New Changes CPP EI RATES for 2020
Every year, the Canadian government tweak the cpp and ei contribution rates for employers and employees. If you are a self employed person or the payroll clerk for your company, you should be aware of the new changes to the cpp ei rates for 2020.
CPP and EI contributions are the amounts the employer deducts from the employees’ pay stub. The contribution rates vary year by year. Normally, if you are an employee, you don’t have to bother with the rates. This is the job of the company payroll clerk or the accountant. They calculate the deductions and remit to CRA (Canada Revenue Agency) every month or every quarter depending on their remittance cycle.
Large businesses or corporations have the benefit of using computerized payroll software or dedicated payroll solutions company. Quickbooks online has a payroll feature at a monthly subscription fee. It also allows for direct deposit to employees’ bank account. If you have more than 5 employees, it makes good sense to have some kind of a computerized payroll software. This is particularly useful if you have employees paid by the hour, and with variable hours every pay period. The software can calculate and pay or accrue the vacation pay depending on the company policy. At the end of the year, it will readily provide the T4 return summary and T4 slips for each employee.
If you are a small business with only one employee, you can simply use an excel spreadsheet to calculate your payroll. Refer to the above chart for new changes to the cpp ei rates for 2020, the maximum annual contributions. Note that the first $3500 of earnings is exempt from CPP . With a small staff of only one, it does not make economical sense to buy a dedicated payroll software to do the calculations.
You can also check the CRA website for its payroll online deductions calculator. This way you can be sure that you have the latest update.
For new Canadians considering self-employment, be sure to visit your local Employment Centre and inquire about government training programs similar to the Douglas College Self employment Program.