Payroll Deductions 2021 Ontario Calculator

How to Calculate Payroll Deductions

Payroll deductions are amounts subtracted from an employee's gross pay to cover various costs. In Ontario, the main deductions are:

• Canada Pension Plan (CPP)
• Employment Insurance (EI)
• Income Tax
• Union Dues (if applicable)
• Voluntary Deductions (if applicable)

The total payroll deductions are calculated by summing all these individual amounts. Use the calculator on this page to determine the exact amounts for your specific situation.

Types of Payroll Deductions

Canada Pension Plan (CPP)

The CPP is a retirement savings program. Employees contribute 5.95% of their earnings, and employers contribute an additional 5.95%. The maximum annual earnings base for CPP in 2021 was $61,800.

Employment Insurance (EI)

The EI program provides temporary income support to workers who lose their jobs through no fault of their own. Employees contribute 1.66% of their earnings, and employers contribute an additional 1.44%. The maximum annual earnings base for EI in 2021 was $55,900.

Income Tax

Income tax is withheld from employee paychecks based on their taxable income. The tax rates for 2021 in Ontario were progressive, ranging from 5.05% to 13.16%.

Union Dues

If an employee is a member of a union, the union may deduct dues from their paycheck. The amount varies by union and agreement.

Voluntary Deductions

Some employers offer voluntary deductions for benefits like health insurance, retirement plans, or flexible spending accounts. These are optional and depend on employee election.

Formula for Payroll Deductions

The total payroll deductions can be calculated using the following formula:

Where:

• CPP = (Employee Earnings × 5.95%) + (Employee Earnings × 5.95%)
• EI = (Employee Earnings × 1.66%) + (Employee Earnings × 1.44%)
• Income Tax = Employee Earnings × Ontario Tax Rate
• Union Dues = Fixed amount per pay period (if applicable)
• Voluntary Deductions = Fixed amount per pay period (if applicable)

The Ontario tax rates for 2021 were:

Worked Example

Let's calculate the payroll deductions for an employee earning $50,000 per year in Ontario for 2021.

1. Calculate CPP:
   • Employee CPP = $50,000 × 5.95% = $2,975
   • Employer CPP = $50,000 × 5.95% = $2,975
   • Total CPP = $2,975 + $2,975 = $5,950
2. Calculate EI:
   • Employee EI = $50,000 × 1.66% = $830
   • Employer EI = $50,000 × 1.44% = $720
   • Total EI = $830 + $720 = $1,550
3. Calculate Income Tax:
   • Taxable Income = $50,000
   • Tax Rate = 9.15% (since $45,142.01 - $90,287)
   • Income Tax = $50,000 × 9.15% = $4,575
4. Assume no union dues or voluntary deductions.
5. Total Deductions = $5,950 (CPP) + $1,550 (EI) + $4,575 (Income Tax) = $12,075

For this employee, the total payroll deductions would be $12,075 per year.