How to Calculate CPP

The Canada Pension Plan, or CPP, is a plan that workers contribute to while employed and receive benefits from when they retire or become disabled. All working people are required to contribute to the CPP, and provided you have contributed, you are eligible to receive CPP payouts starting at age 65 (though you can receive reduced payouts beginning at age 60). Employers and employees alike can calculate their CPP payments using base income and the current contribution rate.

Instructions

1. Calculate the pay period exemption. To do this, find the base annual exemption, which is set yearly by the government. Divide this annual exemption by the number of pay periods per year. For instance, if wages are paid 12 times per year, divide the base exemption by 12. As of 2009, the base exemption was $3,500 Canadian. You can find the current rates on the Canada Revenue Agency website.

2. Add together gross income plus the value of any taxable benefits paid for a single pay period. For instance, in the case of monthly pay, add together the base salary plus taxable benefits received for one month.

3. Subtract the pay period exemption from the total gross income for a pay period.

4. Find the CPP rate for the current year and multiply it by your result from the subtraction equation. The result is the employee’s CPP contribution per pay period. The employer must match the contribution. In 2009, the CPP rate was 4.95 percent. The current rate is always available on the Canada Revenue Agency site.

References

• Canada Revenue Agency: Manual Calculation for CPP
• Service Canada: What is CPP?

Resources

• Canada Revenue Agency