Work & Business
Your First Canadian Paycheque: Taxes, CPP, and EI Explained
Your first Canadian paycheque comes in lower than your offer letter suggested. Here is exactly what CPP, CPP2, and EI take off the top in 2026, before income tax is even applied.
1. Three Deductions Come Off Before Tax
Every paycheque in PEI has Canada Pension Plan (CPP) and Employment Insurance (EI) premiums deducted automatically, on top of federal and provincial income tax. These aren't optional and they aren't PEI-specific; they apply the same way across Canada outside Quebec.
2. 2026 CPP Rates
| CPP Tier | Earnings Band | Rate | Maximum Employee Contribution |
|---|---|---|---|
| Base CPP | $3,500 to $74,600 (YMPE) | 5.95% | $4,230.45 |
| CPP2 | $74,600 to $85,000 (YAMPE) | 4.00% | $416.00 |
Your employer matches both tiers dollar for dollar. If you're self-employed, you pay both the employee and employer portions yourself.
3. 2026 EI Rates
| Rate | Maximum Insurable Earnings | Maximum Annual Premium | |
|---|---|---|---|
| Employee | 1.63% | $68,900 | $1,123.07 |
| Employer | 2.28% (1.4x employee rate) | $68,900 | $1,572.30 |
4. What This Looks Like on a Real Paycheque
An employee earning $85,000 a year pays roughly $4,230.45 in base CPP, $416.00 in CPP2, and $1,123.07 in EI, about $5,769.52 total before any income tax is applied. Once you cross the CPP and EI earnings maximums for the year, those two specific deductions stop, which is why a paycheque late in the year sometimes looks noticeably larger than one in January.
5. Your T4 Ties It All Together
At tax time, your employer issues a T4 slip showing your total employment income and every deduction withheld through the year. You'll need it to file your tax return, and it's also commonly requested when applying for a mortgage, a loan, or even a Health Card renewal that asks for proof of income.