How is CPP deduction amount on an employee's pay calculated?
If you want to confirm the amount of CPP Sage had deducted on a payroll check, use the following manual calculation procedure:
1) calculate the exemption amount per pay period based on the frequency of your payroll by dividing the basic yearly exemption amount (in 2016 it is 3500) by the number of pay periods per year.
a) semi-monthly payroll exemption is 3500 / 24 = 145.8333 per pay period
b) bi-weekly payroll exemption is 3500 / 26 = 134.6154 per pay period
c) weekly payroll exemption is 3500 / 52 = 67.30769
2) calculate the CPP for the pay period by subtracting the exemption amount per pay period from the pensionable earnings for that period and multiplying the balance by the current year's CPP contribution rate (in 2016 it is .0495)
a) for example: a semi-monthly pay of 2500: (2500 - 145.8333) * .0495 = 116.53
b) for example: a bi-weekly pay of 2500: (2500 - 134.6154) * .0495 = 117.09
c) for example: a weekly pay of 2500: (2500 - 67.30769) * .0495 = 120.42
These amounts can also be confirmed using the CRA Payroll Deduction Online Calculator PDOC
To calculate the amount the employer needs to pay to CRA, simply take the amount of the employee deduction and multiply by two. The employer must pay the same amount as the employee into CPP.
There is more information on manual calculations at the CRA website CRA's Manual Calculation for CPP
For information on manually calculating EI deductions, see How are EI Deductions Calculated?