Glossary · Payroll
CPP
CPP is the Canada Pension Plan, a contributory public pension. In 2026 employees and employers each contribute 5.95% of pensionable earnings between the $3,500 basic exemption and the $74,600 YMPE, plus a second contribution, CPP2, of 4% on earnings between $74,600 and $85,000. Quebec has its own plan, the QPP.
Glossary / CPP · Also called Canada Pension Plan, CPP2
How it works
The employer deducts the employee's share from each pay, adds its own equal share, and remits both with income tax to the CRA. The basic exemption is spread across the year's pay periods. Once an employee's contributions reach the yearly maximum, deductions stop until January.
The 2026 maximums are $4,230.45 of base CPP and $416 of CPP2 for each of employee and employer. Contributions start at age 18; people aged 65 to 70 who are receiving a CPP pension can elect to stop contributing, and contributions end at 70. Self-employed people pay both shares themselves on their tax return.
Worked example: An employee earning $90,000 in 2026
Base CPP: 5.95% × ($74,600 - $3,500) = $4,230.45, the maximum. CPP2: 4% × ($85,000 - $74,600) = $416, also the maximum. The employee pays $4,646.45 for the year and the employer pays the same again.
An employee earning $40,000 pays 5.95% × ($40,000 - $3,500) = $2,171.75 and no CPP2.
| Earnings | Base CPP | CPP2 | Employee total |
|---|---|---|---|
| $40,000 | $2,171.75 | $0 | $2,171.75 |
| $90,000 | $4,230.45 | $416.00 | $4,646.45 |
In the US and in Canada
In Canada
In Quebec, employers deduct QPP instead, at 6.3% on the same earnings band in 2026, with QPP2 above it.
In AcboBooks
Canadian payroll in AcboBooks calculates CPP and CPP2 (or QPP for Quebec employees) on each pay using year-to-date pensionable earnings, stops at the yearly maximums, posts the employer share, and reports the totals on T4 slips.
Related terms
Related on this site
- Canadian payroll calculator
- Canada payroll changes 2026
- Canadian payroll in AcboBooks
- Payroll tax rates
Sources
- CRA: CPP contribution rates, maximums and exemptions
- CRA: second additional CPP contribution rates and maximums
Updated October 25, 2026. General information, not tax, legal or accounting advice. Rules and rates change; check with the IRS, the CRA, your state or province, or your accountant.
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