Fun with Numbers Redux

in Money

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.

My That Does Look Big

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 ofย \$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 ย \$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.

• Binary Options Guru June 19, 2013, 3:20 AM

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?

• bigcajunman June 19, 2013, 5:39 AM

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.

• My Own Advisor June 18, 2013, 8:55 PM

He knows where you live ๐

Mark

• Bet Crooks June 18, 2013, 3:51 PM

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

• Jane Savers @ Solving The Money Puzzle June 18, 2013, 9:44 AM

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.

• bigcajunman June 18, 2013, 10:09 AM

Are you self-employed? That means you have a higher Max ๐