Canada Payroll Source Deductions: CPP, EI, T4 and ROE Guide for 2026

Canada payroll source deductions are the amounts an employer must withhold from each paycheque for income tax, Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums, add its own share of CPP and EI, and send to the Canada Revenue Agency (CRA) on a fixed schedule. After the year ends the employer reports everything on T4 slips and a T4 Summary. The rules apply from the first employee, whether the owner lives in Calgary, Naperville or Pune. This guide sets out the 2026 numbers and the steps.

Which Canada payroll source deductions rates apply in 2026?

Quebec runs its own plans. For 2026 the Quebec Pension Plan rate is 6.30% (5.30% base plus 1% first additional) with a $4,479.30 maximum each for employee and employer, the second additional rate is 4% to $85,000, and the Quebec Parental Insurance Plan charges employees 0.430% and employers 0.602% on up to $103,000. Quebec employees pay a lower EI rate of 1.30%. Employers there also pay into the health services fund; see our Quebec compliance guide.

How to run payroll for the first time, step by step

1. Confirm the worker is an employee. The CRA looks at the whole working relationship, including control, tools and financial risk. If unsure, you can request a CPP/EI ruling.
2. Register for a payroll account (RP) online with your business number. See the CRA My Account guide.
3. Collect the employee's Social Insurance Number. A number starting with 9 means a temporary resident; check that it has not expired and that the person holds a valid work permit. See hiring foreign workers.
4. Have the employee complete the federal and provincial TD1 forms so you can apply personal tax credits.
5. Calculate deductions with the CRA's Payroll Deductions Online Calculator or your payroll software.
6. Remit on the due date for your remitter type.
7. File T4 slips and the T4 Summary by the last day of February.
8. Issue a Record of Employment (ROE) when an employee has an interruption of earnings.
9. Keep records for six years.

When do you have to remit?

Your remitter type depends on your average monthly withholding amount (AMWA) from two calendar years earlier.

If the due date lands on a weekend or CRA-recognized holiday, a payment is on time on the next business day. A regular remitter's October 2026 deductions fall due November 15, 2026, a Sunday, so the practical date is Monday, November 16. The CRA deadline calendar lists the next twelve months.

T4 slips, the T4 Summary and the Record of Employment

T4 and T4A slips and their summaries are due the last day of February after the calendar year. February 28, 2027 is a Sunday, so 2026 slips are on time if filed by Monday, March 1, 2027. If you file more than five slips of one type you must file electronically; paper filers over that line face a penalty ($125 for 6 to 50 slips, rising with volume).

The ROE is separate and faster. For electronic ROEs with weekly, biweekly or semi-monthly pay, submit within five calendar days after the end of the pay period in which the interruption occurs. For monthly pay the deadline is the earlier of five days after the pay period or 15 days after the first day of the interruption. A late ROE delays the employee's EI claim.

Penalties for late or missing payroll steps

Interest is also charged on unpaid amounts and compounds daily. Penalties apply to amounts over $500, or any amount if the failure is knowing or grossly negligent. For 1 to 5 late slips the CRA's relief policy reduces the T4 penalty to a flat $100.

Worked example: a $60,000 hire in Mississauga

A Mississauga software start-up hires its first employee at $60,000 for 2026. Employee CPP is ($60,000 - $3,500) x 5.95% = $3,361.75 and the employer matches that. Employee EI is $60,000 x 1.63% = $978.00 and the employer pays 1.4 times that, $1,369.20. The employer's own cost on top of salary is $3,361.75 + $1,369.20 = $4,730.95, before any workers' compensation or Ontario Employer Health Tax. With an average monthly withholding well below $25,000 the company is a regular or quarterly remitter and sends the combined deductions by the 15th of each month or quarter.

Mistakes to avoid

• Treating an employee as a contractor to skip CPP and EI; the CRA can assess both halves plus penalties.
• Starting payroll before the payroll account and SIN checks are done.
• Remitting on the 15th when that day is a holiday and assuming it is late; the next business day is on time.
• Forgetting the ROE for a leave or termination.
• Using last year's CPP and EI maximums in January.

A note for U.S.- and India-linked owners

A U.S. company paying someone for work done in Canada, or an Indian group posting staff to Canada, usually owes Canadian payroll. Canada has social security agreements with both the United States and India, and they can keep a short-term posted worker in the home plan; ask your Canadian CPA about certificates of coverage. Our U.S. employer compliance checklist, the totalization agreement guide and payroll and social security compared show how the systems differ. For Indian-side payroll duties see labour and professional tax compliance.

How we can help

We are a U.S. CPA firm in Aurora, Illinois. We handle U.S. payroll, new-hire reporting and state registrations for clients who also employ people in Canada, and we coordinate with your Canadian CPA or payroll provider so Canadian and U.S. wage records agree. See our payroll and employer compliance and bookkeeping and accounting services.

Frequently asked questions

General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.