Why Your First 2026 Paycheck Looks a Little Different
You didn’t get a pay cut. Your boss didn’t change anything. But that first paycheque of 2026 might be smaller than you expected — because of updated CPP and EI deduction limits that kicked in on January 1.
Here’s exactly what changed, what those deductions are actually for, and when they finally stop for the year.
The Two Deductions on Every Paycheque
Most Canadians see two payroll deductions alongside income tax:
- CPP — Canada Pension Plan: Contributions that build your future retirement pension
- EI — Employment Insurance: Premiums that fund benefits if you lose your job, go on parental leave, or face certain life events
Both are mandatory for most employees. Both are calculated as a percentage of your earnings, up to an annual maximum. Once you hit that maximum, deductions stop — and your take-home pay goes up for the rest of the year.
2026 Numbers: What’s New
CPP (Canada Pension Plan)
| Item | 2026 |
|---|---|
| Contribution rate (employee) | 5.95% |
| Maximum pensionable earnings | $74,600 |
| Basic exemption | $3,500 |
| Maximum annual employee contribution | ~$4,230 |
Your employer matches your CPP contribution dollar for dollar. So for every $4,230 you contribute, your employer puts in another $4,230.
EI (Employment Insurance)
| Item | 2026 |
|---|---|
| Employee premium rate | 1.63% |
| Employer premium rate | 2.282% (1.4× employee rate) |
| Maximum insurable earnings | $68,900 |
| Maximum annual employee premium | $1,123.07 |
CPP2: The Extra Deduction Most People Don’t Know About
Starting in 2024, the government introduced a second tier of CPP contributions — called CPP2. If you earn above the first CPP ceiling ($74,600), you don’t stop paying CPP there. Instead, you start contributing at a second, lower rate on income between $74,600 and $85,000.
| Earnings Range | Rate | What It Is |
|---|---|---|
| $3,500 – $74,600 | 5.95% | Standard CPP (base) |
| $74,600 – $85,000 | 4.0% | CPP2 (second tranche) |
| Above $85,000 | 0% | CPP deductions stop completely |
In plain terms: if you earn between $75K and $85K, expect an additional deduction of up to ~$416 per year compared to before CPP2 existed. If you earn above $85,000, CPP deductions fully stop once you hit that ceiling.
The extra CPP2 contributions increase your future pension benefit — so it’s not money lost, just money saved differently.
The “Tax Holiday”: When Deductions Stop
One of the best-kept secrets of the Canadian payroll system: once you’ve hit the annual CPP and EI maximums, your employer stops deducting — and your paycheque goes up for the rest of the year.
Here’s roughly when that happens for different income levels:
| Annual Salary | EI stops | CPP fully stops |
|---|---|---|
| $45,000 | Never hits max (full year) | ~November |
| $68,900+ | ~Late August | ~October (base CPP only) |
| $85,000+ | ~Late August | ~Early November (CPP + CPP2) |
| $100,000+ | ~Late August | ~Early November |
If you earn around $100,000, you can expect a noticeably fatter paycheque starting in late August (EI done) and again in November (CPP done). Some people treat this as a mini bonus season.
What If You Have Two Jobs?
Each employer deducts CPP and EI as if they’re your only employer — they legally cannot account for what another employer has already deducted.
This means if you work two jobs and each one deducts up to the maximum, you’ll end up overpaying CPP and/or EI.
The good news: the overpayment is automatically refunded when you file your personal tax return. No form needed — it just shows up as a credit. Your employers are not entitled to a refund on their portion, but you get yours back.
What Does This Mean for Your 2026 Paycheque?
Compared to 2025, most employees will see:
- Slightly lower EI deductions — the employee rate dropped from 1.66% to 1.63%, saving you a small amount per paycheque
- Slightly higher CPP deductions — the maximum pensionable earnings ceiling increased, so if you earn above last year’s limit, you’ll contribute on a wider income range
- CPP2 deductions continuing if you earn above $74,600 — this is the second tranche that began in 2024 and continues into 2026
Quick Summary: 2026 vs 2025
| 2025 | 2026 | Change | |
|---|---|---|---|
| CPP rate | 5.95% | 5.95% | No change |
| CPP max pensionable earnings | $71,300 | $74,600 | +$3,300 ↑ |
| CPP max employee contribution | ~$4,036 | ~$4,230 | +$194 ↑ |
| CPP2 ceiling | $73,200 | $85,000 | +$11,800 ↑ |
| EI employee rate | 1.66% | 1.63% | ↓ slightly |
| EI max insurable earnings | $65,700 | $68,900 | +$3,200 ↑ |
| EI max employee premium | ~$1,091 | $1,123.07 | +~$32 ↑ |
The Bottom Line
If your first 2026 paycheque was a little smaller, it’s likely because the CPP ceiling went up — meaning you contribute on a higher portion of your income before hitting the annual maximum. The EI rate actually went down slightly, so that offset some of it.
Neither CPP nor EI is money lost. CPP builds your future pension. EI funds your safety net if you ever need it. And both stop once you’ve hit the annual maximum — giving you more take-home pay in the back half of the year.
Questions about how your payroll deductions affect your overall tax picture? Book a consultation with our team.