As an employer, you have to deduct Canada Pension Plan contributions from an employee’s pensionable earnings if that employee:
- is in pensionable employment during the year; and
- is not considered to be disabled under the CPP or the Quebec Pension Plan (QPP); and
- is 18 to 70 years old even if the employee is receiving a CPP or QPP retirement pension. Exception: do not deduct Canada Pension Plan (CPP) if the employee is 65 to 70 years old, and gives you Form CPT30, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election with parts A, B and C completed.
You have to deduct CPP contributions from your employee’s pensionable earnings. As an employer, you must contribute an amount equal to the CPP contributions that you deduct from your employees’ remuneration.
Each year, the CRA provide the maximum pensionable earnings($54,900 in 2016), the year’s basic exemption amount($3,500 in 2016), the rate(4.95 in 2016) the maximum annual employee and employer contribution ($2,544.30 in 2016), and maximum annual self-employed contribution($5,088.60 in 2016).
CPP contributions you deducted from your employee’s salary($2000/month) in the month ($84.56) + your share of CPP contributions ($84.56) = Total amount you remit for CPP contributions ($169.12).
You should stop deducting deduct Canada Pension Plan contributions when the employee’s annual earnings reach the maximum pensionable earnings or the maximum employee contribution for the year ($2,544.30 for 2016).
The annual maximum pensionable earnings ($54,900 for 2016) applies to each job the employee holds with different employers . If an employee leaves one employer during the year to start work with another employer, the new employer also has to deduct CPP contributions without taking into account what the previous employer paid. This is the case even if the employee has contributed the maximum amount during the previous employment.
Any overpayments will be refunded to employees when they file their income tax and benefit returns. However, there is no provision in the CPP that would allow the CRA to refund or credit the employer for his or her contributions in those circumstances.