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When most people hear the word taxes, they think of a secular amount of money they need to pay, typically taken out of each pay cheque. However, as an employer, it is a bit more complicated than that, for while it is the duty of the employee to pay these taxes, it is the legal obligation for the employer to deduct them – and it isn’t just one. In Ontario, there are three types of mandatory payroll deductions, and today we will review them all.

Income Tax Payroll Deductions

As every employer in Canada knows, it is their legal obligation to deduct income tax from each employee’s pay, and this amount is a combination of federal tax and provincial tax that is determined based on the employee’s income. Typically, these deductions are as follows:

  • Income = $ 1 – $40,922
    • Tax= 15% federal + 5.05% provincial tax
  • Income = $40,923 – $44,701
    • Tax = 15% federal + 9.15% on every dollar after $40,922 in provincial tax
  • Income = $44,702 – $81,847
    • Tax = $6,705 + 22% on each dollar after $44,700 in federal tax + 5.05% on the first $40,922 + 9.15% on each dollar after $40,922 in provincial tax
  • Income = $81,848 – $89,401
    • Tax = $6,705 + 22% on each dollar after $44,700 in federal tax + 5.05% on the first $40,922 + 9.15% on the next $37,146 + 11.6% on each dollar after $81,848 in provincial tax
  • Income = $89,402 – $138,586
    • Tax = $16,539 + 26% on each dollar after $89,401 in federal tax + 5.05% on the first $40,922 + 9.15% on the next $37,146 + 11.6% on each dollar after $81,848 in provincial tax
  • Income = $138,587 – $149,999
    • Tax = $29,327 + 29% on each dollar after $138,586 in federal tax + 5.05% on the first $40,922 + 9.15% on the next $37,146 + 11.6% on each dollar after $81,848 in provincial tax
  • Income = $150,000 – $220,000
    • Tax = $29,327 + 29% on each dollar after $138,586 + 5.05% on the first $40,922 + 9.15% on the next $37,146 + 11.6% on the next $11,412 + 12.6% on each dollar after $149,999 in provincial tax

Employment Insurance (EI)

Employment insurance is a deduction take out of each pay cheque to protect the individual in the event they should find themselves unemployed or laid off, assuming it was not the employee’s choice. The federal government states that the maximum EI to be deducted from employees is 1.88%; however, in Ontario it is also required that employers pay into EI for the employee, contributing 1.4% of the total. This ultimately becomes an expense to the employer.

Canada Pension Plan (CPP)

Simply put, the Canada Pension Plan, or CPP, is a contributory social insurance program that begins deducting pay from Ontario workers starting at 18 years of age. Once retired, the Ontario government will give the recipient a monthly amount of money to subsidize lost income. As an employee, the amount deducted is 4.5 percent, however, the employer is to match that amount dollar for dollar.

What Are Your Options?

When it comes to payroll deductions in Ontario, as an employer, you are legally obligated to do so. However, numerous businesses are enjoying the benefits of partnering with staffing specialist to handle their temporary employee payroll, alleviating time, stress and money in the process.

If you are looking to grow your business quickly and easily with the right talent without all the headaches, it is time to contact the staffing experts at Employment Professionals Canada. Contact us today and find out how we can start working for you.


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