# Fun with Numbers Redux

A long while ago I wrote Monday Fun with Numbers, where I can now reveal that the friend who is “Mr. Arithmetic” or “Mr. Rules” was in fact Michael James.

In this ancient tome, I wrote about if someone tells you, “I just stopped paying my CPP and EI premiums” you can from that infer how much they make yearly.

Let’s revisit that interesting bit of Arithmetic:

• In 2013 the CPP rate is 9.9% (note that in my original post it was only 4.6%, wow, that’s a jump) with a maximum pay out of \$2,356.20 . (this is for folks that are not self-employed)
• The Employment Insurance is deducted at 1.88% with a maximum pay out of \$891.12
• Assuming someone is paid biweekly (but you can do this for other payment methods too).

You are going to estimate a yearly income of  \$X , and since this is June, let’s say your friend says, “Yes, I hit my max this week (and this week is June 16th, or the 25th week of 2013), so this is their 12th pay cheque

(( X / 25.5 ) * 4.5% ) * 12 = 2356.20

Dividing X by 25.5 is about the bi-weekly income numbers. From this equation you can do a little fun equation manipulation to get:

X = ( (2356.20/12) * 25.5) /0.045

X = \$ 111,265 per annum

What if it was next pay where they maxed out

X = ( (2356.20/13) * 25.5 ) / 0.0.45

X = \$ 102,706 per annum

These are rough estimates, and your mileage may vary, but still fun.

### Past CPP & EI

Yes, it is a topic I write about, as it is important to me. Here are a few from the past years, to compare and contrast (hint see how much CPP has gone up).

## Feel Free to Comment

1. I have a question that you might be able to answer. I recently jumped on the “work from home” bandwagon. With a self-employed status now, do I still need to pay CPP?

I had heard somewhere that I have to pay the employer’s portion as well if I’m self-employed but the person I heard that from didn’t know where they had heard that from, so it’s just hearsay. Any understanding of how this works for those of us working for ourselves?

1. To quote the CRA web site:

The maximum employer and employee contribution to the plan for 2013 will be \$2,356.20, and the maximum self-employed contribution will be \$4,712.40.

So yes, you have to pay, and YES you pay more.

2. He knows where you live ðŸ™‚

Mark

3. I find it easier to hack into their bank accounts to check what they make. : )

4. I didn’t max out again last year so it should be easy for someone to figure out that I don’t make very much money.

1. Are you self-employed? That means you have a higher Max ðŸ˜‰

5. I’ve found this interesting too. One thing that isn’t accounted for by your reasoning is bonuses (at least the way my employer calculates CPP and EI deductions, but I think it is the way required by the CCRA). In the case of CCP this year, you pay on the first \$51,100 you make in a 2013. If you happened to get a big bonus on your first pay (regular+bonus >= \$51,100), you would end up having all your CPP for the year deducted from that pay. Your formula would indicate yearly income of about \$1.3 million. But it could be somebody that made \$100,000 salary and happened to get a \$50,000 bonus at the beginning of the year.

1. Good point, I have had both occur (i.e. Bonus was taken into consideration and Bonus was ignored), but yes that would mess with the arithmetic too.

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