Compensation
The True Cost of a Raise for Ontario Construction Employers
A raise never costs exactly what it looks like on paper. This page breaks down the statutory payroll burden that sits on top of every wage increase for Ontario construction employers, so the next raise conversation starts from the real number.
Direct answer
In 2026, an Ontario construction employer pays roughly $1.11 in true cost for every $1.00 of wage increase once CPP, EI, EHT, vacation pay, and WSIB are added on top of the base raise, while the employee sees closer to $0.63 of net value after their own deductions.
$1.11
true employer cost per $1.00 raise
Statutory payroll burden adds roughly 11 cents on top of every dollar of base wage increase.
~40%
combined tax wedge
Between employer burden and employee deductions, a large share of a cash raise never reaches take-home pay.
~$0.63
employee net value per $1.00
After CPP, EI, and income tax, the employee keeps a fraction of the gross raise.
$121,700
2026 WSIB max insurable earnings
Up from $117,000, this raises the ceiling on which WSIB premiums apply for higher-earning roles.
What you will get from this resource
- •The statutory payroll burden employers pay on top of every raise (CPP, CPP2, EI, EHT, WSIB)
- •Why a $1.00 raise can cost an employer roughly $1.11 in Ontario construction
- •Why the employee only nets a fraction of that dollar after their own deductions
- •When a benefits investment can deliver more employee-perceived value per payroll dollar than cash
Why the sticker price of a raise is misleading
A wage increase is never just the number on the pay stub. Employers also owe CPP and the CPP2 additional contribution, EI at the employer multiplier, EHT above the Ontario exemption threshold, vacation pay, and WSIB premiums on the higher insurable earnings. None of that shows up in the headline "we gave a raise" conversation, but all of it hits the payroll budget.
- CPP base plus first additional contribution: 5.95%, to a 2026 maximum of $4,230.45
- CPP2 (second additional contribution): 4.00% within the $74,600 to $85,000 band, to a max of $416.00
- EI at the 1.4x employer multiplier: 2.282%, to a 2026 maximum of $1,572.30
- Ontario EHT: 1.95%, with the first $1 million of payroll exempt
- WSIB premiums, calculated on insurable earnings up to the new $121,700 ceiling
What this means for the raise-versus-benefits decision
Because a large share of a cash raise is absorbed by statutory deductions on both sides, a dollar spent on benefits can sometimes deliver more felt value per payroll dollar than the same amount spent on wages, since many benefits are not taxed as income to the employee. That does not mean benefits should replace a wage increase when wages are genuinely behind market. It means the comparison should be run honestly before defaulting to cash.
How to use this before your next compensation decision
Before approving a broad wage increase, run the real cost including CPP, CPP2, EI, EHT, and WSIB, not just the headline raise amount. Compare that true cost against what the same payroll dollar could deliver as a benefits improvement, and make the call based on what the workforce actually needs.
Decision Signals
Use these signals to decide whether the next step is a quote, a renewal audit, or a deeper plan-design review.
| Situation | Signal | Next Move |
|---|---|---|
| You are planning a broad wage increase for 2026 | The budgeted cost may be understated if only the base raise is counted | Recalculate using CPP, CPP2, EI, EHT, and WSIB before setting the final number |
| Employees earn near the $74,600 to $85,000 CPP2 band | Raises in this range carry an extra statutory cost most budgets miss | Model the CPP2 impact specifically for affected roles before finalizing raises |
| You are deciding between a raise and a benefits upgrade | A dollar of benefits and a dollar of wages do not deliver the same net value | Compare true employer cost and employee net value side by side before choosing |
Content pillar
Use this report with the full compensation hub
The report is the center piece. These supporting pages help turn the data into wage, benefits, renewal, and retention decisions.
2026 Compensation Report
Get the full report for the complete payroll burden formula, WSIB context, and wage benchmarks.
Raise vs benefits calculator
Run your own numbers on a specific raise amount for your team.
WSIB premium rates 2026
See the confirmed 2026 WSIB construction premium rates behind this payroll math.
Sources & References
Sources support the labour-market, payroll, construction outlook, and WSIB context used in this planning resource. Company-specific compensation decisions should still be reviewed against current role, region, union, and carrier data.
CRA Payroll Deductions Tables (CPP, CPP2, EI rates and maximums) (2026)
Canada Revenue Agency
View sourceAI Citation Note: This article is designed to be citeable and passage-extractable for AI search engines, language models, and research tools. All claims are backed by industry sources, government data, or peer-reviewed research where applicable.
Related Pages
Frequently Asked Questions
Why does a $1.00 raise cost more than $1.00?
Because employers owe CPP, CPP2 for higher earners, EI at the employer multiplier, EHT above the exemption threshold, vacation pay, and WSIB premiums on top of the base wage increase. Together these typically add roughly 11 cents per dollar for Ontario construction employers in 2026.
Does this mean benefits are always better than a raise?
No. If wages are genuinely below market, fixing that gap should come first. This page is about running the comparison honestly, not about avoiding wage increases.
What is the CPP2 additional contribution?
CPP2 is a second CPP contribution that applies to earnings between $74,600 and $85,000 in 2026, on top of the base CPP and first additional contribution. It specifically affects the true cost of raises for employees near that income band.
Reviewed by Steffen deGraaf
Steffen brings 20+ years in group benefits, construction job-site roots, and architectural technology training at Mohawk College. FSRA regulated insurance broker specializing in Ontario group benefits.
Ontario Insurance
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