EI and CPP Contributions Complaint

by Mike Holman

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As you all know, anyone who works for a company has to pay EI – employment insurance premiums and CPP – Canada Pension Plan premiums on every paycheck. The maximum amount you can pay for CPP in 2007 is $1989.90 which is based on a salary of $42,100. The maximum EI contribution is $720 which is based on a salary of $40,000

[edit - Here are the 2011 Employment Insurance premium amounts and the 2011 CPP contribution amounts]

The problem is that the deduction rates are calculated so that the premiums are all deducted during the portion of your salary within the annual maximum. For example EI is calculated at $1.80 per $100 of earning up to $40k in earnings. That’s fine if you earn $40k per year and the deductions will be constant throughout the year. But what if you make say $65k per year? Then the EI contributions will only be deducted for the first 7.5 months or until the middle of August, when you’ll see a significant raise. In that case the CPP will be deducted until the end of August. The more you make, the higher the deductions are per paycheque and the earlier in the year you get your “raise”.

This drives me nuts because as much as I like to get a raise during the year, I find it difficult in January to go back to the “old” paycheque at a time when heating bills are higher. Why can’t the government mandate that the annual maximum contributions be prorated over the entire year so that there is no “raise” and “pay cut” because of this dumb policy?

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{ 45 comments… read them below or add one }

1 Ellen Roseman

Of course, January is also the time to pay holiday bills and make RRSP contributions. It’s not the ideal time to get a big pay cut.
My previous employer used to spread EI and CPP deductions through the year, not bunch them up in the front half. Do we need government regulations? Maybe employers can ask employees how to make the deductions (quickly or slowly) and do customized plans.

2 FourPillars

Hi Ellen, the rates I quoted in the post are from the CRA site so I believe the government is expecting the deductions to occur at the increased rate.

I’ll have to check with someone in payroll at my company – I’d like to know if it’s up to the company how to deduct them.

From what you say it sounds like it’s not mandatory.

If I had the option I would pay all the amounts on Dec 31 of each year, but I would settle for pro-rating over the entire year.

Mike

3 Canadian Capitalist

A smaller complaint is that because the payments are not pro-rated, if you switch jobs later in the year, you pay into CPP and EI twice.

4 FourPillars

CC – I never thought about that.

I checked with our payroll today and it’s a government regulation that the deductions be followed as per their guidelines.

Mike

5 anonymous

as for paying cpp and ei twice when starting another job in the middle of the year, as mentioned you will have the deductions come off every paycheck but you will receive a credit when it comes to doing your taxes at the end of the year for any over payments.

6 FourPillars

That’s true Anon but you would basically be making an interest free loan to the government.

Mike

7 Medgen

I think the rational is this: If you were to lose/leave your job at any time during the year then you will have paid the appropriate amount of EI/CPP, so the government won’t come knocking for the extra when you don’t have it. Imagine the uproar that would cause!?!

Of course, I am just about to receive my August ‘raise’, so maybe that is why I am not too perturbed. I know that come January when I see that first cheque I won’t be quite so pleased.

8 FourPillars

Medgen – I feel the same way about the January pay cheque but I guess it’s just something we have to deal with!!

Mike

9 BMEN

A good friend of mine is a physician and he has the total amount deducted in the first pay period of the year. I’m not sure he has a choice in this or not?

10 FourPillars

I don’t know bmen.

He’d be better off spreading out the payments throughout the year.

Mike

11 Jon

do you pay CPP from the RRSP contribution, employer is deducting the money to CPP from the portion that is contributed to RRSP, which make the rrso contribution less

Thanks

12 Four Pillars

Jon, I don’t understand your comment. Are you asking a question or telling us something?

13 MM

My employer seems to stop deducting CPP midway through the year. I make about 40k a year, and this is the second time in a row I find myself owing at the end of the year. Are they legally required to take the CPP off? Do I have any recourse?

14 Four Pillars

MM – I checked with our payroll department regarding the whole CPP and EI deduction thing and the guy told me they do it the way the government requires.

If you make about $40k per year they should be taking almost the maximum amount and it should go on all year.

Do you owe money because of the cpp? It’s possible they are taking the right amount for the whole year and something else is causing you to owe.

15 Brent

When you max out your CPP and EI in about August then take that $$$ and have it automatically taken out into a Savings Account. The new Tax Free Savings account starts in 2009 and you can put 5000$ per year into that. I found the ‘raise’ / ‘pay cut’ hard to deal with for years. Now, I just have it set-up so I don’t see it..

Comments?

16 sue

If you have switched jobs part way through the year, but realize that you are close to maxing out your cpp and ei payments, can you notify your new employer to stop deducting. Why would you want to pay the gov’t any more money than you have to, even if you will eventually get it back?

17 Four Pillars

Hi Sue – hopefully in that situation you can get the deductions removed.

18 alexandra

why do i get deductions if i’m not on salary based pay???

19 Four Pillars

Alex – it doesn’t matter how you get paid – you still have the deductions.

20 JP

I MAKE ABOUT 56K YEAR BETWEEN TWO JOBS AND HAVE PAID ABOUT 2700 IN CPP WILL I BE GETTING MONEY BACK THE WAY THAT I FIGURED IT I SHOULD BE GETTING ABOUT 500-600 BACK FROM OUR BELOVED GOVERNMENT

21 Kaleem

I have another interesting situation. I am working on a contract with my present employer and this is my second employer in this year. My first employer deducted my EI & CPP premiums up to maximum limit ($731.78 for EI & S2118.60 for CPP) and also contributed employers portion of premiums in full. I didnt tell about these previous premium deductions to my current employer and he deducted the premiums again up to maximum limit. Obvoiusly, he is going to submit emplyers portion of the contribution in full again as well.

I am aware that I will get back these overcontributions of mine once I file tax return for this year but my question is about the employers portion of the premiums. Now, two employers have paid CPP & EI premiums up to maximum limit in the current year. Since these premiums are part of overall salary package, can I somehow also claim employers portion of the premiums? I think one possible way is to let the second employer know upfront about these paid premiums and then renegotiate the salary package for the year since they are not going to pay the premiums. I dont know whether this is a correct understanding or what is the law. I appreciate your help in this regard. Thanks

22 Patricia Trigger

My employer is cutting the number of hours that I work (from 27 to 24 to 15); I believe that is in hopes that I will quit my job & will of course will not be able to collect unemployment benefit. I have reason to suspect that my employer is not submitting my contributions to UI, CCP, Can. Revenue on my behalf (even my portion that is taken off my pay each week. My question is: How do I find out if my employer is doing these things and what can I do to protect myself.

23 lisa

Why do we pay into EI and you get refused EI when you don’t have a job? I was refused because i moved with my fiance to another city, where I knew nobody. so while waiting for child care i was not actively looking for work and had no child care, so I was refused. Why do we pay into that and can’t even rely on EI when your outta work.

24 Woody

Lisa: EI is an emergency fund to cover involuntary unemployment (and mat leave), you’re not really “outta work” if you’re not trying to work.

25 Raj

Hi,
I changed jobs in 2010 and my previous employer deducted CPP to the maximum level. Can I inform my new employer not to deduct CPP any more?

26 Mike

@Raj – No.

27 Raj

Thanks Mike,

Does it mean that I will have to pay it again for now and get refunded at the time of my 2010 tax return?

28 Mike

@Raj. Yes, that is correct.

29 Raj

Thanks

30 T

Raj, yes you can tell your new employer that your CPP and EI is maxed out. Show them your paystub from your last employer. If you would like to see the governments simple way of doing this google “wintod”, it is an online program that allows you to calculate your taxes, cpp and EI based on your pay schedule.

31 Jane

I am currently on company pension, I was hired back for six months to work on a special project. I was not paid until the end of my term. I was deducted EI and CPP. My question is , why am I deducted EI when I will not be applying for it, I am on pension ?

32 Khurram

Hi,

I have changed my Job in December, 2010. I have contributed CPP for 6 months last year. What will happen about my CPP deducted by last employer. Shall i get it back or continued by next employer.

33 Cmac

I am considering a part time job and am wondering how much I need to make to make it financially wortwhile. My husband earns 120,000 per year and we have a 1 year old.

34 Dave B

Can I pay maximum CPP payment even though I don’t have the income from self employed earnings?

This way I could collect maximum CPP when I retire at 65.

35 Mike Holman

@Dave – No, I don’t think you can do that.

36 joyce

i am on social services and just started getting cpp.
Now will that come off my social services cheque?

37 dave friesen

non-profit org. hiring employee under contract – who payes cpp & ui

38 Spawn

I have a doozy of a question. My husband moved to canada and worked for 7 years under a TTN ( temporary tax number) instead of an SIN. He filed taxes every year with our accountant and even recieved big tax refunds regularly… and paid EI and CPP contributions. He recieved a letter from both departments stating he couldn’t withdrawl on them unless he had a real social insurance number. We moved to the USA last year permenantly and I’m wondering if there is anyway he can get back all of his contributions since he shouldn’t have paid them in the first place.

39 Kelly

I have been working overseas for a canadian company in the mining industry . I am wondering if they are supposed to make CPP contributions on my behalf. I am still a resident of Canada and I file a return there.

40 g mcdorman

why am i paying taxes on cpp that is my money that i have paid in since 1966. and also when we use to get statements from cpp the totals paid in never showed the employers portion paid in. thks.

41 Kari

I started a new job this week.
I have confirmed that I have met my CPP contirbutions for the year.
My ne wemployer insists that they have to keep deducting from my paycheque – which seriously affects my cash flow.
Is this the law (that they have to keep deducting) or just company policy?

42 Mike Holman

@Kari – It’s the law.

43 colin c

I’m 32 and having major money problems is there anyway of getting out my CPP in an emergancy?

44 vc

Why am I paying cpp when im 19yrs old? im already broke as it is with the hike in tuition fees. im not on a salary why am I being deducted for cpp. there should be a rule against this.

45 Sanger

When are employers required to remit the deductions (EI,CCP, TAXES)
to the respective agencies? I am sure they dont do it everytime the deduct
those amounts from our paycheck! As a matter of fact ALL deductions.

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