Payroll Deductions in Canada: What Every Employer Needs to Know in 2025

Why in Payroll Deduction in Canada

If you're an employer in Canada, understanding how to handle payroll deductions is more than just a good idea; it’s a legal requirement. Whether you run a small startup or a growing company, calculating payroll taxes correctly can save you from CRA penalties and employee confusion.

What Are the Main Payroll Deductions?

Payroll taxes in Canada consist of:

• CPP (Canada Pension Plan) contributions

• EI (Employment Insurance) premiums

• Federal and provincial income tax

Employers are responsible for deducting these from employee pay and also contributing the employer share for CPP and EI.

What’s New in 2025?

Here are the key rates to keep in mind this year:

• CPP employee rate: 5.95%

• EI employee rate: 1.66%

• Employer CPP match: 5.95%

• Employer EI match: 1.4× employee contribution

Steps to Calculate Payroll Taxes

1.  

   Figure out gross salary or hourly pay

    

2.  

   Calculate CPP and EI deductions

    

3.  

   Use CRA tax tables to determine income tax

    

4.  

   Subtract all deductions to get net pay

    

5.  

   Match and remit employer contributions to the CRA

    

Conclusion

Staying compliant with Canadian payroll tax rules doesn’t need to be stressful. With the right tools and updated info, your payroll process can run smoothly every pay period. For a full walkthrough, read the complete guide on how to calculate payroll taxes in Canada.

Whether you’re new to hiring or need a refresher, keeping up with the 2025 changes is key to avoiding costly mistakes.