There have been some changes to the payroll deductions required by the Canadian Revenue Agency (CRA) in 2019. These changes include a change in the deductible federal and provincial/territorial income tax as well as in the CPP contributions and EI premiums to be deducted from an employee’s pay.
With new income tax, EI premium, and CPP contribution rates kicking in, there might be some adjustments to the paycheck received by employees in 2019. What are some of the biggest changes to payroll deductions in 2019 compared to 2018? The basic federal tax exemption has increased from $11,809 to $12,069 in 2019. The basic provincial tax exemption has also increased from $10,354 in 2018 to $10,582 in the current year.
In addition to the above, we have also witnessed an increase in the maximum EI and CPP deduction. These amounts have increased from $858.22 and $2,593.80 in 2018 to $860.22 and $2,748.90 respectively in 2019. All the major changes in 2019 to the payroll deductions that employers need to make are discussed below.
Strong Employment Numbers Have Pushed EI Premium Rates Lower
With unemployment in Canada reaching a 40-year low, the demand for employment insurance (EI) has also decreased. EI rates paid by employees have dropped by 4 cents per $100 of insurable earnings to change from $1.66 in 2018 to $1.62 in 2019.
What does this mean for employers? The employer’s contribution equalling 1.4 times the amount paid by the employee has also decreased. As a result of this, the overall EI deduction from an employee’s pay has reduced. Therefore, when employers calculate the deductible EI from an employee’s pay in 2019 using our payroll deductions calculator, they will have to apply an EI rate that is different from the previous year.
CPP is Being Increased
Over the next seven years, the CRA has plans to ‘gradually increase’ the CPP. The revenue body will achieve this by increasing contributions. This means that a greater amount of CPP will be deducted from an employee’s pay now to ensure they receive more money after retirement than previously promised.
The CPP contribution rate has increased from 4.95% in 2018 to 5.1% in 2019. This rate is constant for earnings between $3,500 and $57,400. $57,400 is the maximum pensionable earnings under the CPP in 2019, a $1500 increase from the previous year. 5.1% is the rate for employees, which will have to be matched by their employers. How does this affect the deductible CPP contribution compared to the previous year? Following is what we got when we calculated the CPP based on the new rate using our payroll calculator for Canada:
- You will pay $36 more per year if your income is $27, 450
- You will pay $79 more per year if your income is $55,900
- You will pay $80 more per year if your income is $85000
You can calculate the above amounts yourself by using an online payroll calculator.
Changes to Federal Tax Thresholds
There have been changes to federal income thresholds in 2019. These changes are based on the changes in CPI. The following are the federal tax rates for the different income slabs/thresholds in 2019.
|Income in 2018||Income in 2018||Tax Rate|
|$47,630 or less||$46,605 or less||15%|
|$47,631 to $95,259||$46,606 to $93,208||20.5%|
|$95,259 to $147,667||$93,209-$144,489||26%|
|$147,667 to $210,371||$144,490-$205,842||29%|
|Over $210, 371||Over $205,843||33%|
In addition to the above, changes have also been made to Canada’s employment amount and personal amounts. The amount of non-refundable personal amount or personal credits for tax purpose has been increased from $11,809 in 2018 to $12,069 in 2019 while the Canada employment amount has been increased from $1,195 to $$1,222 in 2019.
Personal credit is a non-refundable ‘personal amount’ that all taxpayers can claim for their income tax to lower their tax bill. On the other hand, the Canada employment amount is a non-refundable tax credit available for the first thousand dollars of earned employment income.
Based on the new rates, the deductible federal income tax from an employee’s pay can be calculated using our payroll deductions calculator. With that, we round-up the changes to payroll deductions in 2019 and how to calculate them.