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Home >> Living >> Personal Finance >> Payroll Deductions

Payroll Deductions

A portion of every paycheque earned in Canada goes towards a number of deductions. The most common deductions are:

  • Income Tax — The federal and provincial governments both collect income tax using different calculation formulas. The amount of tax a person pays is based on their total or gross income. A person who earns a large amount of money, for example, will pay more income tax than an individual who earns a lower income.
  • Canada Pension Plan (CPP)
  • Employment Insurance (EI)

Workers may also contribute towards a private health plan, dental insurance and a company pension plan. If the workplace is unionized, some employees may also pay monthly union fees or dues that show up as deductions (see Benefits, Dues & Other below).

Every paycheque should be accompanied by a separate piece of paper or detachable stub that clearly lists all the deductions and their full amount.

Canada Pension Plan

Canadian workers contribute a small sum of money every month towards the Canada Pension Plan (CPP). The plan is a retirement fund that pays a monthly sum of money or benefit to people who have contributed to it. People aged 65 and over are eligible for a CPP retirement pension. Individuals between 60 and 64 can collect CPP benefits if they meet certain criteria.

Employment Insurance

A small percentage of every paycheque goes towards Employment Insurance (EI). This is a government fund that pays benefits to individuals who have lost their job through no fault of their own and are looking for another one. Some individuals also collect employment insurance while they undergo retraining in a new field.

There are several types of benefits (see For More Information links below) available to Canadians depending on their situation.

Some employers top up maternity leave through payroll deductions.

Benefits, Dues & Other

Your paycheque may include other deductions that cover additional benefits provided through your workplace. These benefits might include life insurance, dental coverage, prescription medications, medical services not covered by the Ontario Health Insurance Plan (OHIP) or a company pension plan.

If the workplace is unionized, workers can also expect to have regularly deductions for union fees or dues.

The Ontario government also requires workers to pay an Ontario Health Premium to support the provincial health system. The amount of the premium is determined by an individual's overall income and is included in the provincial income tax calculation.

For More Information

Taxes and Benefits
A guide to the common payroll deductions on Canadian paycheques, including income tax, Canada Pension Plan, Employment Insurance, taxable benefits and union dues.

Ontario Health Premium
The Ontario Health Premium is deducted from workers’ paycheques and pension cheques through the income tax system.

Canada Pension Plan Retirement Pension
Information about eligibility for the Canada Pension Plan, when to apply, forms, payment rates, status of application and other related information.

Employment Insurance Regular Benefits
Information on Employment Insurance (EI): what it is, who is eligible, how to apply, and application forms.

Employment Insurance — Types of benefits
Information on other types of benefits available to Canadians who are sick, pregnant, or caring for a newborn or adopted child. Assistance is also available for those caring for a seriously ill family member with a significant risk of death.

Illegal Deductions from Wages Video
An Ontario Ministry of Labour video explaining when employers can make deductions from wages and when such deductions are illegal. In Ontario, employers can make deductions only in very specific circumstances, but as a rule cannot make deductions from an employee’s wages. Available in Chinese, English, French, Portuguese, Punjabi, Spanish, Tagalog, Tamil, and Urdu.

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