🟢 Basic · Step 2 of 22 · Topic: Banking, Budget & Saving

In one sentence

This post explains each line on a Canadian pay stub, so you know why your pay is smaller than your salary and where the rest goes.

▶ Prefer to watch? Here is the 3-minute version.

Words to know

• Pay stub: the paper or online statement your employer gives you with each pay. It is also called a statement of earnings.
• Gross pay: what you earned before anything is taken off.
• Net pay: what is left after deductions. This is the money that lands in your bank account.
• Deduction: an amount your employer takes off your pay and sends somewhere for you, such as to the government.
• CPP and EI: the Canada Pension Plan (a public pension) and Employment Insurance (support if you lose your job). Both come off most pay.

Step 1: Find your gross pay and net pay

Look for two big numbers on your stub. Gross pay is at the top. It can include regular hours, overtime and vacation pay. Net pay is at the bottom.

Also check how often you are paid. “Biweekly” means every two weeks, which is 26 pays a year. “Semi-monthly” means twice a month, which is 24 pays a year.

Always plan your budget with net pay, not gross pay. Net pay is the money you can actually use.

Step 2: Understand income tax

Your employer takes off income tax and sends it to the Canada Revenue Agency (CRA). There are two parts: federal tax, for all of Canada, and provincial or territorial tax, for where you live.

In 2026, the lowest federal tax rate is 14%, on taxable income up to $58,523. Each province has its own rates too.

You don’t pay tax on every dollar. A basic personal amount (a part of your income that is not taxed) lowers your tax. When you start a job, you fill in a TD1 form. It tells your employer which tax credits you claim.

The amount taken off is an estimate. If too much is taken, you get a refund when you file your tax return (see Step 7).

Step 3: Understand CPP (and CPP2)

The Canada Pension Plan (CPP) is a public pension. You pay in while you work. Later, it pays you money in retirement. Your employer pays the same amount as you.

For 2026, the employee rate is 5.95%. It applies to earnings between $3,500 (the basic exemption, which is not charged) and $74,600 (the maximum pensionable earnings). The most an employee pays in a year is $4,230.45.

If you earn more than $74,600, a second part called CPP2 applies. It is 4% on earnings between $74,600 and $85,000. The most anyone pays is $416.00.

When you reach the yearly maximum, CPP stops coming off. Your net pay goes up for the rest of the year. In Quebec, workers pay into the Quebec Pension Plan (QPP) instead.

Step 4: Understand EI

Employment Insurance (EI) can pay you for a while if you lose your job, and in some other cases, like parental leave.

For 2026, outside Quebec, the employee rate is 1.63% of insurable earnings, up to $68,900. The most an employee pays in a year is $1,123.07. In Quebec, the EI rate is 1.30%, because Quebec has its own parental insurance plan.

Step 5: Check the other lines and keep your stubs

Your stub may show other deductions too:

• Workplace benefits, such as health or dental insurance.
• Pension plan or group RRSP contributions at work.
• Union dues, if you are in a union.

Look for the year-to-date (YTD) column. It shows the total so far this year. Check that your hours and pay rate are right. Keep your stubs, because they help you check your T4 slip (the yearly summary of your pay) at tax time.

To check the numbers, you can use the CRA’s free Payroll Deductions Online Calculator.

Example

Let’s look at a simple pay stub. Gross pay is $2,000 every two weeks. That is $2,000 × 26 = $52,000 a year. The worker lives outside Quebec.

Line	How it is worked out	Amount
Gross pay		$2,000.00
CPP	($2,000 − $134.62) × 5.95%. The $134.62 is the $3,500 exemption split over 26 pays ($3,500 ÷ 26).	− $110.99
CPP2	$52,000 a year is under $74,600, so none	− $0.00
EI	$2,000 × 1.63%	− $32.60
Income tax (federal + provincial)	Roughly. The real number depends on your province and your TD1 form.	about − $240.00
Net pay	$2,000 − $110.99 − $32.60 − $240	about $1,616

The CPP and EI lines follow the 2026 rates above. The income tax line is only a rough guess for many provinces. Your employer uses the CRA’s payroll tables or calculator, so the number on your real stub is the one to trust.

In this example, about $384 of every $2,000 is taken off before you get paid ($110.99 + $32.60 + $240 = $383.59).

Common mistakes

• Making a budget with gross pay instead of net pay.
• Ignoring the TD1 form. A wrong TD1 can mean too much or too little tax is taken off.
• Thinking CPP and EI are “lost” money. They pay for your future pension and job-loss support.
• Throwing stubs away before checking them against your T4 slip.

✅ My checklist

☐ I found my gross pay and net pay
☐ I know how often I am paid
☐ I found the lines for income tax, CPP and EI
☐ I checked my hours and pay rate
☐ I saved my pay stubs in one folder

Next step → Step 3: Splitting your paycheque: a simple budget that works

More in this topic → Banking, Budget & Saving

---

There are no affiliate or referral links in this post. This is general information, not financial, tax or legal advice; everyone’s situation is different. Figures were checked in October 2026 and can change.

Sources: Canada.ca: CPP figures for 2026 · CRA: EI premium rates and maximums · CRA: T4127 Payroll Deductions Formulas, July 2026 · CRA: how to calculate payroll deductions · CRA: Payroll Deductions Online Calculator