Skip to content

Brought to you by

Dentons logo

Canadian Employment & Labour Law

Making the law work for your workplace.

open menu close menu

Canadian Employment & Labour Law

  • Home
  • About Us
  • Topics
    • Topics
    • Labour
    • Workplace investigations

Significant increase in Canadian payroll deductions for the Canada Pension Plan in 2022

By Employment and Labour Group
December 31, 2021
  • Pensions and Benefits
Share on Facebook Share on Twitter Share via email Share on LinkedIn

Canadian employers must withhold higher amounts from employees’ pay in 2022 to fund the mandatory defined benefit state pension plan for Canadian workers, called the Canada Pension Plan (CPP).  (Quebec workers are subject to a similar plan, called the Quebec Pension Plan.)

Here’s a guide to what’s happening in the New Year.

A few years ago the federal and provincial governments across Canada agreed on a significant change to the CPP. An “enhanced” CPP regime was enacted in 2017, to be phased in over several years, with two elements:

  • Premiums paid by employers and employees to the CPP would increase every year, over seven years, commencing 2019 (employers and employees each pay the same amount); and
  • Eventually, the monthly benefit paid to retirees from the CPP would increase. 

In 2021, the maximum employer and employee contribution to the CPP for the year was $3,166.45 each.  In 2022, it will be $3,499.80 each. Employers should be aware of the reason why there is such a significant increase, to respond to questions that employees may raise. 

The two components of the previously announced formula aren’t changing. First, the employer and employee contribution rates are set to rise from 5.45% of eligible pay to 5.7%, subject to a cap. Second, the cap itself is rising, as it’s tied to a government-determined wage amount, called the YMPE (yearly maximum pensionable earnings). The formula for determining the YMPE takes into account the growth in average weekly wages in Canada. Commentators have noted that the growth in average weekly earnings has been significant during the pandemic because there were fewer people working in lower-paying jobs. 

Organizations including the Fraser Institute and the Canadian Federation of Independent Businesses have called for governments to hit the pause button on implementing the CPP “enhancements,” though lobbying efforts may not be successful. Employers may want to be proactive and communicate this change to employees by providing plainly worded explanations to describe that although there is a bigger amount taken from paycheques, this is a mandatory government program that aims to provide better retirement security to Canadian workers in the form of better-funded and higher pensions from the CPP. 

Share on Facebook Share on Twitter Share via email Share on LinkedIn
Subscribe and stay updated
Receive our latest blog posts by email.
Stay in Touch
Employment and Labour, pensions and benefits
Employment and Labour Group

About Employment and Labour Group

Dentons’ Employment and Labour group in Canada offers customized, effective, multijurisdictional advice on employment and labor matters. Protecting your business is our primary concern, whether intellectual property, through tailor-made employment contracts, restrictive covenant and confidentiality agreements or other methods.

All posts Full bio

RELATED POSTS

  • Pensions and Benefits

Immediate vesting and locking-in

Ontario pension rules prior to July 1st, 2012 allowed employers to require Ontario members of pension plans to wait two […]

By Employment and Labour Group
  • Pensions and Benefits

Interesting times for employers with Ontario pension plans

By Employment and Labour Group
  • Pensions and Benefits

Employment and labour law trends to watch for in 2020

By Andy Pushalik

About Dentons

Dentons is designed to be different. As the world’s largest law firm with 20,000 professionals in over 200 locations in more than 80 countries, we can help you grow, protect, operate and finance your business. Our polycentric and purpose-driven approach, together with our commitment to inclusion, diversity, equity and ESG, ensures we challenge the status quo to stay focused on what matters most to you. www.dentons.com

Dentons boilerplate image

Twitter

Categories

  • Amendments to Safety Laws
  • Confidentiality/Trade Secrets
  • Constructive Dismissal
  • COVID-19
  • Criminal Offences by Employees
  • Employment Standards
  • Executive Compensation
  • General
  • Human Rights
  • Immigration
  • Labour
  • Occupational Health and Safety
  • Pay Equity
  • Pensions and Benefits
  • Privacy
  • Restrictive Covenants
  • Union Issues
  • Workers' Compensation
  • Workplace investigations
  • Wrongful Dismissal
  • WSIB

Subscribe and stay updated

Receive our latest blog posts by email.

Stay in Touch

Dentons logo

© 2023 Dentons

  • Legal notices
  • Privacy policy
  • Terms of use
  • Cookies on this site