As a newcomer to Canada, it is important to know how Canadian laws regarding wages and deductions work. Before starting work, you should keep in mind that the wage or salary you negotiate is not what will remain in your bank account at the end of each pay period. Your employer has to make certain deductions from your gross income, so the amount you receive may be less than you expect.
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Wages
Your employer must pay your wages on the regularly scheduled payday. Most commonly, you get paid twice a month, which may differ from your home country.
If you are an employee working in a federally regulated business or industry, you have certain protections related to payment of wages. In particular, he has the right to receive at least the minimum wage. If the minimum wage set by the province or territory in which you are employed is higher than the federal minimum wage, that provincial or territorial rate will apply. If he is not paid by the hour, he must receive at least the equivalent of minimum wage as wages.
A pay stub, also called a wage stub, is a record of what you have earned from your job. For each wage payment you receive, you’ll get a pay stub that shows how that amount was calculated, including any deductions. The stub can be in paper or digital format and can be delivered to you in person, emailed, or stored in a system that employees have access to.
While pay stubs from different employers may look different, they generally all include the same information. Your pay stub will include:
- Your name (and employee identification number, if applicable)
- Pay Date, or the date you receive your wages or salary for the period
- Pay period, which is the period for which you are paid (usually two weeks)
- Gross earnings, or your income for that pay period before taxes and deductions
- Deductions for the pay period, such as income tax
- Net pay for the pay period, which will be your salary after taxes and deductions
- Gross pay and deductions year to date
A pay stub differs from a paycheck, which is the actual payment of wages in the form of a physical check. Many Canadian employers ask their employees to sign up for direct deposit, which means that their salary is transferred directly to their bank account instead of receiving it by check.
deductions
Your employer may take certain deductions from your wages before giving it to you. These deductions can be used to finance public systems, while others are used to provide assistance at certain stages of life, such as periods of unemployment, parental leave or retirement.
As an employee, your employer can make certain deductions from your pay, including deductions:
- Required by federal or provincial law, such as taxes and employment insurance premiums
- Authorized by a court order, such as child support payments
- Authorized by a collective agreement, such as union dues
- Intended to collect overpaid wages
As an employee, you can also authorize your employer to make other deductions, including deductions for:
- charitable donations
- Contributions to savings plans
- Medical and dental premiums
- Life and long-term disability insurance premiums
- Contributions to pension plans or RRSP
For your authorization to be valid, it must be in writing and state the specific amounts, purpose, and frequency of deductions. This ensures that you fully understand what you are signing and how and when it will affect your payment. It is important to know that your employer cannot force you to sign an authorization. You must consent voluntarily.
Common deductions in Canada
The most common payroll deductions in Canada include Canada Pension Plan (PPC) or Quebec Pension Plan (QPP), employment insurance (EI) premiums and personal income tax deductions.
The Canada Pension Plan (CPP) is a government-administered plan that provides a taxable pension to replace part of your income after you retire. Quebec has its own pension plan, and Quebec employers and workers must contribute to the QPP instead of the CPP.
The maximum pensionable income under the CPP for 2023 is $66,000, with a basic exemption amount of $3,500 and the employee and employer contribution rate for 2023 will be 5.95%.
This means that if your annual income is over $66,000, your annual CPP contribution will equal ($66,000 – $3,500) x 5.95/100 = $3,718.75. On the other hand, if your income is less than $66,000, your CPP contribution will be (your income – $3,500) x 5.95/100.
Employment Insurance insures your employment income and provides temporary financial assistance to people who are eligible and have their jobs or are unable to work.
The maximum insurable earnings for 2023 is 1.63 percent and the maximum insurable earnings is $61,500.
This means that if your annual insurable income is $61,500 or more, you will have to pay $61,500 x 1.63/100 = $1,002.45 in EI premiums annually.
Income tax deductions are paid to the government by your employer. Individuals and businesses are legally required to pay taxes to finance the operation and improvement of publicly funded services.
The amount of income tax deducted from your salary will depend on your income. The federal government and provincial governments have separate tax rates, so your total tax liability will depend on how much you earn annually and the province in which you live.
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reference: www.cicnews.com