From gross to net: two layers, two systems
A Canadian pay stub subtracts two fundamentally different families. Payroll contributions — CPP and EI — are flat-rate premiums that buy pension and unemployment coverage. Income tax is progressive and charged twice: once by Ottawa (federal), once by your province. Your employer withholds both in a single deduction line each pay period.
On a $65,000 Ontario salary the engine computes $50,817.56 of annual take-home — $4,234.80 a month, roughly $1,954.52 per biweekly cheque. Of the $14,182.44 withheld, $4,718.75 are CPP/EI contributions and $9,463.69 are income tax. Same numbers, pre-computed, on the $65,000 after tax page.
Each deduction line
| Line (65,000 $/yr, ON) | Rate | Amount |
|---|---|---|
| CPP (≤ YMPE 74,600 $) | 5.95% | $3,659.25 |
| Employment Insurance (≤ 68,900 $) | 1.63% | $1,059.50 |
| Federal income tax | 10.24% | $6,591.75 |
| ON provincial income tax | 4.46% | $2,871.94 |
The CPP/EI guide explains the ceilings (YMPE, insurable maximum) and the second CPP tier; the federal/provincial guide shows how the two income taxes stack.
Reading beyond the current column
Check the YTD figures — they are what your T4 slip reconciles in February: Box 14 (employment income), Box 16 (CPP contributions, which earn you a tax credit), Box 18 (EI premiums), Box 22 (income tax deducted). If your stub shows a separate RRSP or group-insurance line, those are employer-plan deductions and lower the tax withheld in real time — the main reason two colleagues on the same gross take home different amounts.
Your employer also contributes on top: it matches CPP dollar-for-dollar and pays 1.4× your EI premium — invisible because it was never part of your gross.
Deductions that are not taxes
One more family of stub lines: after-tax deductions and registered plan contributions. Union dues, parking, charitable payroll giving come off net pay without touching taxable income. An employer pension plan (RPP) contribution does the opposite — it reduces the income tax withheld on the spot, like an RRSP contribution would at filing. This is why two colleagues at the same gross can legitimately show different nets before either made a mistake.
Taxable benefits: income you never see as cash
Some employer perks count as income even though no money reaches you: employer-paid life insurance premiums, a company car's standby charge, below-market loans. They appear as taxable benefits — added to your income for withholding purposes, then listed separately, so your net can shrink without any visible deduction. They will show up again on the T4 in Boxes 14 and 40. Employer health and dental premiums, by contrast, are generally not taxable federally — Quebec treats some of them differently, one of many provincial wrinkles covered in the Quebec guide.
Pay frequency changes the cheque, not the year
Weekly (52 cheques), biweekly (26) or semimonthly (24): the annual withholding is identical — only the split differs. On our example that is $1,954.52 biweekly or $2,117.40 semimonthly. Comparing a new offer? Always normalize to annual before judging the raise.
The first paycheque of the year looks different
January cheques often feel heavier on deductions: CPP and EI restart from zero each calendar year, so they take their full bite until the ceilings are reached — high earners then see a mid-year « raise » when both lines simply stop. If you hit the maximums, your last cheques of the year are larger than your first, with no salary change at all.
Where a calculator and a stub diverge
Taxable benefits (group life, employer RRSP contributions), union dues, parking and RRSP payroll deductions all move the net without changing the gross. Provincial surtaxes — Ontario's surtax and Health Premium — are outside the engine's v1 scope, as documented on the methodology page. Run your own numbers in the salary calculator. Indicative estimate computed with the official parameters in force — not a pay slip, and not tax or legal advice.