filing your tax return.
How much CPP pension will I actually receive at retirement?
It depends on how much and how long you contributed, and at what age you start collecting. The maximum monthly CPP retirement pension changes each year based on contribution history, most people receive well below the maximum, since it requires maximum contributions for 39+ years. Service Canada provides personalized estimates based on your actual contribution record.
Can I collect CPP early, and does it reduce my pension?
Yes, you can start as early as age 60, but your monthly amount is permanently reduced (roughly 0.6% for each month before age 65). Waiting past 65, up to age 70, permanently increases your monthly amount instead.
Do self-employed people pay CPP and EI differently?
Self-employed individuals pay both the employee and employer portions of CPP (effectively double the rate), since there’s no separate employer to match it. EI is optional for the self-employed. You can opt in for limited special benefits like parental or sickness leave, but you won’t qualify for regular job-loss benefits since you can’t be “laid off” from your own business.
Is EI the same as unemployment insurance?
EI (Employment Insurance) is the current, broader name. It covers job-loss benefits (what used to be called “unemployment insurance”) plus parental, maternity, sickness, and caregiving benefits, all under one program.