Payroll processing in Canada varies by province and territory, with key differences in tax rates, deductions, and labor laws. If you’re running a business in Ontario or any other province, understanding these variations is crucial for compliance and accurate payroll management.
In this guide, we’ll break down how payroll in Ontario differs from other provinces, covering income tax, CPP, EI, and employer responsibilities, ensuring you stay legally compliant while efficiently managing payroll.
1. Federal vs. Provincial Payroll Deductions: What Stays the Same?
Before we dive into the differences, let’s clarify what’s consistent across all provinces:
✅ Canada Pension Plan (CPP) – Applies to all provinces except Quebec, where the Quebec Pension Plan (QPP) is used instead.
✅ Employment Insurance (EI) – Nationwide deduction with the same rates, but Quebec has a separate Quebec Parental Insurance Plan (QPIP).
✅ Federal Income Tax – Collected across all provinces, with provincial tax rates varying based on location.
✅ Minimum Wage Variations – Each province sets its own minimum wage, affecting payroll calculations.
Now, let’s explore how Ontario’s payroll rules differ from other provinces.
2. Ontario Payroll vs. Other Provinces: Key Differences
🔹 Income Tax Rates
Ontario’s provincial tax brackets differ from other provinces, impacting how much tax employees pay. For example:
- Ontario’s lowest tax bracket starts at 5.05%, while provinces like British Columbia (5.06%) and Alberta (10%) have different structures.
- Some provinces, like Newfoundland and Labrador, have higher tax rates at lower income levels, increasing tax deductions.
💡 Employer Impact: Payroll software must be configured to calculate province-specific deductions to ensure accurate tax withholding.
🔹 Canada Pension Plan (CPP) vs. Quebec Pension Plan (QPP)
Ontario and most provinces use CPP, while Quebec has its own QPP with slightly different contribution rates.
- 2025 CPP Contribution Rate: 5.95% (Employer and Employee)
- 2025 QPP Contribution Rate: 6.40% (Higher than CPP)
💡 Employer Impact: If hiring employees in Quebec, employers must separately calculate QPP contributions, as they differ from CPP deductions in Ontario.
🔹 Employment Insurance (EI) & Quebec’s Parental Insurance Plan (QPIP)
- Ontario employees pay standard EI premiums
- Quebec employees contribute to QPIP, which is separate from EI, requiring different calculations
💡 Employer Impact: If hiring remote workers across provinces, businesses must ensure they’re applying correct EI/QPIP deductions for compliance.
🔹 Employer Payroll Taxes & Health Levies
Ontario and several provinces have employer payroll levies beyond regular deductions.
- Ontario Employers Pay the Employer Health Tax (EHT) – A progressive tax on payroll expenses over $1 million.
- Quebec has a Health Services Fund Contribution – A separate payroll expense for employers.
- Manitoba, Newfoundland, and British Columbia also have payroll tax levies.
💡 Employer Impact: If your business operates in multiple provinces, you may owe different payroll taxes depending on employee location.
🔹 Minimum Wage & Overtime Rules
Each province sets its own minimum wage, affecting payroll calculations.
- Ontario Minimum Wage (2025): Expected to increase from $16.55 per hour
- Alberta has a frozen minimum wage at $15 per hour
- British Columbia’s minimum wage is $16.75 and increases annually
💡 Employer Impact: Payroll systems must adjust wages based on provincial laws to ensure compliance with minimum wage and overtime rules.
3. Payroll Compliance: What Employers Need to Do
✅ Use Payroll Software with Provincial Tax Settings – This prevents under-deductions or overpayments when handling employees in multiple provinces.
✅ Stay Updated on Annual Rate Changes – Provincial tax rates, CPP, and EI deductions change annually, so payroll systems must be updated.
✅ Apply Correct Employer Levies – Businesses in Ontario must factor in EHT, while Quebec, Manitoba, and British Columbia have additional payroll costs.
✅ Provide Accurate Pay Stubs – Employees must see detailed breakdowns of federal and provincial deductions to ensure compliance.
4. Hiring Across Provinces? Here’s How to Stay Payroll Compliant
If your business operates in multiple provinces, follow these best practices:
✔️ Verify Employee Residency – Payroll tax deductions depend on where employees live, not where the company is based.
✔️ Use Multi-Province Payroll Software – Avoid manual errors by using software that automatically applies provincial deductions.
✔️ Consult a Payroll Expert – If hiring in multiple provinces, work with a payroll specialist to stay CRA-compliant.
Final Thoughts: Payroll in Ontario vs. Other Provinces
Payroll in Ontario follows national standards but has unique employer taxes, minimum wage rules, and provincial tax rates that differ from other provinces. Understanding these differences is crucial for business owners, HR teams, and payroll managers to ensure compliance, avoid penalties, and manage payroll efficiently.
Whether you’re a small business in Toronto or hiring remote workers across Canada, staying informed about provincial payroll differences helps ensure smooth payroll processing while keeping your business legally compliant in 2025.
