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E
efmasonry
December 19, 2019
Question

Calculate cpp on bonus pay

  • December 19, 2019
  • 2 replies
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2 replies

J
JamesM
December 19, 2019

Hi there,

 

I appreciate you reaching out to the Community. I'd be happy to show you how to calculate Canada pension plan and bonus pay in QBO. 

 

Calculate CPP

 

With a few exceptions, all employees pay the Canada Pension Plan (CPP) at a rate of 5.10% (matched exactly by the employer) on wages earned between a minimum of $3,500 (called the basic exemption) and a maximum of $57,400 (called wage cap). Here's how to calculate the CPP:

  1. Determine the taxable gross pay (all pay types except reimbursement + Registered Retirement Savings Plan (RRSP) company contributions).
  2. Subtract the basic exemption for one period (depends on your pay schedule).
  3. Multiply by CPP rate: 0.051 (5.10%).

Is CPP not calculating correctly? Things to check:

  • Is the employee paid (EE) marked exempt?
  • Has the employee reached the annual maximum or wage cap?
  • Is the employee too young or too old? (Under 18 or over 70)

Reference pages for CPP:

For more info, check out this helpful article: How to calculate Canada pension plan and employment insurance. 

 

There's an article on our blog which shows you how to calculate Employee Taxes Using the Bonus Method. Check it out here. In case you have other questions, feel free to reach out to our support team using this link here. 

R
Rochelley
January 9, 2020

Hi @JamesM ,

 

I have a situation in QB Desktop where Bonus Cheques (unscheduled payroll) were issued on Dec 10/19 and regular pay cheques were issued on Dec 20/19 (scheduled payroll).  Both cheques were covering the same bi-weekly pay period from Dec 1 - 14/19.  However, in doing my year-end checks for CPP calculations, I find that QB has calculated an extra pay period and applied the exemption to one more pay period in the year than it should have (in cases of employees being there for the entire year, it calculated the exemption using 27 pay periods instead of 26, and for employees not there for the entire year, it added one more PP than it should have), thus knocking the CPP calculation for the year out of whack.  The only people on my payroll (50+) who have correct CPP calculations are those who had reached the maximum at some point during the year.  This has caused a huge problem for me as I am about to make my last remittance of the year and have to now make a lot of adjustments to avoid a PIER from CRA.

 

I have always thought QB would recognize that if two pay cheques are covering the same pay period, that it would not double up the CPP exemption for that period, but it has done exactly that.  Is this normal behavior for QB?  I don't recall ever having a problem with this before, and I have made many bonus payments over the years in the same way as I did for 2019.  Help . . . ?

J
JamesM
January 9, 2020

Hi Rochelley. It's good to hear from you again. The employees with the bonus cheque will have more deductions because even though it's an unscheduled payroll for a bonus cheque, it's still an employee paycheque. This means that the CPP, EI and Federal Tax will be deducted. The program is correct by indicating that it's an extra paycheque because it is, although, it's a bonus cheque. Let me know if this makes sense. 

J
jassonbrowno9
February 15, 2025

CPP is calculated on bonus pay if the total earnings, including the bonus, exceed the annual basic exemption limit. The contribution rate for CPP is 5.95% (as of 2025) on earnings between the basic exemption amount and the maximum pensionable earnings. Both employer and employee contribute equally.

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