Manual calculation for CPP

To use the manual calculation method, follow these steps:

Step 1: Calculate the basic pay-period exemption

Divide the basic yearly exemption ($3,500 for 2018) by the number of pay periods in the year. Do not round off to the nearest cent. See the basic exemption chart.

Notes

A pay period means the period for which you pay earnings or other remuneration to an employee. Once you have established your type of pay period, the pay period exemption must remain the same, even when an unpaid leave of absence occurs, or when earnings are paid for part of a pay period.

Step 2: Calculate the total pensionable income

The total pensionable income is the sum of the employee’s gross pay including any taxable benefits and allowances the employee received in the pay period that requires CPP deductions.

Step 3: Deduct the basic pay-period exemption from the total pensionable income

Deduct the basic pay-period exemption in step 1 from the total pensionable income for the period in step 2.

Step 4: Calculate the amount of CPP contributions

Multiply the result of step 3 by the current year’s CPP contribution rate (4.95% for 2018). Make sure you do not exceed the maximum for the year. The result is the amount of contributions you should deduct from the employee.

Step 5: Calculate the amount of CPP contributions you have to pay

As an employer, you have to pay the same amount as your employee. Multiply the result of step 4 by 2.

Example

Joseph receives a weekly salary of $500 and $50 in taxable benefits. Calculate the amount of CPP contributions that you have to pay.

Step 1: Calculate the basic pay-period exemption

$3,500 ÷ 52 = $67.30 (do not round off)

Step 2: Calculate the total pensionable income

$500 + $50 = $550

Step 3: Deduct the basic pay-period exemption from the total pensionable income

$550 – $67.30 = $482.70

Step 4: Calculate the amount of CPP contributions

$482.70 × 4.95% = $23.89

Step 5: Calculate the amount of CPP contributions you have to pay

$23.89 × 2 = $47.78

Note

There are circumstances such as when an employee turns 18 where you will need to prorate the maximum contribution. See Checking the amount of CPP you deducted to find out when you must prorate.

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