How do I install the Canada Payroll skill?

Run npx skillmds@latest add openaccountants/canada-payroll in your terminal (requires Node.js), paste this page's agent-chat prompt into Claude, Cursor, or any MCP-connected agent, or download the SKILL.md file and copy it into your agent's skills directory.

What does the Canada Payroll skill do?

> Use this skill whenever asked about Canadian payroll, source deductions, CPP contributions, EI premiums, or employer obligations in Canada. Trigger on phrases like "source deductions", "CPP", "Canada Pension Plan", "CPP2", "EI", "employment insurance", "T4", "TD1", "payroll deductions", "CRA payroll", "remittance", "ROE", "record of employment", "statutory holiday pay", "vacation pay Canada", "minimum wage Canada", "provincial tax", "payroll Canada", "PD7A", "remitter type", or any question about running payroll in Canada. This skill covers federal rules; Quebec (QPP/QPIP) differences are noted but not fully detailed. ALWAYS read this skill before processing any Canadian payroll work. It is listed under AI & ML on SkillMD.

Is Canada Payroll safe to use?

This skill has not completed SkillMD's automated safety review yet. SkillMD never runs a skill's scripts for you; review the SKILL.md before installing.

Which AI agents work with Canada Payroll?

This skill is tagged as working with Claude Code, Claude.ai, OpenAI Codex. SKILL.md is an open format, so most agents that read a skills directory can load it too.

Is Canada Payroll free to use?

Yes. Installing skills from SkillMD is free. This skill is licensed under AGPL-3.

Who published Canada Payroll?

openaccountants (@openaccountants) published this skill. Their other Agent Skills are listed on their SkillMD profile.

Canada Payroll by openaccountants — Agent Skill

Name: Canada Payroll
Author: openaccountants

Canada -- Payroll Skill v1.0

General reference only. This skill is general tax/accounting reference material for AI-assisted workflows. It has not been reviewed for any specific person's facts, documents, elections, deadlines, residency, filing status, or local procedures. Do not rely on it to file, pay, amend, or take a tax position without review by a qualified professional in the relevant jurisdiction.

Section 1 -- Quick Reference

Field	Value
Country	Canada
Currency	CAD ($) only
Tax year	Calendar year (1 January -- 31 December)
Primary legislation	Income Tax Act (federal); Canada Pension Plan Act; Employment Insurance Act; Canada Labour Code (federal employees)
Tax authority	Canada Revenue Agency (CRA)
Reporting system	T4/T4A information returns; PD7A remittance voucher
Pay frequency	Biweekly (most common), semi-monthly, monthly, weekly
Employer registration	Business Number (BN) + payroll program account (RP) via CRA
Provincial variation	Each province/territory has its own income tax brackets, ESA, and minimum wage
Validated by	Pending -- requires sign-off by a Canadian CPA or payroll compliance practitioner (PCP)
Skill version	1.0

Section 2 -- Income Tax Withholding (Source Deductions)

Employers withhold both federal and provincial/territorial income tax from each pay. CRA publishes payroll deduction tables (T4032) and formulas (T4127) annually.

Federal Tax Brackets (2026)

Taxable Income (CAD)	Rate
0 -- 58,523	14%
58,523 -- 117,045	20.5%
117,045 -- 181,440	26%
181,440 -- 258,482	29%
258,482+	33%

The lowest bracket rate was reduced from 15% to 14% effective for the 2026 tax year (enacted via 2025 tax reform).

Federal Basic Personal Amount (BPA) -- 2026

Income Level	BPA (CAD)
Up to $181,440	$16,452
$181,440 -- $258,482	Claws back to $14,829
Above $258,482	$14,829

Provincial/Territorial Tax

Each province has its own tax brackets applied on top of federal tax. The employer determines the applicable province based on the employee's province of employment (where they physically report to work). Employees complete a federal TD1 and a provincial TD1 form.

Key Provincial Top Marginal Rates (Combined Federal + Provincial, 2026)

Province	Top Combined Rate (approx.)
Ontario	~53.5%
British Columbia	~53.5%
Alberta	~48.0%
Quebec	~53.3%
Manitoba	~50.4%
Saskatchewan	~47.5%

Section 3 -- Social Security: Employee Deductions

Canada Pension Plan (CPP) -- 2026

Component	Rate (Employee)	Ceiling	Maximum Contribution
CPP base + first additional	5.95%	YMPE $74,600 (less $3,500 basic exemption)	$4,230.45
CPP2 (second additional)	4.00%	Earnings between YMPE $74,600 and YAMPE $85,000	$416.00

Basic exemption: $3,500/year (pro-rated per pay period)
CPP applies to employees aged 18--69 (mandatory 18--65; elective 65--70)
CPP2 is a second tier introduced in 2024 on earnings between the first and second ceilings

Employment Insurance (EI) -- 2026

Item	Rate	Maximum Insurable Earnings	Maximum Annual Premium
Employee (Canada except Quebec)	1.63%	$68,900	$1,123.07
Employee (Quebec -- reduced for QPIP)	1.31%	$68,900	$902.59

Quebec Differences

Quebec employees pay QPP instead of CPP (rate 6.40% for 2026) and QPIP (Quebec Parental Insurance Plan) at 0.494%. These are deducted separately.

Section 4 -- Social Security: Employer Contributions

CPP Employer Contributions -- 2026

Component	Rate	Maximum
CPP base + first additional	5.95% (matches employee)	$4,230.45
CPP2	4.00% (matches employee)	$416.00

Employer CPP contributions mirror the employee amount exactly (1:1 match).

EI Employer Contributions -- 2026

Item	Rate	Maximum
Employer (Canada except Quebec)	2.282% (1.4× employee rate)	$1,572.30
Employer (Quebec)	1.834% (1.4× employee rate)	$1,264.03

The employer pays 1.4 times the employee EI premium. Employers may apply for an EI premium reduction if they have a qualifying short-term disability plan.

Workers' Compensation

Provincial/territorial requirement. Premiums vary by industry classification and province. Typically $0.50--$3.00 per $100 of insurable earnings for office workers; higher for construction/manufacturing.

Employer Health Tax (Select Provinces)

Province	Threshold	Rate
Ontario (EHT)	$1,000,000	0.98%--1.95%
British Columbia (EHT)	$1,000,000	1.95%--2.925%
Manitoba (HE levy)	$2,250,000	2.15%--4.3%
Quebec (HSF)	All payroll	1.65%--4.26%

Section 5 -- Minimum Wage and Overtime

Federal Minimum Wage

$17.75/hour (as of April 2025, indexed annually to CPI). Applies to federally regulated industries only (banking, telecom, interprovincial transport).

Select Provincial Minimum Wages (2026)

Province	Rate (CAD/hour)
Ontario	$17.20
British Columbia	$17.85
Alberta	$15.00
Quebec	$16.10
Manitoba	$15.80
Saskatchewan	$15.00

Rates are approximate and subject to annual adjustments.

Overtime

Jurisdiction	Threshold	Rate
Federal	8 hrs/day or 40 hrs/week	1.5× regular rate
Ontario	44 hrs/week	1.5× regular rate
British Columbia	> 8 hrs/day or > 40 hrs/week	1.5×; > 12 hrs/day = 2×
Alberta	> 8 hrs/day or > 44 hrs/week	1.5× regular rate
Quebec	> 40 hrs/week	1.5× regular rate

Section 6 -- Mandatory Benefits

Vacation Pay

Jurisdiction	After 1 Year	After 5+ Years
Federal	4% (2 weeks)	6% (3 weeks)
Ontario	4% (2 weeks)	6% (3 weeks after 5 years)
British Columbia	4% (2 weeks)	6% (3 weeks after 5 years)
Alberta	4% (2 weeks)	6% (3 weeks after 5 years)
Quebec	4% (2 weeks) initially; 6% after 3 years	6% (3 weeks)
Saskatchewan	5.77% (3 weeks)	7.69% (4 weeks after 10 years)

Statutory / Public Holidays

9 federal statutory holidays. Provincial holidays vary (6--10 per province). Employees are entitled to the statutory holiday with pay or premium pay (typically 1.5× or time off in lieu) if they work on the holiday.

Sick Leave

Jurisdiction	Paid Days	Unpaid Days
Federal	10 paid (after 30 days of service)	--
Ontario	3 paid	--
British Columbia	5 paid	3 unpaid
Quebec	2 paid (after 3 months)	24 unpaid
Alberta	0 paid	16 unpaid

Maternity / Parental Leave (EI Benefits)

Benefit	Duration	EI Rate
Maternity (birth parent only)	15 weeks	55% of insurable earnings (max ~$695/week for 2026)
Standard parental	35 weeks	55% of insurable earnings
Extended parental	61 weeks	33% of insurable earnings

Employers are not required to top up EI benefits, though many do contractually. The one-week EI waiting period is currently waived (suspended).

Group Benefits

Not legally mandated, but most Canadian employers provide extended health, dental, life insurance, and short/long-term disability as part of competitive compensation.

Section 7 -- Payslip Requirements

The Canada Labour Code (federal) and provincial Employment Standards Acts require employers to provide a pay statement each pay period.

Mandatory Payslip Contents

Pay period dates
Gross earnings
All deductions itemised (CPP, EI, federal tax, provincial tax, other)
Net pay
Hours worked (if hourly)
Rate of pay
Overtime hours and pay (if applicable)
Vacation pay (if applicable)

Additional Requirements by Province

Ontario requires the employer's name and address, the employee's name, and the pay period. Quebec requires similar plus contribution details. Most provinces align with the above minimum.

Section 8 -- Filing Obligations

Remittance of Source Deductions

Remitter Type	Threshold (Avg Monthly Withholding)	Due Date
Quarterly	< $1,000 (new, perfect compliance)	15th of month after quarter end
Regular	< $25,000	15th of following month
Threshold 1 accelerated	$25,000 -- $99,999.99	Twice monthly (15th and month-end)
Threshold 2 accelerated	≥ $100,000	Up to 4 times per month (within 3 business days of pay date)

Year-End Filing (T4)

Task	Deadline
T4 slips to employees	Last day of February
T4 Summary to CRA	Last day of February
T4A slips (contract/other income)	Last day of February
Quebec: RL-1 slips to employees and Revenu Québec	Last day of February

Record of Employment (ROE)

Must be issued within 5 calendar days of an interruption in earnings (layoff, leave, termination, etc.). Filed electronically via ROE Web.

Penalties

Violation	Penalty
Late remittance	3% (1--3 days late) to 10% (7+ days late) + arrears interest
Failure to deduct	Employer liable for undeducted amounts + 10% penalty
Late T4 filing	$100/day per employee (min $100, max $7,500)
Failure to issue ROE	Up to $2,000 fine and/or 6 months imprisonment

Section 9 -- Common Payroll Patterns

Pattern 1 -- Biweekly Employee (Ontario)

Annual salary $75,000. Paid biweekly (26 pay periods).

Gross per period: $75,000 ÷ 26 = $2,884.62
CPP: ($2,884.62 - $134.62 exemption) × 5.95% = $163.60
CPP2: if annualised earnings exceed $74,600, additional 4% applies on the excess (calculated cumulatively)
EI: $2,884.62 × 1.63% = $47.02
Federal tax: per T4032 table for biweekly pay
Ontario provincial tax: per T4032-ON table
Employer CPP: $163.60 (matches employee)
Employer EI: $47.02 × 1.4 = $65.83

Pattern 2 -- Employee Reaching CPP Maximum

Employee paid $80,000 semi-monthly ($3,333.33/period). By period 11, cumulative pensionable earnings exceed YMPE $74,600. CPP deductions stop at $4,230.45. CPP2 continues until YAMPE $85,000 is reached (max $416.00). Payroll software tracks cumulative contributions and stops deducting when maximums are reached.

Pattern 3 -- Vacation Pay Payout

Employee earning $52,000/year with 4% vacation pay. Vacation pay accrues: $52,000 × 4% = $2,080/year. Can be paid on each cheque (added to gross, subject to all deductions) or accrued and paid when vacation is taken.

Pattern 4 -- Termination with ROE

Employee terminated without cause. Final pay includes:

Outstanding regular wages through last day
Accrued vacation pay (mandatory payout)
Termination pay (if applicable under ESA -- typically 1 week per year of service)
Severance (Ontario: 1 week per year if 5+ years and employer payroll ≥ $2.5M)

Issue ROE within 5 days via ROE Web. Code M (dismissal) or other applicable code.

Section 10 -- Interaction with Other Skills

Skill	Interaction
payroll-workflow-base	Provides generic payroll processing steps; this skill adds Canadian-specific rules
canada-bookkeeping	Payroll journals: salaries + ER CPP/EI + ER EHT/WCB to P&L; net pay + source deductions payable to BS
canada-corporate-tax	Employer CPP/EI and provincial health taxes are deductible business expenses
canada-gst-hst	No GST/HST on wages; but taxable benefits may trigger GST/HST

Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional (such as a CPA, EA, tax attorney, or equivalent licensed practitioner in your jurisdiction) before filing or acting upon.

The most up-to-date, verified version of this skill is maintained at openaccountants.com. Log in to access the latest version, request a professional review from a licensed accountant, and track updates as tax law changes.

Source: OpenAccountants — open tax Guides for AI, reviewed by named CPAs/CAs/EAs. Quality: source-cited draft. For always-current figures and named-accountant backing, connect the OpenAccountants MCP server (openaccountants-mcp).

Canada Payroll

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