The Canada Pension Plan is one of the most fundamental components of Canada's retirement income system, and understanding the contribution rates that apply in 2025 is essential for employers, employees, and self-employed Canadians alike. Whether you run a small business in Calgary or work as an independent contractor, getting your CPP contributions right keeps you onside with the CRA and protects your future benefits.
The Canada Pension Plan is a mandatory contributory program that provides Canadians with retirement, disability, and survivor benefits. Participation is compulsory for most workers between the ages of 18 and 70 who earn employment income in Canada outside of Quebec. Quebec operates its own parallel program, the Quebec Pension Plan (QPP), which applies to employees and employers in that province.
CPP contributions are shared between employees and their employers. Self-employed individuals carry the full cost on their own, contributing both the employee and employer portions. In exchange, contributors build entitlement to a monthly retirement pension, long-term disability benefits, and survivor benefits for their families.
Since 2019, the federal government has been phasing in CPP enhancement, which added a second earnings tier to the program. As of 2024, both the original CPP (now often called CPP1) and the enhanced second tier (CPP2) are fully active, each with their own rates and thresholds.
The base CPP contribution structure for 2025 is built around three figures: the contribution rate, the Year's Maximum Pensionable Earnings (YMPE), and the basic exemption amount.
The basic exemption means that the first $3,500 of employment income is not subject to CPP contributions. Contributions apply only on earnings between $3,500 and the YMPE of $71,300.
To calculate the maximum CPP1 contribution for both employees and employers, apply the 5.95% rate to pensionable earnings above the exemption:
($71,300 − $3,500) × 5.95% = $67,800 × 5.95% = $4,034.10
This means the maximum CPP1 employee contribution in 2025 is $4,034.10, and the employer must match that with an identical $4,034.10. An employee earning $71,300 or more will reach this ceiling partway through the year, at which point both the employee and employer stop contributing to CPP1 for the remainder of the year.
Employees earning less than $3,500 in a calendar year owe no CPP contributions at all, and no employer remittance is required on their behalf.
The CPP2 enhancement, which came into full effect in January 2024, introduces a second earnings ceiling above the YMPE. For 2025, that ceiling is the Year's Additional Maximum Pensionable Earnings (YAMPE) of $81,900.
CPP2 applies only to earnings between the 2025 YMPE of $71,300 and the YAMPE of $81,900 — a band of $10,600.
An employee earning $81,900 or more in 2025 will contribute a maximum of $424.00 in CPP2, and their employer will remit an equal $424.00. For someone earning between $71,300 and $81,900, the CPP2 contribution is prorated to actual earnings above the YMPE.
It is worth noting that CPP2 contributions build entitlement to a separate additional pension on top of the standard CPP retirement benefit. The two tiers are tracked independently by the CRA.
Self-employed individuals do not have an employer to share the cost of CPP, so they are responsible for contributing both the employee and employer portions. For CPP1, that means a combined rate of 11.9% on net self-employment income between $3,500 and $71,300.
The maximum CPP1 self-employed contribution for 2025 is therefore:
$67,800 × 11.9% = $8,068.20
For CPP2, self-employed individuals also pay both sides, meaning an 8% rate applies to net self-employment income between $71,300 and $81,900, up to a maximum of $848.00.
While self-employed Canadians carry a heavier CPP burden, the tax rules provide some relief:
This split treatment ensures that self-employed Canadians are not doubly penalised — the employer half functions as a cost of doing business and reduces taxable income before credits are calculated.
Not every worker is required to contribute to CPP. The following categories are exempt:
Employers must confirm an employee's age and status before stopping deductions, and should retain documentation to support the exemption in the event of a CRA review.
As an employer, you are responsible for calculating the correct CPP deduction from each employee's paycheque, matching that amount from your own funds, and remitting the combined total to the CRA along with income tax withholdings.
Remittance frequency — monthly, quarterly, or accelerated — depends on your average monthly withholding amount in the prior calendar year. Penalties apply for late or short remittances, so accurate payroll records are essential. The CRA's Payroll Deductions Online Calculator (PDOC) is a practical tool for verifying deduction amounts each pay period.
Employers must also issue T4 slips by the last day of February each year, reporting the employee's CPP1 contributions in Box 16 and CPP2 contributions in Box 16A. Misreporting these amounts can trigger reassessments and interest charges.
At Swift Accounting Calgary, our payroll services team handles the full cycle — from calculating deductions and preparing remittances to filing T4s and reconciling year-end payroll accounts — so business owners can focus on running their operations rather than tracking rate changes and remittance deadlines.
| CPP Component | Rate | Earnings Range | Maximum Contribution |
|---|---|---|---|
| CPP1 — Employee | 5.95% | $3,500 – $71,300 | $4,034.10 |
| CPP1 — Employer | 5.95% | $3,500 – $71,300 | $4,034.10 |
| CPP1 — Self-Employed (combined) | 11.9% | $3,500 – $71,300 | $8,068.20 |
| CPP2 — Employee | 4% | $71,300 – $81,900 | $424.00 |
| CPP2 — Employer | 4% | $71,300 – $81,900 | $424.00 |
| CPP2 — Self-Employed (combined) | 8% | $71,300 – $81,900 | $848.00 |
Over-deducted CPP contributions are reconciled when you file your T1 return. If total CPP deductions exceed the annual maximum, the CRA will refund the excess through your tax return. You do not need to contact your employer mid-year unless you believe there is a systematic error, though it is worthwhile to review your pay stubs to confirm amounts are being calculated correctly against the 2025 thresholds.
If you operate through a corporation and pay yourself a salary, standard employee and employer CPP rules apply — the corporation deducts the employee portion from your salary and contributes the matching employer share. If you pay yourself dividends instead of salary, CPP does not apply to dividend income. Many incorporated business owners work with an accountant to determine the optimal salary-dividend mix, taking CPP obligations and future benefit entitlements into account.
CPP rates and thresholds are set federally and apply uniformly in all provinces and territories except Quebec. Quebec workers and employers contribute to the QPP instead, which has its own rates and rules set by Revenu Québec. For 2025, the QPP employee contribution rate is 4.00% on the first earnings tier, with its own YMPE and exemption amounts set separately from CPP.
If you are between 65 and 70 and receiving a CPP retirement pension while still working, you can elect to stop contributing to CPP by completing Form CPT30 and submitting it to your employer. If you are under 65 and receiving your retirement pension, or if you are between 65 and 70 and have not filed CPT30, contributions continue. Employees 70 and over stop contributing automatically regardless of pension status.
CPP rates, thresholds, and the added layer of CPP2 mean that payroll is more involved than it was even a few years ago. Getting the calculations wrong — under-remitting, misclassifying exempt employees, or incorrectly splitting CPP1 and CPP2 amounts on T4s — can result in penalties and interest from the CRA that far outweigh the cost of professional payroll support.
If you have questions about CPP contributions, employer remittances, or self-employed tax planning in 2025, contact Swift Accounting to speak with our team. We work with businesses across Calgary to keep payroll accurate, compliant, and stress-free through every rate change the CRA brings.
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