Introduction
Your first paycheque can feel confusing. The money in your bank account is less than the money you thought you earned. Where did the rest go? Your pay stub has the answer. A pay stub is a paper or a digital record from your boss. It shows what you earned, what came off, and what you really got paid. Every worker in Canada should know how to read it. This guide will show you, in very simple words.
What It Is
A pay stub is a record of one pay period. A pay period is the time your pay covers, often one week or two weeks. Your boss must give you a pay stub on or before each payday in most provinces. In Ontario, the stub must show your pay period, your wage rate, your gross wages and how they were worked out, the amount and purpose of each deduction, and your net wages. A deduction is money taken off your pay before you get it. Other provinces have similar rules, so your stub may look a little different, but the main parts are the same.
A pay stub has two columns of numbers. One column is for this pay period. The other column is year to date, or YTD. YTD means the total since January 1 of this year. The YTD column is very useful at tax time. Your T4 slip at the end of the year is built from those YTD totals. A T4 is a paper from your boss that shows your pay and the tax taken off for the whole year. Keep your pay stubs until you get your T4. Then check that the last stub of December matches your T4. If the numbers do not match, ask your boss or payroll before you file your taxes. Payroll is the team or the system that works out your pay.
How It Works
There are three big numbers to find first. Gross pay is what you earned before anything came off. Net pay is what you get after all the deductions. Net pay is also called take-home pay. It is the money that goes into your bank account. Total deductions are the money in the middle. Gross pay minus total deductions equals net pay. If your gross pay is $1,560 and your deductions are $260, your net pay is about $1,300. The missing money did not vanish. Your pay stub shows where it went.
Gross pay is more than your normal hours. It can also include overtime pay, bonuses, commissions, and vacation pay. Overtime pay is extra pay for hours over your normal work week. A commission is money you earn when you sell something. Vacation pay is money for your time off. In Ontario, vacation pay is at least 4% of your gross wages if you have worked for your boss for less than five years. After five years, it is at least 6%. Some bosses pay vacation pay on each paycheque. Others save it up and pay you your normal wage while you take time off.
Next come the deductions. There are two kinds. The first kind is the law. These are called statutory deductions. Statutory means the law makes your boss take them off. The three main ones are income tax, CPP, and EI. The second kind is your choice or your job. These can be union dues, health benefits, a workplace pension, or RRSP money taken off through payroll. Union dues are fees you pay to a union, if you belong to one. A workplace pension is a plan that saves money for your retirement. Ask your boss what each line on your stub means if you do not know it.
Income tax is often the biggest deduction. Your boss takes off federal tax for the Government of Canada and provincial tax for your province. Your boss sends that money to the Canada Revenue Agency, or CRA. The CRA is the office that collects tax in Canada. Your boss works out the tax as if you earn the same pay all year. That is why too much tax can come off a student paycheque. When you file your tax return at the end of the year, the CRA checks the real numbers. If too much tax came off, the extra money comes back to you as a refund. A refund is money you get back. Learn more in our simple guide on income tax in Canada for students and part-time workers.
CPP is the Canada Pension Plan. It is a public pension for your retirement. A pension is money you get each month after you stop working. In 2026, you pay 5.95% of your pensionable earnings to CPP. Pensionable earnings are the part of your pay that counts for CPP. The first $3,500 you earn in the year is free from CPP. The most you pay in 2026 is $4,230.45 for the year. Your boss pays the same amount again for you. If you earn more than $74,600 in 2026, you also pay CPP2, a second payment of 4% on earnings up to $85,000, at most $416. Most students never reach CPP2. In Quebec, workers pay QPP instead of CPP. QPP is the Quebec Pension Plan.
EI is Employment Insurance. It is a federal program that gives temporary money if you lose your job or need time off for illness or care. In 2026, you pay 1.63% of your insurable earnings to EI, up to $68,900 of earnings in the year. The most you pay in 2026 is $1,123.07. Your boss pays 1.4 times your EI amount. In Quebec, the EI rate is lower, at 1.30% in 2026. EI stops once you reach the yearly maximum with that boss.
Your stub may also show TD1. TD1 is a form you fill in when you start a new job. It tells your boss about your tax credits. A tax credit is an amount that lowers your tax. If your TD1 is wrong, the wrong amount of tax may come off your pay. Check your name, your hours, your wage rate, and your bank deposit every time. Your bank deposit must match the net pay on your stub, to the cent.
An Example With Numbers
Meet Sara. Sara works part-time in Toronto. She earns $20 an hour. In one two-week pay period, she works 75 hours. Her regular pay is 75 times $20. That is $1,500. Her boss also pays vacation pay on each cheque. Vacation pay is 4% of $1,500. That is $60. Her gross pay is $1,500 plus $60. That is $1,560.
Now the deductions. First, income tax: in this example, her boss takes off $150. This $150 is only an example number, not a real tax calculation for you.
Next, CPP. Her CPP is about $84.81 in this pay period, using the 2026 rate of 5.95% on her pensionable pay. Next, EI. Her EI is 1.63% of $1,560. That is about $25.43. Her total deductions are $150 plus $84.81 plus $25.43. That is $260.24. Her net pay is $1,560 minus $260.24. That is $1,299.76. That is the money that goes into her bank account. Check the math: $150 plus $84.81 is $234.81, plus $25.43 is $260.24. And $1,560 minus $260.24 is $1,299.76. The idea is always the same. Gross pay minus all deductions equals net pay.
Common Mistakes
One big mistake is to look only at the money in your bank account. That tells you what you got, but not what you earned or what came off. Always read the full stub. A second mistake is to ignore your hours and your wage rate. If your boss paid you for 70 hours but you worked 75 hours, you are missing five hours of pay. Check the hours every time. A third mistake is to throw your stubs away. You need them to check your T4 at the end of the year. If your T4 is wrong, your tax return will be wrong too. A fourth mistake is to think a tax refund is free money. It is not. It is your own money coming back to you. It is smart to save it. Read our guide on how much cash a student should keep for a rainy day. A fifth mistake is to never ask questions. If a line on your stub makes no sense, ask payroll. It is your money, and you have the right to know where it went.
Final Thoughts
A pay stub is not a mystery. It is a simple record with three big numbers. Gross pay is what you earned. Deductions are what came off for tax, CPP, EI, and other items. Net pay is what you really get. The YTD column is your friend at tax time, because your T4 is built from it. Take two minutes to read your stub each payday. Check your hours, your rate, your deductions, and your bank deposit. If something looks wrong, ask payroll right away.
Quick Questions
What is the difference between gross pay and net pay?
Gross pay is what you earned before anything came off. Net pay is what is left after tax, CPP, EI, and other deductions, and it is the money that goes into your bank account.
What are CPP and EI on my pay stub?
CPP is the Canada Pension Plan, a public pension for your retirement. EI is Employment Insurance, a program that gives temporary money if you lose your job or need time off.
What is a T4, and why does my pay stub matter for it?
A T4 is a slip from your boss that shows your pay and deductions for the whole year. It is built from your pay stub YTD totals, so keep your stubs and check that the last stub of December matches your T4.
Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.
Sources: Government of Canada, Starting your first job (gross pay, net pay, deductions, T4) — https://www.canada.ca/en/financial-consumer-agency/services/first-job.html ; Canada Revenue Agency, CPP and EI rates and maximums for 2026, as reported at https://www.ledgri.com/blog/cpp-ei-2026-rates and https://tools.tnaado.ca/canadian/cpp-ei-contribution-limits-by-year/ ; Ontario vacation pay 4%/6% under the Employment Standards Act, 2000, as reported at https://stlawyers.ca/labour-employment-law-employees/vacation-pay-ontario/ ; pay-stub lines and YTD at https://creditlab.ca/learn/how-to-read-a-pay-stub and https://www.canooq.ca/blog/how-to-read-canadian-pay-stub
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