- CPP - 4.95% of annual earnings in excess of $3,500, to an annual maximum of $2,049.30
- EI - 1.73% of annual earnings, to an annual maximum of $711.03
How to deal with this "pay cut"? Ideally, you would base your spending around this diminished income, and have the discipline to save the extra that you earn after maxing out the deductions. Then, when January rolls around again, you're already spending less than you earn, and have built up a substantial cushion of savings. This takes a lot of discipline, but it puts you in great financial shape.
As for us, we have some room for reductions in several budget categories, so I'm making small cuts here and there to make up the difference. Since the Emergency Fund is already above $1,000, I'm reducing the bi-weekly contributions to $10. Our (modest) budget for eating out is also being cut. The good news is that, after having a cash-only Christmas, we don't need to spend January playing catch-up. I am also receiving my year-end bonus tomorrow, so that helps to ease the pain of a diminished paycheque.
UPDATE - The January "pay cut" only applies to Canadians who earn more than $41,100 per year. I completely overlooked this point when I originally wrote this post, and I should apologize for that. File this "pay cut" under "problems I'm fortunate to have".