How can I calculate my payroll? New to payroll processing in Canada?
Use this free, simple, yet powerful tax deduction calculator to calculate payroll for your employees – paid salary or hourly – in any province or territory in Canada.
Fill in the fields below for a quick calculation. Be sure to turn on advanced mode for a more accurate calculation.
Please note that the ADP Canadian Payroll Calculator “(the Calculator”) is designed to provide general guidance and estimates only. The Calculator is not intended to provide tax, legal or other professional advice. While every effort is made to provide current information, tax laws change regularly, and laws may vary depending on the province/territory of the employer and of the employee. You should consult a professional advisor or accountant for advice on any specific requirements or concerns. For more information, you may visit Canada Revenue Agency (CRA) online payroll calculator.
Payroll calculator guide
Although our payroll calculator does much of the heavy lifting, it may be helpful to take a closer look at a few of the calculations essential to payroll.
How to calculate gross pay
Gross pay is a fundamental concept in payroll and financial planning for employers and employees. A Canada payroll calculator can supply the gross pay for budgeting and forecasting labour costs for businesses. Conversely, for employees, understanding gross pay is essential for personal financial planning, budgeting, and evaluating job offers.
In loan applications or financial verifications, institutions may check an individual's gross pay as it provides a clearer picture of pay after tax and income before any mandatory or voluntary deductions. Ensuring the accurate calculation of gross pay is pivotal for maintaining transparent financial and employment records. When considering how to calculate payroll, a salary calculator can provide a precise understanding of earnings.
Gross pay is earned wages before payroll deductions and employers typically use this figure when discussing compensation with employees. (i.e. $60,000 annually, or $25 per hour). Calculating gross pay depends on how the employee is paid. For salaried employees, gross pay is equal to their annual salary divided by the number of pay periods in a year (see chart below).
| Pay Schedule | Pay Periods |
| Weekly | 52 |
| Bi-weekly | 26 |
| Semi-monthly | 24 |
| Monthly | 12 |
To calculate gross pay for hourly workers, multiply the hourly rate by the hours worked during a pay period.
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How to calculate insurable earnings
Insurable earnings are the amounts reported on a worker’s earnings statement, and any income reported in box 14 of the T4 slip as gross earnings. It plays a vital role in determining an employee's entitlement to various benefits, particularly in systems like the Employment Insurance (EI) program in Canada.
An online payroll calculator to calculate monthly income after tax can help determine insurable earnings so that the correct reporting is made towards government programs.
How do I calculate my CPP deductions?
The Canada Pension Plan (CPP) is a foundational component of Canada's social safety net, ensuring citizens can access financial support during retirement. With tools like a payroll deductions online calculator, individuals can get a clearer picture of their contributions. Using a payroll calculator, Canada social services payments can be precise.
All employees pay CPP at a rate outlined by the Canada Revenue Agency (CRA). It’s not as difficult as you may think to manually calculate your CPP contributions. Follow the steps below.
- Divide the basic pay-period exemption amount by the number of pay periods per year. Do not round off to the nearest cent.
- Calculate the total pensionable income. This is the sum of an employee’s gross pay, including any taxable benefits and allowances the employee received in the pay period.
- Subtract the basic pay period exemption amount from step 1 from the total pensionable income amount in step 2.
- Multiply the result in step 3 by the current year’s CPP rate. The result of this is the CPP contribution you should deduct from the employee.
- As an employer, you must pay the same amount as your employee. Multiply the result from step 4 by 2.
Please refer to the CRA’s page for more information on calculating Canada Pension Plan (CPP) contribution.
How do I calculate my EI deductions?
As an employer, you must deduct Employment Insurance (EI) from the insurable earnings you pay to your employees. Follow the steps below to manually calculate an employee’s EI premium.
- Determine the employee’s insurable earnings.
- Determine the EI rate for the year.
- Multiply the amount in step 1 by the rate in step 2. The result of this is the EI to be deducted for your employee.
As an employer, you must pay 1.4 times the amount as your employee. Multiply the result from step 3 by 1.4.
Please refer to the CRA’s page for more information on calculating Employment Insurance (EI) premiums deductions.
How much do taxes take out of my pay cheque?
The amount of tax deducted from a pay cheque, aside from CPP and EI is known as income tax. In Canada, this tax varies based on where an employee lies on the federal and provincial tax bracket. Tax bracket is determined by the taxable income and there are currently five federal income tax brackets. Provincial tax varies by province.
How do I calculate Québec Pension Plan (QPP)?
As an employer in Quebec, it is your responsibility to also collect QPP contributions. In 2023, the contribution rate is 12.80% of an employee’s gross earnings. This rate includes contributions to the basic plan and the additional plan. An employer pays half (6.40%) and deducts the other half from the employee’s pay. The contribution rate is applied to only the portion of pay included between the basic exemption ($3500) and the maximum pensionable earnings.
Having operated in the province of Quebec for over 40 years, ADP Canada has significant expertise in creating and supporting French workplaces. Learn more about ADP's Payroll services.
How do I calculate Québec Parental Insurance Plan (QPIP)?
Wage earners, self-employed workers, and employers all pay premiums into QPIP. The yearly rate can be found here. QPIP premium rates and amounts for an employer in Quebec can be found here.
ADP has nearly 600 associates located in Quebec. Talk to us today and find out more about our bilingual payroll services.
Understanding payroll deductions
Payroll deductions refer to the amounts deducted from an employee's gross pay to cover both mandatory and optional contributions. In Canada, these deductions typically consist of:
- Federal and provincial or territorial income taxes
- CPP contributions or QPP contributions for employees in Quebec
- EI premiums or QPIP premiums for employees in Quebec
The specific amounts deducted vary depending on the province or territory of employment. For instance, employees in Ontario face different provincial tax rates compared to those in British Columbia or Quebec. It is the employer's responsibility to accurately withhold and remit these amounts to the CRA or Revenu Québec.
Steps for new employers
If you're a new employer, establishing a payroll system for the first time can be daunting. Here is a simplified step-by-step guide:
- Register for a payroll program account with the CRA or Revenu Québec.
- Gather employee information, including Social Insurance Numbers (SINs), TD1 tax forms (both federal and provincial) and bank details for direct deposits.
- Review the Employment Standards Act (ESA) for the respective province you do business in to ensure compliance.
- Establish payroll deductions for income tax, CPP or QPP, and EI or QPIP.
- Select a pay schedule: Choose from weekly, biweekly, semimonthly or monthly.
- Remit deductions and contributions to the CRA or Revenu Québec by the specified deadlines.
- Issue pay statements that clearly outline gross pay, deductions and net pay.
- File year-end slips for employees and submit the required summaries to the CRA or Revenu Québec.
By following these steps, you can support a smooth, compliant payroll process.
FAQs
What are examples of incorrect payroll deductions?
Incorrect payroll deductions can occur for various reasons. Common examples include:
- Deducting the wrong amount of income tax due to incorrect tax forms or calculations
- Not accounting for specific benefits or exemptions that an employee is entitled to, which can lead to over- or under-deductions
- Miscalculating CPP or QPP contributions based on incorrect salary information
- Not adjusting for employees on leave, maternity or parental leave, which may affect EI premiums
How are payroll deductions reported?
Payroll deductions are reported to the government through various channels. Employers must file payroll remittances to the CRA or Revenu Québec, depending on their location. This includes reporting the total amounts withheld for income tax, CPP or QPP contributions and EI or QPIP premiums on a regular basis (monthly or quarterly). Additionally, employers must provide employees with pay statements that detail deductions and issue T4 slips for reporting income and deductions to the CRA at year-end.
What are examples of payroll deductions?
Examples of payroll deductions include:
- Income tax: Federal and provincial or territorial income taxes
- CPP or QPP contributions: Mandatory retirement savings contributions
- EI premiums: Contributions to Employment Insurance for entitlement to benefits
- Union dues: Deductions for membership in a labour union
- Health and dental benefits: Employee contributions toward benefits offered by the employer
How often are deductions remitted to the government?
The frequency of payroll remittances depends on your business’s average monthly withholding account (AMWA) from the previous two calendar years. The CRA places employers into different remitter types:
- Monthly remitter: Most new or smaller employers remit once per month. Payments are due by the 15th of the following month.
- Quarterly remitter: Eligible employers with AMWA of less than $3,000 may remit once every quarter. Payments are due by the 15th of the month following the end of each quarter.
- Accelerated remitter 1 (threshold 1): Employers with an AMWA of $25,000 to $99,999.99 must remit twice monthly. Deductions from the 1st to the 15th are due on the 25th of the same month. Deductions from the 16th to the end of the month are due by the 10th of the following month.
- Accelerated remitter 2 (threshold 2): Employers with an AMWA of $100,000 or more must remit up to four times per month, typically within three business days after the pay date.
Do I have to withhold deductions if I pay myself a salary?
Yes, if you pay yourself a salary as a business owner or shareholder, you are required to withhold the same deductions that apply to any employee. This includes income tax, CPP or QPP contributions and EI premiums. EI deductions are not mandatory for self-employed employees or owners. If you’d like to opt in to the program, register with the Canada Employment Insurance Commission. Proper withholding helps ensure compliance with tax laws and can facilitate smoother tax reporting.
What happens if you don’t make payroll deductions?
Not making payroll deductions can lead to significant consequences, including:
- Penalties and interest: The CRA and Revenu Québec impose penalties and interest on amounts not remitted on time.
- Legal repercussions: Not complying with payroll deduction laws can lead to audits and, in severe cases, legal action.
- Impact on employee benefits: If contributions are not accurately submitted by their employer, employees may have issues accessing benefits like EI or CPP payments.
- Reputation damage: Noncompliance can harm your business's reputation and lead to a loss of trust among employees.
By ensuring that payroll deductions are accurately calculated and remitted, both employers and employees can reduce the risk of these potential issues and facilitate compliance with tax laws.
