The CPP rate is going down in 2027. Here's what it means for your payroll.

For most of the past decade, January brought the same news to anyone who runs payroll: CPP was going up. First came the enhancement, phased in one step at a time. Then, in 2024, a second earnings ceiling arrived with its own line on the pay stub.

So it is worth noticing that January 2027 brings a cut.

Starting with the first pay of 2027, the CPP rate drops from 5.95% to 5.75%, for employees and employers alike. Bill C-30, which put the 2026 Spring Economic Update into law, received Royal Assent on June 18, 2026, and the CRA has already posted the 2027 figures.

The reduction is real. It is also smaller and less even than the headlines suggest, and that difference matters when you are setting next year's payroll budget.

What actually changed

CPP is built in three layers. The base contribution is the original plan. The first additional contribution was phased in between 2019 and 2023. The second additional contribution, known as CPP2, began in 2024 and applies only to earnings above the first ceiling.

Only the base layer is being cut, from 4.95% to 4.75% on each side. The first additional layer stays at 1%, which is how 5.95% becomes 5.75%. CPP2 does not change at all. It stays at 4% for employees and 4% for employers.

Here is how the official numbers compare.

CPP figure	2026	2027
Employee and employer rate (each)	5.95%	5.75%
Basic exemption	$3,500	$3,500
Maximum pensionable earnings (YMPE)	$74,600	$76,700
Maximum contribution (each side)	$4,230.45	$4,209.00
CPP2 ceiling (YAMPE)	$85,000	$87,400
CPP2 rate (each side)	4%	4%
Maximum CPP2 contribution (each side)	$416	$428
Maximum self-employed CPP	$8,460.90	$8,418.00

Source: CRA, CPP contribution rates and CRA, CPP2 rates.

The rate went down. The ceiling went up.

Those two changes pull in opposite directions. Where an employee sits on your pay scale decides which one wins.

Take someone earning $50,000. After the $3,500 exemption, CPP applies to $46,500. At 5.95% that came to $2,766.75 in 2026. At 5.75% it is $2,673.75. The employee keeps $93 more over the year, and you, as the employer, save the same $93.

At $70,000 the saving grows to $133 on each side. That is the example the federal government used when it announced the change.

At the top of the scale, the saving almost disappears. An employee earning more than $87,400 reaches both ceilings. Their combined CPP and CPP2 goes from $4,646.45 in 2026 to $4,637.00 in 2027. That is $9.45 for the whole year. The higher ceilings absorb nearly all of the lower rate.

In other words, the cut is worth the most to middle-income payrolls. Picture a Richmond distributor with 20 employees averaging $60,000 a year. Its employer-side CPP falls by roughly $2,260 in 2027. That is useful money. It will not change anyone's year.

Don't count the saving twice

CPP is not the only deduction that changes in January. EI premiums also rise for 2027, and the maximum employer premium goes up by $53.27 per employee.

For an employee earning above both CPP ceilings, the math flips. The employer saves $9.45 on CPP and pays $53.27 more in EI, so the cost of that position rises by about $44. For a team of well-paid specialists, the total payroll burden can go up in 2027 even though CPP went down. We break down the EI and WorkSafeBC changes in a separate article.

If you pay yourself a salary

Owner-managers who take a salary from their own corporation pay both halves of CPP, one through payroll and one as the employer. At the maximum, the combined CPP and CPP2 on both sides goes from $9,292.90 in 2026 to $9,274.00 in 2027.

That difference is too small to settle the salary-versus-dividends question on its own. RRSP room, your future CPP pension and your personal tax picture carry far more weight. If you are self-employed and not incorporated, you pay 11.5% on net earnings up to the first ceiling in 2027, plus 8% CPP2 above it, through your personal tax return.

Before your first pay run of 2027

• Check the pay date, not the work period. A pay period that runs from late December into January, but is paid in January, falls under the 2027 rates.

• Confirm your software is updated. Most payroll systems update automatically, but it is worth running one test pay and comparing it with the CRA's online calculator, PDOC, once the 2027 version is live.

• Reset year-to-date tracking. Every employee's CPP and CPP2 maximums start again on January 1.

• Update your budget. Use the new ceilings, not just the new rate. For higher earners the ceilings decide the outcome.

CPP is one line on a pay stub, but getting it wrong shows up in three places: the employee's cheque, your remittance to the CRA and the T4 in February. Our payroll services cover all three for BC corporations with five or more employees, with remittances and year-end slips included. If you would like a second pair of eyes on your 2027 setup, book a consultation.