Hiring in Canada as a foreign company means navigating a layered tax system where federal obligations interact with ten different provincial regimes. You’ll remit contributions for the Canada Pension Plan and Employment Insurance at the federal level, withhold income tax, and then layer on whatever provincial payroll taxes apply to your employee’s location. Getting this right from day one protects you from penalties and keeps your Canadian hires compliant. This guide covers every employer obligation for 2026 with the exact figures you need.
How employment tax jurisdiction works in canada
Canada splits employment law and tax administration between federal and provincial governments, and understanding that split determines which rules govern your workforce. Federally regulated industries, which include banking, interprovincial transport, telecommunications, and broadcasting, fall under the Canada Labour Code and federal employment standards. That covers roughly 10% of Canadian workers. Everyone else is governed by the employment standards legislation of their province, such as Ontario’s Employment Standards Act or British Columbia’s Employment Standards Act.
For payroll taxes, the federal layer applies universally: all employers across all provinces remit CPP contributions and EI premiums to the Canada Revenue Agency (CRA). Provincial payroll taxes, by contrast, vary by province, with some provinces levying a dedicated employer payroll tax and others relying on workers’ compensation alone. The province where the employee works determines which provincial obligations apply to you, not where your company is incorporated or headquartered.
Canada pension plan (cpp) contributions
The Canada Pension Plan is Canada’s mandatory earnings-related retirement program. Employers contribute at the same rate as employees, and both amounts are remitted to the CRA.
Cpp base rates for 2026
For 2026, the employer CPP contribution rate is 5.95% on pensionable earnings. The Year’s Maximum Pensionable Earnings (YMPE) is $74,600, and the basic annual exemption is $3,500, meaning contributions apply to earnings between $3,500 and $74,600. The maximum employer contribution under CPP is $4,230.45 per year.
Cpp2: the second additional contribution
Canada introduced a second CPP tier, CPP2, to fund enhanced retirement benefits. For 2026, CPP2 applies at a rate of 4% on earnings between the YMPE of $74,600 and the Year’s Additional Maximum Pensionable Earnings of $85,000. The maximum additional employer contribution under CPP2 is $416.00 per year. If your employee earns above $74,600, you’ll pay both the standard CPP maximum and up to $416.00 on top of that.
A note on quebec
Quebec employees and employers don’t contribute to CPP. Quebec operates the Quebec Pension Plan (QPP), which is administered separately by Revenu Québec. The contribution mechanics are similar but the rates and administration differ. See the Quebec section below for full details.
Employment insurance (ei) premiums
Employment Insurance covers workers for temporary income loss due to job loss, illness, pregnancy, and parental leave. It’s a shared cost between employees and employers, with employers paying a higher multiplier.
Ei rates for 2026 (outside quebec)
For employers operating outside Quebec, the 2026 employer EI rate is 2.28% on insurable earnings. The Maximum Insurable Earnings (MIE) for 2026 are $68,900, which means the maximum employer EI contribution is $1,572.30 per year per employee.
Ei rates for quebec employers
Quebec employers pay a reduced EI rate of 1.834% because Quebec operates its own Quebec Parental Insurance Plan (QPIP), which funds maternity, paternity, and parental benefits separately. The federal EI program’s parental benefit component doesn’t apply in Quebec, so the federal rate is reduced to reflect that. Quebec employees and employers pay into QPIP directly, in addition to EI.
What ei covers
Standard EI covers job loss (regular benefits), sickness, compassionate care, and, outside Quebec, parental benefits. Employers don’t choose coverage levels. The program is mandatory, and premiums are set annually by the federal government.
Provincial payroll taxes
Beyond CPP and EI, some provinces levy their own employer payroll taxes. These are separate from income tax withholding and workers’ compensation premiums. The most significant is Ontario’s Employer Health Tax.
Ontario employer health tax (eht)
Ontario charges employers a payroll-based health tax called the Employer Health Tax (EHT). The rate ranges from 0.98% to 1.95% depending on your total Ontario payroll. Eligible employers with Ontario payrolls up to a threshold benefit from a $1,000,000 annual exemption, meaning EHT applies only to the portion of Ontario payroll above that exemption. Employers with Ontario payroll exceeding $5 million are not eligible for the exemption and pay EHT on the full payroll amount. EHT is filed and remitted to the Ontario Ministry of Finance, not the CRA.
Other provincial payroll taxes
Several other provinces levy payroll taxes of their own, including Manitoba (Health and Post-Secondary Education Tax Levy), Quebec (various employer contributions to the Health Services Fund), and Newfoundland and Labrador (Payroll Tax). The rates, thresholds, and exemption rules differ by province. If you’re hiring outside Ontario, you’ll need to confirm the specific payroll tax obligations for each province where your employees are based.
Workers’ compensation
Workers’ compensation is mandatory for virtually all employers in every Canadian province and territory. It provides wage replacement and medical benefits to employees who suffer work-related injuries or illnesses, and it shields employers from civil lawsuits related to workplace injuries.
Each province administers its own workers’ compensation system. The major bodies are the Workplace Safety and Insurance Board (WSIB) in Ontario, WorkSafeBC and the Workers’ Compensation Board (WCB) in British Columbia, the WCB in Alberta, and the Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST) in Quebec. Employers register with the relevant body in each province where they have workers.
Premium rates are set by industry classification and reflect the claims experience of your industry group. A desk-based technology company will pay substantially lower rates than a construction firm. Registration is required before you bring on your first employee in a province, not after. Failure to register can result in penalties and retroactive assessments.
Income tax withholding
Canadian employers are required to deduct federal and provincial income tax from each employee’s pay and remit those amounts to the CRA (and, for Quebec, to Revenu Québec as well). This is a withholding obligation, not an employer tax: the cost falls on the employee, but the employer is responsible for calculating and remitting the correct amounts.
Federal income tax rates
Federal income tax in Canada is progressive across five brackets, with rates of 15%, 20.5%, 26%, 29%, and 33%. The rate that applies to each portion of income increases as earnings rise. As the employer, you use the CRA’s payroll deduction tables or an authorized software tool to calculate the correct withholding amount per pay period based on the employee’s anticipated annual earnings and their TD1 personal tax credits form.
Provincial income tax
Every province has its own income tax rates and brackets that layer on top of federal income tax. Employees pay both federal and provincial tax. Employers withhold both simultaneously in most cases, remitting a single amount to the CRA for federal tax and, where applicable, a separate amount to the provincial authority. The combined federal-plus-provincial effective rate varies meaningfully by province, so location matters for total employee compensation planning.
Quebec: a separate system
Quebec operates the most distinct payroll system in Canada. Employers hiring in Quebec interact with Revenu Québec rather than the CRA for provincial tax, and they contribute to several Quebec-specific programs.
Quebec employees contribute to the Quebec Pension Plan (QPP) instead of CPP. QPP serves the same function as CPP but is governed and administered entirely by Quebec. QPP rates and maximums are set separately from CPP and may differ from year to year.
Quebec also operates the Quebec Parental Insurance Plan (QPIP), which covers maternity, paternity, adoption, and parental leave benefits. Both employees and employers contribute to QPIP. Because QPIP covers what EI parental benefits cover in other provinces, Quebec employers pay a reduced federal EI rate (1.834% in 2026, as noted above).
Provincial income tax in Quebec is filed with Revenu Québec, not the CRA. Quebec maintains its own tax brackets, forms, and remittance schedules. If you’re hiring in Quebec, you’ll need to be set up with both the CRA and Revenu Québec.
Worked example: what you pay for an ontario employee at cad 70,000
Here’s what you’d owe as the employer for an Ontario-based employee earning CAD 70,000 in 2026, excluding workers’ compensation (which varies by industry).
CPP contribution Pensionable earnings: $70,000 minus $3,500 exemption = $66,500 Contribution: $66,500 x 5.95% = $3,956.75
CPP2 doesn’t apply here because $70,000 is below the $74,600 YMPE threshold.
EI premium (outside Quebec) Insurable earnings: $68,900 (the cap; $70,000 exceeds the MIE) Premium: $68,900 x 2.28% = $1,571.12 (Note: the exact maximum is $1,572.30, the slight difference reflects the cap applying mid-year for this salary level.)
Ontario EHT Assuming this is your only Ontario employee and your Ontario payroll is $70,000, well below the $1,000,000 exemption threshold, EHT is $0 for this scenario. Employers with larger Ontario payrolls would apply the applicable rate to payroll above $1,000,000.
Total estimated employer contributions: approximately $5,527.87
That’s roughly 7.9% on top of base salary before workers’ compensation and any benefits you offer. For an employee earning above the CPP and EI maximums, the percentage cost drops because those contributions are capped.
How an EOR simplifies canadian employer taxes
Managing Canadian payroll compliance from outside Canada means registering with the CRA, each relevant provincial tax authority, and the applicable workers’ compensation board before you can make a single hire. An Employer of Record takes on that compliance infrastructure on your behalf, acting as the legal employer in Canada so you don’t need a local entity. EOR services cover CPP and EI remittances, provincial payroll tax filings, workers’ compensation registration, and income tax withholding across every province. RemotePass provides Employer of Record coverage in Canada, handling the full payroll compliance stack so you can hire confidently without building a Canadian legal presence. Book a demo to see how RemotePass handles Canadian payroll compliance end to end.
