Summary

Canadian social security is primarily focussed on pension and retirement benefits (CPP) but also has an element of Survivors and Disability Insurance, as well as Employment Insurance (EI). It is not a comprehensive social security system.

Details

Contributions

For 2023, the CPP contribution rates is 11.9% of earnings between C$3,500 and C$66,600. This is split evenly between employers and employees, and the maximum payable by each per year is C$3,750. EI contributions are limited to $1,002 (employee) and C$1,403 (employer) per year

Treaties

Canada has a very wide network of social security agreements. These are primarily focussed on allocating the right to collect contributions and to allow pension totalisation, and in practice these mean that few inbounds to Canada are required to pay contributions (and, conversely, most Canadian outbounds continue to pay contributions in Canada/are exempt in their host countries). 

Exemptions

Because of the earnings cap applicable to both CPP and EI contributions, pay restructuring to reduce tax in Canada are unlikely to have any impact on any CPP and EI due.

Administration

CPP and EI are both administered by employers alongside tax withholding, and as a result of the capped rates are, in practice, a standard amount for each employee each month.

Benefits

Pension payments are based on average earnings throughout an individual’s working life, their contributions to the CPP, and the age they decide to start your CPP retirement pension.

The standard age to start the pension is 65. However, it can be claimed as early as age 60 or as late as age 70.

Other

Rates of both employer and employee contributions are slightly higher in Quebec. Although broadly similar, Quebec has its own retirement benefit scheme (the QPP) which operates separately from CPP. Quebec also has its own social security agreements and is not automatically included in ‘Canadian’ agreements with other countries.

Because of the low rates of social security contributions in Canada, localisation rather than expatriation, particularly for individual moving from much of Europe, can deliver significant cost savings to employers.

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