What Does an Employer Pay on Top of Wages in Canada?

An employee costs more than their wage. On top of wages, an employer in Canada pays its own share of Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums, usually workers' compensation premiums, vacation pay and, in some provinces, a payroll tax. New employers often budget for the wage and are surprised by the rest.

These are the 2026 figures, and they change every January.

CPP: the employer matches the employee

CPP is the federal pension plan that employees and employers pay into. The employer pays the same amount as the employee. For 2026 the rate is 5.95% on pensionable earnings between a $3,500 basic exemption and $74,600. That works out to a maximum of $4,230.45 per employee for the employer's share. A second tier, called CPP2, adds 4% on earnings between $74,600 and $85,000, up to $416 more. Quebec has its own plan, the QPP, with different rates.

EI: the employer pays more than the employee

EI is the federal program that pays benefits to workers who lose their job or take certain leaves. The employee's premium for 2026 is 1.63% of insurable earnings up to $68,900. Insurable earnings are the earnings EI premiums are charged on. The employer pays 1.4 times the employee's premium, which is about 2.28%, up to a maximum of $1,572.30 per employee. Some employers with an approved wage-loss replacement plan, which pays employees part of their wages when they're off sick, qualify for a reduced employer EI rate. Quebec has a reduced EI rate and a separate parental insurance plan.

Workers' compensation premiums

Most employers also pay premiums to their province's workers' compensation board. The amount depends on payroll and on the risk rate for the industry. This is covered in do I need workers' compensation coverage for my employees in Canada?

Vacation pay and statutory holidays

Provincial employment standards set minimums for vacation pay, which commonly starts at 4% of wages and rises with years of service in many provinces. Many employees are also entitled to pay for statutory holidays, which are the public holidays a province recognizes. The rules vary by province, so check the one where your employee works.

Provincial payroll taxes

Some provinces charge a payroll tax on employers. BC and Ontario have an Employer Health Tax (EHT), and Manitoba has a similar payroll levy. These generally apply only once total payroll passes an exemption threshold, so many small employers pay nothing. Confirm the threshold and whether you're close to it. Quebec has its own set of employer contributions.

Other costs

Beyond the legal ones, there are costs you choose: benefits, payroll software or a payroll provider, and the bookkeeping time to run it all. They don't show up in a wage conversation, but they show up in your bank account.

Mistakes employers make

• Budgeting only the wage. The employer's share of CPP and EI, workers' compensation and vacation pay all come on top.
• Confusing the employee's deductions with the employer's costs. What you hold back from an employee's pay is theirs. Your matching share is an additional cost to the business.
• Using last year's rates. CPP and EI rates and ceilings are reset each January.
• Mixing employer costs into wages in the books. If the extra costs are lumped together with wages, your reports hide what an employee really costs.
• Missing the provincial pieces. Workers' compensation and payroll taxes depend on where the employee works.

If you haven't set up payroll yet, start with do I need a payroll account to hire my first employee? and see payroll remittance due dates for when the money goes to the CRA.

The RSB Guide takes you through your monthly bookkeeping routine, so payroll costs get recorded in the right place each month, and the Guided plan's dashboard keeps your CRA deadlines in front of you. If you want to work out what a hire would cost in your situation, ask Margot (bottom right of this page, free to try, no sign-up). She'll give you a plain answer, or tell you when it's one for your accountant.

FAQ

Is the employer's CPP and EI taken out of the employee's pay? No. The employee's share comes out of their pay. The employer's share is paid on top, and both are sent to the CRA.

Do these costs apply to contractors? Generally not, because a contractor is responsible for their own CPP and taxes. But whether someone is a contractor or an employee depends on the working relationship, not the label.

Do employer costs stop at some point in the year? CPP and EI contributions generally stop once the employee reaches the applicable annual contribution maximums. Other costs, including workers' compensation and vacation pay, may continue.

Is there a rule of thumb for the extra cost? There's no single number, because it depends on the province, industry, pay level and benefits. It's more reliable to list each cost for your own situation.

Budget for the whole cost of an employee, not just the wage.