Earned vs received
- Gross pay: everything you earned before anything is taken off.
- Net pay: what’s left after deductions: your take-home pay.
Net pay = gross pay − total deductions
Common Canadian deductions
| Deduction | What it’s for |
|---|---|
| Federal and provincial income tax | government services |
| CPP (Canada Pension Plan) | your retirement pension (QPP in Quebec) |
| EI (Employment Insurance) | income support if you lose your job or take parental leave |
| Union dues | union membership |
| Benefits | health, dental, life insurance |
| Pension plan (employer) | workplace retirement savings |
CPP, EI and income tax are required by law. Rates and limits change each year; employers and the Canada Revenue Agency publish the current values.
Reading a pay stub
A pay stub shows each part of your pay.
| Item | Amount |
|---|---|
| Gross pay (80 h × $20) | $1,600.00 |
| Income tax | −$210.00 |
| CPP | −$88.00 |
| EI | −$26.00 |
| Health benefits | −$18.00 |
| Net pay | $1,258.00 |
(The deduction amounts here are illustrative.)
Total deductions = $342.00, which is about 21% of gross pay.
Calculating with percentages
Example: Gross pay $2,400. Deductions: income tax 15%, CPP 5.95%, EI 1.64%.
- Tax: $360.00
- CPP: $142.80
- EI: $39.36
- Total: $542.16
- Net: $1,857.84
(Real CPP and income tax calculations are more complex: CPP has a basic exemption, and income tax uses brackets and credits. These simplified rates show the idea.)
Why net pay matters
Budget with net pay, not gross pay. If your job "pays $50,000 a year", your take-home pay might be closer to $38,000–$40,000.
Annual to per-pay
Example: Net pay per year is $39,000, paid biweekly.
39,000 ÷ 26 = $1,500 per pay.
Worked examples
Example 1: Gross $950, deductions $187. Net? $763.
Example 2: Net is $1,200 and deductions are 20% of gross. Gross? 1,200 ÷ 0.80 = $1,500.
Example 3: Which is larger: gross or net pay? Gross (unless there are no deductions).
Common mistakes
- Budgeting with gross pay.
- Finding gross from net by adding 20% of net instead of dividing by 0.80.
- Ignoring that rates change yearly.
Try it yourself
- Gross $1,850, deductions $412. Net?
- Gross $3,000; deductions total 24%. Net?
- Net pay is $680 after 15% in deductions. Gross?
- Name two deductions required by law in Canada.
Answers: 1) $1,438 2) $2,280 3) $800 4) e.g. income tax, CPP (or EI)
Quick recap
- Gross pay − deductions = net pay.
- Required deductions include income tax, CPP and EI.
- Budget with net pay; check your pay stub.