Understanding Employer Payroll Taxes: What You Need to Pay and When

Key Takeaways

• Employers are responsible for both deducting and contributing payroll taxes, including CPP, EI, and income tax—and submitting them to the correct agency.
  
• Contribution rates and maximums change annually, so it is important to stay current to avoid errors or penalties.
  
• Your remittance schedule depends on your payroll size and CRA classification.
  
• Quebec employers have distinct obligations and must remit through Revenu Québec.
  
• Late or incorrect remittances can result in financial penalties and increased audit risk.
  

Running payroll is not just about paying employees, it is about staying compliant with tax law, avoiding penalties, and managing your obligations to the CRA and, in Quebec, Revenu Québec. For Canadian employers, understanding what payroll taxes need to be paid, when they are due, and how much to contribute is critical.

In this guide, we will walk through exactly what employers need to know; from which payroll taxes apply, to contribution rates and remittance timelines, with a focus on clarity, accuracy, and current rules.

What Are Employer Payroll Taxes?

Employer payroll taxes refer to the mandatory deductions and contributions a business is responsible for when paying employees. These include:

• Income tax (federal and provincial)
  
• Canada Pension Plan (CPP) contributions
• Employment Insurance (EI) premiums
  
• Quebec-specific equivalents: QPP (Quebec Pension Plan) and QPIP (Quebec Parental Insurance Plan)
  

Some of these amounts are deducted from employees’ pay, while others are employer-paid contributions that must be matched or topped up before being remitted to the appropriate authority.

Your Payroll Tax Responsibilities: At a Glance

These amounts are calculated on every pay period and must be remitted by a specific deadline, depending on your remitter type.

Breakdown of Key Employer Payroll Contributions

1. CPP Contributions (Canada Pension Plan)

• Applies to employees aged 18 to 69, unless they are already receiving a CPP pension and have elected to stop contributions.
  
• Contribution Rate (2025): 5.95% (employer matches this)
  
• Annual Maximum Contribution (2025): $3,867.50 per employee (each for employee and employer)
  

Employers outside Quebec are required to deduct CPP and match the amount dollar-for-dollar.

2. EI Premiums (Employment Insurance)

• Employee Rate (2025): 1.66%
  
• Employer Contribution: 1.4 times the employee amount
  
• Annual Maximum (2025): $1,049.12 (employee); $1,468.77 (employer)
  

Employees in Quebec contribute at a lower EI rate due to separate QPIP coverage.

3. Federal and Provincial Income Tax

• Employers are required to deduct the correct amount of income tax based on the employee’s total earnings and TD1 forms.
  
• Employers do not match or contribute to income tax—your role is to calculate, deduct, and remit it.
  
• Use the CRA’s Payroll Deductions Online Calculator (PDOC) or certified payroll software to calculate accurate amounts.

4. QPP and QPIP (for Quebec Employers)

Employers with staff working in Quebec must follow distinct rates set by Revenu Québec and contribute to:

• QPP: Mirrors the CPP structure but with its own contribution rates and thresholds.
  
• QPIP: Provides parental benefits in Quebec and replaces the federal EI parental components.
  

Remittances go directly to Revenu Québec, not CRA.

When Do You Pay Payroll Taxes? Remittance Schedules Explained

CRA assigns remittance schedules based on your Average Monthly Withholding Amount (AMWA):

Quebec employers must follow Revenu Québec's specific remittance schedules, which are often similar but administered independently.

How to Calculate and Submit Payroll Taxes

Step 1: Use the Right Tools

Use CRA’s PDOC, Revenu Québec’s online services, or certified payroll software to calculate:

• Income tax withholding
  
• CPP or QPP contributions
  
• EI or QPIP premiums
  
• Employer portions
  

Step 2: Track Maximums

Be aware of annual contribution limits for CPP, QPP, EI, and QPIP. Once an employee hits the annual maximum, deductions should stop automatically.

Step 3: Remit Accurately and On Time

Remittances should include both employee and employer portions. CRA’s My Business Account and Revenu Québec’s ClicSÉQUR portal support electronic submissions.

Common Mistakes That Lead to Penalties

• Missing remittance deadlines
  
• Incorrectly calculating deductions
  
• Remitting only employee amounts without matching employer contributions
  
• Applying the wrong tax rates for Quebec vs. other provinces
  
• Using outdated payroll tables
  
• Failing to track cumulative maximums for CPP, EI, QPP, or QPIP
  

Penalties can range from 3% to 10%, depending on how late your payment is. Interest is charged daily on overdue balances.

FAQs: Employer Payroll Taxes

Do I have to register with the CRA before running payroll?

Yes. You must open a CRA payroll account (a program account under your Business Number) before issuing any payments subject to deductions.

If I hire employees in both Quebec and Ontario, do I remit payroll taxes separately?

Yes. Quebec payroll deductions are remitted through Revenu Québec, while other provinces remit through the CRA. You must register with both if you operate in Quebec and another province.

What if I use a contractor instead of an employee?

Contractors are not subject to payroll deductions. However, misclassifying employees as contractors is a common CRA audit trigger and may lead to penalties and retroactive contributions.

Can I automate all of this?

Yes. Using certified payroll software or a payroll provider like Outsource Payroll Solution can automate calculations, deductions, remittances, and year-end reporting.

Are bonuses and commissions treated the same?

No. Bonuses and commissions are subject to lump sum taxation rules. You must deduct tax, CPP, and EI based on CRA’s lump sum withholding rates or the employee’s regular rate if known.

Conclusion

Understanding your payroll tax obligations as an employer is not just about cutting cheques, it is about meeting legal obligations that impact your employees' benefits, your company’s compliance, and your peace of mind. By keeping up with changing contribution rates, calculating deductions accurately, and remitting on time, you will avoid unnecessary penalties and ensure that payroll runs smoothly.

Whether you handle payroll internally or work with a provider, staying informed is the first step in managing risk and building a compliant, well-run business.

Let Us Help Simplify It

At Outsource Payroll Solution, we help employers manage every aspect of payroll from calculating accurate deductions to filing remittances on time. Whether you are hiring your first employee or managing a multi-province team, we help ensure nothing falls through the cracks.

Visit www.payrollsolution.ca to learn more or speak with a payroll specialist.