FREE TOOL · CANADA · 2026 CPP, EI AND ONTARIO EHT RATES
Employee Cost Calculator (Canada): The True Cost of an Employee in 2026
See what a new hire really costs before you post the job. Enter a salary or hourly rate and the calculator adds the employer share of CPP, CPP2 and EI, Ontario Employer Health Tax, WSIB, vacation pay and benefits, then shows the total annual cost and the cost per hour worked.
Wages
Payroll taxes and premiums
Total annual cost
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How This Calculator Works
The calculator starts with gross pay: your salary, or hourly rate × hours per week × 52 weeks, plus any vacation pay. It applies 2026 employer rates to that, then adds benefits and other costs.
- What it includes: employer CPP, CPP2 and EI, Ontario Employer Health Tax if your payroll is over the exemption, WSIB at your rate, vacation pay, benefits and other costs.
- What it assumes: a full year with one employer, so the full $3,500 CPP basic exemption applies. Salaried staff take two weeks of vacation and nine Ontario public holidays, which sets the hours behind the cost per hour worked.
- EHT is kept simple: if your Ontario payroll is over the exemption, each extra dollar of wages is taxed at 1.95%. The lower rates on the scale apply only to payroll of $400,000 or less.
For the full process, see our guide on how to do payroll in Canada.
How Much Do Employees Cost in 2026?
The employer-side costs on top of gross pay for 2026, each linked to its source:
| Cost | 2026 employer rate | Note |
|---|---|---|
| CPP | 5.95% of earnings between $3,500 and $74,600 | Maximum $4,230.45 per employee; the employee pays the same. |
| CPP2 | 4% of earnings between $74,600 and $85,000 | Maximum $416 per employee. |
| EI | 1.4 times the employee rate of 1.63% (2.282%) on earnings up to $68,900 | Maximum $1,572.30 per employee. |
| Ontario EHT | 0.98% to 1.95% of total Ontario payroll | Eligible employers pay nothing on the first $1,000,000 of payroll. |
| WSIB | Your rate class’s premium per $100 of insurable earnings | Charged on earnings up to $121,700. Not every business needs coverage. |
| Vacation pay | 4% of gross wages, or 6% after five years of service | Ontario minimum; salaried staff usually take paid time off instead. |
Worked example: a $55,000 salary in Ontario
- CPP: 5.95% of $51,500 ($55,000 less the $3,500 exemption) is $3,064.25.
- CPP2: nothing, because the salary is under $74,600.
- EI: 2.282% of $55,000 is $1,255.10.
- EHT and WSIB: nothing, if your payroll is under the EHT exemption and your industry does not require WSIB coverage.
Payroll costs come to $4,319.35, so the employee costs $59,319.35 a year before benefits, 7.9% more than the salary. Over 1,807.5 hours actually worked, that is $32.82 an hour, against $28.21 if you divide the salary by 1,950 paid hours. Your share and the employee’s deductions go to CRA on a set schedule; see our guide to payroll remittances in Canada.
Costs the Calculator Leaves Out
- Overtime: extra hours at premium rates, which also raise CPP, EI and EHT.
- Public holiday premiums: premium pay or a substitute day off for staff who work a holiday.
- Recruiting: job board or agency fees and interview time.
- Training and management time: a new hire is rarely fully productive in the first few months.
- Payroll administration: running pay, remittances and T4 slips, done yourself or through payroll services.
Employee or Contractor?
A contractor costs no CPP, EI, EHT or vacation pay, but the contract’s label does not settle the question. CRA looks at the real relationship: who controls the work, who supplies the tools, whether the worker can hire helpers, and who carries the financial risk. If CRA decides the worker was an employee, you can be assessed for the missed CPP and EI, plus penalties and interest. CRA sets out the tests in its employee or self-employed guidance, which replaced guide RC4110 in January 2026. If a contractor works through their own corporation, read about the personal services business rules first. More calculators are on our free accounting tools for Canadian business owners.
Rates reflect CRA, Ontario Ministry of Finance and WSIB figures for 2026 as of October 2026. This page is general information, not advice for your specific situation.
Frequently Asked Questions
Most small businesses do not. Eligible employers, generally private-sector employers with Ontario payroll under $5 million, pay no EHT on the first $1,000,000 of payroll a year. Above that you register and pay 1.95% on the excess, with monthly instalments once payroll is over $1.2 million.
CPP2 is the second additional Canada Pension Plan contribution, introduced in 2024. In 2026 employers and employees each pay 4% on earnings between $74,600 and $85,000, up to $416 each. Employees earning $74,600 or less never pay it.
Close to it, because CPP, EI, EHT and WSIB scale with pay. The $3,500 CPP exemption is a bigger share of a small paycheque, which lowers the per-hour cost slightly, while benefits and equipment spread over fewer hours raise it.
Partly. CPP, CPP2 and EI are the same everywhere except Quebec, so the other province option covers those, but it does not add other provinces’ payroll taxes or workers’ compensation premiums. Quebec employers pay QPP, QPIP and the Quebec health services fund instead, which are not modelled.
When the employee’s 2026 earnings reach $68,900 for EI, $74,600 for CPP and $85,000 for CPP2. Nothing more is due until January 1. The maximums apply per employer, so a mid-year hire starts again from zero and the employer share paid elsewhere is not refunded.
Want Payroll Set Up Properly?
A new hire means a CRA payroll account, correct deductions from the first pay, remittances on time and T4 slips at year-end. With 10+ years of helping Canadian small businesses, Targeted Accounting can set it all up and run it for you before your first pay date.