US vs Canada payroll costs: FICA and FUTA against CPP, EI, EHT and WSIB
Canada swaps FICA for CPP and EI, then adds provincial health tax and workers’ compensation. At mid-range salaries the totals are closer than most US finance teams expect.
The Canadian lines on a US-style payroll budget
US vs Canada payroll costs are closer than they look. On an 85,000 salary, Ontario’s statutory employer costs come to 9.45% of pay, while US federal payroll taxes are about 7.70% before state unemployment tax and workers’ compensation are added.
How do US and Canadian employer payroll taxes line up?
Both countries fund retirement, unemployment and workplace injury insurance through payroll, but Canada caps most federal contributions at modest earnings ceilings and adds provincial health levies. A US employer pays Social Security at 6.2% up to the annual wage base and Medicare at 1.45% on all wages, matching the employee’s share, as set out in the IRS topic on Social Security and Medicare withholding. It also pays federal unemployment tax (FUTA), state unemployment tax (SUTA) and workers’ compensation, the last two set by each state.
The Canadian equivalents for 2026, outside Quebec, are the Canada Pension Plan (CPP) at 5.95%, a second pension tier called CPP2 at 4% on a narrow band of earnings, and Employment Insurance (EI) at 2.282% for the employer. Provinces then add their own lines. In Ontario those are the Employer Health Tax (EHT) and premiums to the Workplace Safety and Insurance Board (WSIB); Quebec, British Columbia and Alberta each have their own versions.
The result is a similar headline burden with a different shape. US FICA keeps running on Medicare for every dollar of pay, whereas Canadian CPP and EI stop at fixed maximums, so the Canadian percentage falls as salaries rise past about CAD 85,000, apart from any provincial health tax, which applies to the whole salary.
The employee side mirrors the employer side in both countries. A Canadian worker matches CPP and CPP2 and pays EI at 1.63%, just as a US worker matches Social Security and Medicare, so gross-to-net calculations follow a familiar pattern even though the rates and ceilings differ.
What do CPP and CPP2 cost an employer in 2026?
CPP in 2026 costs the employer 5.95% of pay above the CAD 3,500 exemption and below the CAD 74,600 ceiling, which works out at no more than CAD 4,230.45 a head, and each employee matches it. That 5.95% combines the base rate of 4.95% with the 1% “first additional” enhancement. The rates and ceilings are published on the CRA’s CPP contribution rates page.
CPP2, the second additional contribution, is a 4% charge on each side covering only the CAD 10,400 of earnings between CAD 74,600 and CAD 85,000, so it never exceeds CAD 416 per party. For anyone earning CAD 85,000 or more, the employer’s pension cost is therefore fixed at CAD 4,646.45 a year. Social Security in the US runs to a much higher wage base, so a US employer keeps paying 6.2% on salaries well above the point where Canadian CPP stops.
Quebec employers contribute to the province’s own pension plan instead, known as the QPP or Régime de rentes du Québec, at 6.30% up to the same CAD 74,600 ceiling, a maximum of CAD 4,479.30, plus the same 4% second contribution. For per-pay calculations, see our employer guide to CPP and EI contributions and our explainer on the CPP2 second earnings ceiling.
How does EI compare with FUTA and state unemployment tax?
Canadian EI costs the employer more per employee than FUTA, but it replaces both the federal and state unemployment layers and also funds maternity and parental benefits. The IRS explains that FUTA is charged at 6.0% on wages up to USD 7,000 per worker per year, reduced by a credit of up to 5.4% for state unemployment contributions paid in full and on time, which gives an effective 0.6%, or USD 42 per employee, outside credit reduction states. SUTA rates and wage bases vary by state and by the employer’s own claims history.
EI for 2026 is set at 1.63% for the worker, with the employer paying 1.4 times that, 2.282%, on insurable earnings up to CAD 68,900. ESDC’s 2026 premium table limits the employer’s annual EI cost to CAD 1,572.30 and the worker’s to CAD 1,123.07. There is no separate provincial unemployment tax.
In Quebec, EI drops to CAD 1.82 per CAD 100 on the employer side and CAD 1.30 on the worker side, since parental benefits in that province come from QPIP, the Régime québécois d’assurance parentale. QPIP then adds 0.602% for employers and 0.430% for staff, on insurable earnings up to CAD 103,000.
Where do EHT and WSIB fit against US state levies?
Provincial health taxes have no direct US federal equivalent, while workers’ compensation exists on both sides of the border. Ontario’s Employer Health Tax is charged on total Ontario remuneration at 0.98% up to CAD 200,000, stepped rates in between, and 1.95% above CAD 400,000. A CAD 1 million exemption is available to eligible employers, and it disappears entirely once an associated group’s combined Ontario payroll goes over CAD 5 million.
When an EOR is used, it is the employer of record’s Ontario payroll that sets the EHT rate and decides on the exemption. We assume in our example that the employer exceeds both thresholds, giving 1.95% and no exemption. British Columbia has its own Employer Health Tax, exempt up to CAD 1 million of BC remuneration and charged at 1.95% on total payroll above CAD 1.5 million, and in Quebec the Health Services Fund charges employers between 1.65% and 4.26% according to their sector and total payroll.
Workers’ compensation is run by provincial boards rather than private carriers. The WSIB’s 2026 average premium is CAD 1.23 per CAD 100 of insurable payroll, on earnings up to CAD 121,700, with office-based professional work in Class L at CAD 0.18. WorkSafeBC’s average base rate is CAD 1.55 and WCB-Alberta’s average collected rate CAD 1.46 per CAD 100. US employers usually insure through private carriers or state funds, with rates that likewise depend on the kind of work.
What does a CAD 85,000 salary cost compared with USD 85,000?
On the same headline salary, Ontario’s statutory employer costs come to 9.45% of pay, against 7.70% for US federal payroll taxes alone before state unemployment tax and workers’ compensation. The comparison below uses percentages rather than converted currency, so exchange rates do not distort it, and it counts only employer-side statutory costs, leaving out benefits, bonuses and any service fee.
For Canada we take our 2026 Ontario worked example: CAD 85,000 of salary for all of 2026 from one employer, EHT charged at 1.95% without the exemption, and WSIB premiums at the Class L rate. The employer pays CPP of CAD 4,230.45, CPP2 of CAD 416.00, EI of CAD 1,572.30, EHT of CAD 1,657.50 and WSIB of CAD 153.00, a total of CAD 93,029.25. The federal items (CPP, CPP2 and EI) amount to CAD 6,218.75, or 7.32% of salary, and the provincial items add a little over 2%.
The US side takes USD 85,000, below the Social Security wage base, with full FUTA credit. Social Security at 6.2% is USD 5,270.00, Medicare at 1.45% is USD 1,232.50 and FUTA after credit is USD 42.00, a total of USD 6,544.50. State unemployment tax and workers’ compensation would come on top and vary by state, industry and claims history, so the true US figure depends heavily on location.
The federal layers of the two systems are therefore close at this salary, with Canada slightly cheaper, and the gap opens up in the provincial or state layer. At higher salaries the Canadian federal percentage falls because CPP, CPP2 and EI are capped, while US Medicare continues on every dollar.
A second illustration shows the effect. On CAD 150,000 in Ontario, CPP, CPP2 and EI stay at CAD 6,218.75, EHT at 1.95% is CAD 2,925.00 and WSIB Class L, capped at CAD 121,700 of insurable earnings, is CAD 219.06, a total of CAD 9,362.81 or 6.24% of salary. On USD 150,000, assuming the salary sits below that year’s Social Security wage base, Social Security is USD 9,300.00, Medicare USD 2,175.00 and FUTA USD 42.00, a total of USD 11,517.00 or 7.68%, again before state levies. The same assumptions apply as above: one employer for the full year, no benefits and no exemptions.
Which costs sit outside the statutory payroll figures?
Benefits and the EOR fee are the largest costs outside the statutory lines, and benefits are where US and Canadian budgets differ most. Many US employers carry group health insurance as a major per-head cost. In Canada core medical care is funded publicly through provincial plans, so employer plans usually cover extended health, dental, vision and prescription drugs, Price the actual plan with a broker before drawing conclusions, because costs depend on the cover chosen and the group’s size.
Paid time off is also partly statutory in Canada. In Ontario, anyone with under 5 years’ service must get 2 weeks’ vacation paid at 4% of gross wages or more, alongside 9 public holidays. For salaried staff the salary simply continues during vacation, which is how our worked example treats it.
An EOR hire also carries the service fee from USD 560 monthly, equal to about CAD 790.56 using ECB reference rates for 24 September 2026. That brings the Ontario example to CAD 102,515.97 a year, before the one-off set-up fee most clients pay when the first hire starts. Our article on the cost of employing someone in Canada breaks the whole figure down, including the employee’s take-home pay of CAD 63,679.42.
How do filing and remittance deadlines differ?
Canadian payroll remittances are usually monthly rather than tied to each payday. Regular remitters pay over each month’s income tax, CPP and EI within 15 days of that month’s end, while larger employers remit up to twice a month (average monthly withholding of CAD 25,000 to 99,999.99) or up to four times a month (CAD 100,000 or more). US employers deposit on their own schedule and file Form 941 quarterly.
Payroll is only one part of the move north. Leave, notice and work permits for a US business taking on Canadian staff are covered in our note for US employers expanding into Canada.
Year-end reporting uses T4 slips and a T4 Summary, which must reach the CRA by the last day of February; anyone filing more than 5 slips must do so electronically. A Record of Employment, which the worker relies on for any EI claim, usually has to be issued within 5 calendar days after earnings stop. In Quebec, provincial source deductions are remitted to Revenu Québec as well.
Under Employer of Record Canada, these remittances and filings are made by us in our capacity as legal employer, and you receive one monthly invoice covering salary, statutory costs and the fee.
Frequently asked
Q01Are Canadian payroll taxes higher than US payroll taxes?
Q02Is there a Canadian equivalent to FICA?
Q03Does Canada have a state-style unemployment tax?
Q04What is Ontario’s Employer Health Tax?
Q05Do Canadian employer contributions stop at a ceiling?
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We deduct and remit CPP, EI and provincial levies as employer of record; our fee is from USD 560 for each employee monthly.