March 22, 2026
CPP Contributions: How They Work in 2025
Everything you need to know about CPP1 and CPP2 contributions in 2025 — rates, the YMPE, the new second ceiling, and how self-employed Canadians pay both halves.
The Canada Pension Plan (CPP) is Canada’s mandatory public pension program. Most working Canadians contribute to it every payday, yet few understand exactly how the calculation works — or that since 2024 there is now a second earnings ceiling called CPP2. This guide breaks it all down with 2025 figures.
The Basic Structure
CPP contributions are a percentage of your pensionable earnings — your employment income between a lower floor (the Year’s Basic Exemption) and an upper ceiling (the Year’s Maximum Pensionable Earnings). Income below the floor and above the ceiling is exempt from CPP contributions.
2025 CPP Key Figures
| Parameter | 2025 Amount |
|---|---|
| Year’s Basic Exemption (YBE) | $3,500 |
| Year’s Maximum Pensionable Earnings — CPP1 (YMPE) | $71,300 |
| Year’s Additional Maximum Pensionable Earnings — CPP2 (YAMPE) | $81,900 |
| CPP1 employee rate | 5.95% |
| CPP1 employer rate | 5.95% |
| CPP2 employee rate | 4.00% |
| CPP2 employer rate | 4.00% |
| Maximum CPP1 employee contribution | $4,034.10 |
| Maximum CPP2 employee contribution | $396.00 |
| Maximum total employee contribution | $4,430.10 |
CPP1: The Original Contribution
CPP1 applies to earnings between $3,500 (YBE) and $71,300 (YMPE). The formula:
CPP1 contribution = (Employment income − $3,500) × 5.95%, capped at $4,034.10.
Once you have paid $4,034.10 in CPP1, your employer stops deducting CPP1 for the rest of the calendar year.
CPP2: The Enhancement (New Since 2024)
The federal government introduced a second earnings ceiling starting in 2024. CPP2 applies to earnings between the YMPE ($71,300) and the YAMPE ($81,900) — a band of $10,600 in 2025.
CPP2 contribution = (Earnings between $71,300 and $81,900) × 4.00%, up to $396.00.
CPP2 builds entitlement to an enhanced CPP retirement benefit on top of the base CPP1 retirement pension.
Worked Example: $85,000 Salary
An employee earning $85,000 in 2025:
CPP1: Pensionable earnings = $71,300 − $3,500 = $67,800 CPP1 = $67,800 × 5.95% = $4,034.10 (maximum)
CPP2: Earnings above YMPE = min($85,000, $81,900) − $71,300 = $81,900 − $71,300 = $10,600 CPP2 = $10,600 × 4.00% = $424.00 — but capped at $396.00
Total employee CPP = $4,034.10 + $396.00 = $4,430.10
Employer matches: $4,034.10 (CPP1) + $396.00 (CPP2) = $4,430.10
Total CPP flowing to the fund on this employee’s behalf: $8,860.20
Worked Example: $45,000 Salary
An employee earning $45,000 does not reach the YMPE, so no CPP2 applies.
CPP1 = ($45,000 − $3,500) × 5.95% = $41,500 × 5.95% = $2,469.25
Employer contributes the same: $2,469.25
No CPP2.
Self-Employed Canadians Pay Both Halves
Employees have the employee rate deducted from their paycheque, and their employer remits the matching employer contribution separately. Self-employed individuals have no employer — so they pay both sides themselves on their T1 return.
Self-employed CPP1 rate: 11.90% on net self-employment income between $3,500 and $71,300.
Self-employed CPP2 rate: 8.00% on net self-employment income between $71,300 and $81,900.
On a net self-employment income of $71,300:
CPP1 = ($71,300 − $3,500) × 11.90% = $67,800 × 11.90% = $8,068.20
The self-employed can deduct half of their CPP contributions (the employer half) as a deduction from income on their T1, which partially offsets the extra cost. The employee half remains a non-refundable tax credit.
How CPP Appears on Your T4
Box 16 of your T4 slip shows CPP1 contributions deducted. Box 16A shows CPP2 contributions. Both generate non-refundable tax credits on your federal return — you apply the 15% credit rate to the contribution amounts.
The CPP Retirement Benefit
Your CPP retirement pension is calculated based on your contribution history. Contributing at the maximum for 39 years produces the maximum CPP retirement pension, which in 2025 is approximately $1,364/month if taken at age 65. CPP2 contributions build an additional enhanced benefit on top of that.
You can take CPP as early as age 60 (with a permanent reduction of 0.6% per month before 65) or delay until 70 (with a permanent increase of 0.7% per month after 65).
Provincial Exception: Quebec
Quebec residents do not contribute to CPP. Instead they contribute to the Quebec Pension Plan (QPP), which is administered by Revenu Québec. QPP rates and ceilings are similar to CPP but set independently. QPP also has a second additional ceiling (QPP2) mirroring the CPP2 enhancement.
Key Takeaways
- CPP1 applies to earnings between $3,500 and $71,300 at a 5.95% employee rate, maxing at $4,034.10 in 2025.
- CPP2 applies to earnings between $71,300 and $81,900 at a 4.00% employee rate, maxing at $396.00 in 2025.
- Employers match both CPP1 and CPP2 contributions dollar for dollar.
- Self-employed Canadians pay the combined employee + employer rate (11.90% CPP1, 8.00% CPP2) but can deduct the employer half.
- Quebec residents contribute to QPP, not CPP.
Use our calculators to apply these concepts to your own income. Tax information is for general guidance only — consult a CPA for advice specific to your situation.
Tax rates and thresholds sourced from the Canada Revenue Agency (CRA). Last verified for the 2025 tax year.