Question

Mason Jones earns $800.00 per week. In May he received a work related bonus of $800.00. He compared his regular weekly cheque with the bonus cheque and noticed the Canada Pension Plan contribution was a different amount. He emailed the Payroll Department asking why, when the gross earnings were the same. Write a memo to Mason explaining the difference in the amount withheld for Canada Pension Plan contributions.

Answer 1

To: Mason Jones

From: Payroll Department

Date: 01/18/2019

RE: Amount withheld for Canada Pension Plan Contributions

As you are aware that every person over the age of 18 who works in Canada outside of Quebec and earns more than a minimum amount ($3,500 per year) must contribute to the Canada Pension Plan (CPP). The amount you contribute is based on your employment income.

You make contributions only on your annual earnings between minimum and maximum amounts. These are called your pensionable earnings. The minimum amount is frozen at $3,500.

The earnings ceiling in the CPP is set each January, based on increases in the average wage in Canada. In 2019, the CPP earnings ceiling is $57,400. The contribution rate on these pensionable earnings is 10.2% (9.9% for the base, or original CPP, and 0.3% for the CPP enhancement which began to be phased in on January 1, 2019), the contribution rate is split equally between you and the Company.

Hope this answers your query. In case of any questions do not hesitate to approach us.