What does an employee really cost your corporation, beyond the salary?

What sits on top of the wage

Your corporation is the employer, so it owes contributions of its own on what it pays an employee, over and above the wage itself. Two of them are federal and land on every employer outside Quebec, being the Canada Pension Plan and Employment Insurance. Three more are provincial: vacation pay set by employment standards law, a payroll levy charged in four of the nine provinces, and workers’ compensation priced by a provincial board.

The pension plan takes 5.95% from the employee’s pay and the same again from your corporation. Both run on the pay between a basic exemption of $3,500 and a ceiling of $74,600. Each side therefore stops at $4,230.45 for the year, whatever the pay is. Pay above that ceiling picks up a second contribution called CPP2, charged at 4% from each side up to $85,000, to a maximum of $416.00 each.

Employment Insurance costs the employee 1.63% of their pay, up to $68,900 of pay in the year, and your corporation pays 1.4 times whatever it deducted from them. The employer premium therefore stops at $1,572.30, so a salary well above the ceiling costs exactly what one sitting on the ceiling costs. That’s why the percentage on top of the pay falls as the pay rises, and why the two figures are worth reading together.

Vacation pay, and when it costs more

Every province sets a minimum share of wages as vacation pay, and the minimum rises once an employee has been with you long enough. The first tier runs from 4% to 5.77% depending on the province, and the years of service behind the higher tier run from 5 to 15. The table further down gives both figures for each of the nine provinces, from the ministry or the statute each one was read against.

Years of service are counted the way the calculator asks for them, as the years completed by the end of the year priced. Where a province starts its higher rate part way through a year, the calculator uses the first year whose wages all earn it. The table does the same, so every province is read on one footing.

Whether the minimum costs you anything further depends on how you pay the person in the first place. An hourly rate is quoted for the hours somebody actually worked, so the vacation minimum is added to the wages they earned. A salary keeps running while the employee is away, so it already carries the minimum. The percentage then matters as the floor the salary has to clear, rather than as a second bill.

A week is one fifty-second of a year, so a minimum of 4% of wages pays for two weeks off. The calculator takes those weeks out of the year whichever way you pay, and prices an hour on the hours actually worked. A salary and an hourly wage paying the same money for the same work therefore come out at the same cost per hour.

Vacation pay is pay, so the pension contribution and the Employment Insurance premium run on it exactly as they run on the rest of the money. Where the calculator adds vacation pay on top of the wage, both contributions are worked out on the wage plus that addition. The Canada Revenue Agency states the treatment on its own vacation pay page. The rules table at the foot of this page carries it with the date we read it.

The provincial payroll levy

Four of the nine provinces charge the employer a levy on its whole payroll rather than on any one employee. Each of them exempts a payroll below a threshold, and the lowest of those thresholds is $1,000,000. A corporation on its own hiring its first employee sits a long way underneath all of them, so the levy costs it nothing. The calculator says so on the line rather than leaving the line blank.

Above the exemption the arithmetic differs by province, and the figure shown is what this one hire adds rather than what the payroll owes in total. Read it as the levy on your whole payroll with them, less the levy on the same payroll without them. Two of the four charge a higher rate on the slice just above the exemption, so that a payroll crossing the line doesn’t suddenly owe the full rate on all of it.

Where the corporation is associated with another employer, which broadly means under common control, the exemption belongs to the group. Every province with a levy makes an associated group share one exemption. Some also take it away altogether once the group’s combined payroll passes a cut-off. The calculator asks whether the corporation is associated, then asks for whichever figures the chosen province’s rule turns on. It states that rule under the question (e.g. the combined payroll above which a group has no exemption left).

The other five provinces charge no employer payroll levy at all, and rather than leave that unsaid the calculator states it for the province you picked. The figures table names the listing each of those finance ministries was checked against. A blank there is a finding rather than a gap in what we happen to hold.

Workers’ compensation, the rate you look up

Workers’ compensation is insurance your province’s board runs, and the premium is a rate per $100 of payroll rather than a percentage of any one wage. The boards set those rates by industry class and publish hundreds of them, so no page on this site carries the one that applies to you. As such the calculator asks for your rate and leaves the line out of the total until you enter it. An average rate would be wrong for almost everybody reading this.

Your rate is printed on the assessment or the rate statement your board sent you, and the board for the province you picked is named under the field. Registering with the board is a separate obligation from paying it, and several boards count a registration deadline in days from your first hire. Whether coverage is mandatory for your industry, and how quickly the board expects to hear from you, are both in the hiring guide linked from this page.

What this calculator leaves out

The arithmetic covers what the law makes your corporation pay on the wage, and it stops at that boundary. Benefits, statutory holiday pay, overtime, training, equipment and the cost of finding the person are all real costs of an employee. None of them is in the total. Neither is the time payroll takes. For one employee that still means a remittance to the Canada Revenue Agency on a schedule, a T4 slip once a year, and a date you can’t miss.

Four smaller omissions are worth naming. An employer running a registered wage-loss plan can qualify for a reduced Employment Insurance premium, and the calculator uses the standard multiple instead of working that reduction out. Every workers’ compensation board charges its rate only on each worker’s pay up to a yearly maximum. The calculator doesn’t hold those maximums, so the premium reads high for pay above your board’s. Where a hire takes an associated group over a cut-off, the other members lose their share of the exemption too. That loss falls on the other members, so the figure for this corporation doesn’t include it. The Canada employment amount is a credit the employee claims on their own return, so it moves what they keep rather than what your corporation pays.

Quebec is out of scope for this page, and the reason is that almost every figure on it would be a different figure there. Quebec runs the Quebec Pension Plan in place of the federal one and adds a parental insurance premium of its own. It also charges its own payroll levy, and reduces the Employment Insurance rate to match. Mixing any of that with the federal figures here would produce a number that’s wrong twice over, so the calculator shows none for Quebec.

The sequence for a first hire, from opening the payroll account to filing the T4 slip, sits in the guide this calculator was built from. Hiring your first employee has the sequence, and the employee or contractor test covers whether the person belongs on payroll at all.

Three worked examples

To provide an example, take an Ontario corporation hiring one person on a salary, with nobody else on the payroll and a full year of work ahead of them.

A salary of $60,000 costs the corporation $3,361.75 in its half of the Canada Pension Plan and $1,369.20 in Employment Insurance. The Ontario vacation minimum sits inside a salary rather than on top of it, and the payroll levy costs nothing at this size, so the year comes to $64,731. Read another way, the hire adds $4,731 to the salary, which is 7.88% of it, or $32.37 for each of the 2,000 hours worked against $30.00 of pay.

The second example is a different hire, paid by the hour, which is where the vacation minimum turns into money you actually hand over.

$24.00 an hour over a 35-hour week comes to $42,000 of wages for the 50 weeks worked, because the Ontario minimum pays for the other two weeks as vacation pay. That vacation pay adds $1,680 on top, and both contributions are then worked out on the larger figure, so the corporation owes $2,390.71 of Canada Pension Plan and $996.77 of Employment Insurance. The year costs $47,067, which is 12.07% on top of the wages, or $26.90 for each hour worked.

The third example is a larger British Columbia employer standing on its own, where the pay runs past the $74,600 pension ceiling and the $68,900 Employment Insurance ceiling, and the payroll sits above the provincial exemption.

A salary of $80,000 in British Columbia runs past the $74,600 pension ceiling, so the pension contribution, CPP2 included, reaches $4,446.45, and past the $68,900 Employment Insurance ceiling, so the premium stops at $1,572.30. The employer is over the provincial exemption, so the hire adds $4,680 of payroll levy, and a workers' compensation rate of $2.00 per $100 adds $1,600. The year costs $92,299, or 15.37% on top of the salary.

What changes by province

The pension plan and Employment Insurance are federal, so they cost the same in every province outside Quebec. What changes from province to province is the vacation-pay minimum, whether the province charges the employer a levy on its whole payroll, and which board runs workers’ compensation.

Every figure in the table renders from the entry the province’s own ministry or statute was checked against. The sources are in the table at the foot of this page. A province showing no levy was checked against its finance ministry’s own list of tax programs, so the blank there is a finding rather than a gap. The higher-tier column counts years of service completed by the end of the year priced, as the calculator does. Prince Edward Island’s figure follows its new Employment Standards Act, in force from June 30, 2026. The higher rate arrives sooner under it than the 8 years the former Act required.