Is Paying CPP Mandatory for Self-Employed Individuals?


Canadian employees and their employers must each contribute a portion of their earnings to the Canadian Pension Plan, or CPP. When employees retire, they earn up to 25 percent of their average earnings for the past five years as their pension. Employees who do not take a pension until after they turn age 65 receive an increase in their maximum earnings, while those who take a pension before the age of 65 receive a reduction in their benefits. Self-employed individuals must contribute both the employer's and employee's share to the CPP.

Required Contributions

All employees, whether self-employed or working for an outside employer, must contribute to the Canadian Pension Plan, according to Gary White Insurance. If you are between the ages of 18 and 65 and are employed in any capacity, you must contribute to the plan each year. If you turn 65, become disabled or begin receiving payouts from the plan, you no longer have to contribute to it.


If you are employed by an outside employer, both you and the employer pay into the CPP. However, if you are self-employed, you must pay both the employer's and the employee's contribution to the CPP. In addition, if you hire any employees in your business, you must pay the employer's contribution to the CPP for each employee. Thus, self-employed persons have more expensive contributions to the CPP than a person employed by an outside agent. At the time of publication, the rate for an employer contribution and an employee contribution is 4.95 percent apiece, which means a self-employed person must contribute 9.9 percent of his individual earnings.

Early Retirement

At the time of publication, individuals may begin receiving retirement benefits at the age of 60 as long as they make less than $900 in the month prior to their first month of benefits. Starting in 2012, if a retired person gets a new job or begins earning more than $900 per month, he and his new employer must contribute to the CPP until he turns 65. Self-employed individuals must return to paying both the employer and employee contributions to the CPP in this situation.

Voluntary Contributions

Although self-employed individuals must contribute to the CPP until they reach the age of 65, contributions from the age of 65 to the age of 70 are voluntary. If a self-employed person chooses to contribute during these years, she must still contribute both the employer's and employee's share to the pension fund.

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