Understanding Canadian Paystubs: Why Your Paycheque Looks Different Than Expected
If you’re new to working in Canada, receiving your first paystub can be surprising. You might find yourself thinking: “Why is my pay lower than what I was promised?”
Don’t worry—you’re not the only one. Paystubs can seem confusing at first, but once you understand how they work, they become a useful tool to track your earnings and identify errors.
What Is a Paystub?
A paystub (sometimes called a pay statement) is the detailed summary that accompanies your paycheque. It outlines:
Your total earnings.
Any deductions that were taken out.
The actual amount deposited into your bank account.
Think of it as a financial snapshot of your job, showing your gross income, deductions, and net pay—the real money you take home.
Main Sections of a Canadian Paystub
1. Earnings
This section lists what you earned before deductions, including:
Regular wages: Your standard hourly rate or salary.
Overtime pay: Extra earnings for hours worked beyond your normal schedule.
Bonuses or commissions: Additional income based on performance.
Vacation pay: Some paystubs also track accrued vacation or paid time off.
2. Deductions
Deductions are amounts subtracted from your gross pay. Common ones in Canada include:
Income Tax (federal + provincial): Canada’s progressive tax system means your tax rate increases as your income rises. In 2025, the federal basic personal amount is $16,129.
CPP (Canada Pension Plan): 5.95% of your eligible earnings (up to $71,300 in 2025), matched by your employer.
EI (Employment Insurance): 1.64% of insurable earnings (up to $65,700 in 2025).
Other deductions: Could include union fees, health insurance, or retirement plan contributions.
3. Net Pay
Your net pay is what actually lands in your account after all deductions. This is often referred to as your take-home pay.
4. Year-to-Date (YTD)
The YTD section totals your earnings and deductions from the start of the year. It’s helpful when comparing your paystub with your T4 slip at tax time.
Why Paying Attention to Your Paystub Matters
Catch Mistakes: Payroll errors can occur—incorrect hours, missing overtime, or incorrect deductions. Your paystub serves as proof.
Plan Your Budget: Knowing the difference between gross and net pay helps you understand your actual income. A $20/hour job might feel more like $16–$17/hour after deductions.
Tax Preparation: Understanding your paystub simplifies filling out your T4 and tax return.
Financial Awareness: Reading paystubs helps you track money flow, promoting better money management skills.
Tips for Understanding Your Paystub
Make sure your recorded hours match your work schedule.
Keep copies of all paystubs—they’re proof of income for loans, rentals, or taxes.
Don’t be alarmed by deductions—they are often required by law and may benefit you in the future (like CPP and EI).
Many companies provide digital paystubs through online portals—know how to access yours.
Bottom Line
Your paystub is more than just paperwork—it’s a tool for understanding your income and taking control of your finances. Learning to read it is an essential step toward financial independence and smarter money management.
Need help with taxes or payroll questions?
Feel to reach out on understanding your pay and taxes in Canada.
