If you are new to Canada and intend to find a job there, you must be familiar with Canadian laws concerning wages and deductions.

Before starting your job in Canada, you must know that the wage or salary you have been appointed to and the salary or wage you receive in your bank account at the end of your pay term will not be the same.

The employer must deduct a certain amount from your gross income; thus, the salary received might be lower than your appointed salary.

Wage System in Canada

If you are pursuing a job in Canada, your employer is required to pay your salary on the selected regular payment day. Commonly, the wage is paid twice every month in Canada, which might contrast with your country.

You have several wage payment protections if you work in a federally governed business or industry, which are mentioned below.

You’ll receive at least the minimum wage fixed by the government. If the provincial or territorial minimum wage is higher than the federal minimum wage, you will be paid at the provincial or territorial rate.

If you are not receiving the payments hourly, you must receive at least the same amount of the minimum wage as a salary.

You’ll receive a pay stub or a salary slip from your employer for every salary payment, which is a record of your earnings from your job.

The salary slip will demonstrate how your salary was calculated, along with the deductions.

The salary slip may be either in paper or digital form. Also, it can be delivered to you in person, emailed to you, or saved in a system that employees can access.

The salary slips of different organizations might appear different, but they all include similar details. It includes:

  • Employee’s name and employee id number (if supplied)
  • Payment date on which the salary is supplied to the employee
  • Payment term for which the employee is being paid (typically 2 weeks)
  • Total employee income or gross earnings for the pay term prior to deductions or taxes
  • The deducted amount for the pay term like taxes
  • The amount paid for the pay term or salary after deductions.
  • Year-to-date total payment and deductions

Note that the salary slip or pay stub is different from a paycheque.

A paycheque is a wage or salary payment made via a physical cheque.

Many employers in Canada directly transfer the salary to a bank account instead of providing a cheque.

Deduction system in Canada.

Before providing you with the salary, the employer might deduct a particular amount from it. The deducted amount can be used to support the public systems and, alternatively, to assist you at various life stages, such as at the time of parental leave, unemployment, or retirement.

An employee can deduct a certain amount from the employee’s wage in the following situations:

  • If the deduction is mandated by federal or provincial laws, including taxes and employment insurance.
  • If the deduction is approved by a court, like payments for child support.
  • If the deduction is approved by a collaborative contract, like union dues.
  • If the deduction is planned to manage the overpaid salaries.

Besides these, employees can also allow employers to deduct a certain amount from their income in the following situations.

  • If it’s a charitable donation
  • If it’s a contribution to a savings plan
  • If it’s for medical & dental payments
  • If it’s for life insurance & long-term disability payments
  • If it’s for a pension plan or RRSP payments

Suppose an employee is permitting an employer to make the deduction. In that case, the employee must give permission in writing as proof, and it must mention the amount, purpose, and number of deductions an employer can make.

This will confirm that the employee understands what he is committing to as well as how and when the deduction will influence his wages.

Note that the employer can not force or compel employees to sign such deductions, and the employee must consent voluntarily.

Overview of Canada’s Common Deductions

In Canada, the most standard income deductions are the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP), income tax deductions, and Employment Insurance (EI) premiums.

The CPP, or Canada Pension Plan, is an income deduction plan operated by the government that offers a taxable pension after you retire.

The province of Quebec operates its own pension plan. Therefore, instead of CPP, employers, as well as employees in Quebec are required to contribute to the QPP or Quebec Pension Plan.

For 2023, the highest possible pensionable income under the Canada Pension Plan is $66,000, with a basic exemption of $3,500.

Also, the employer and employee contribution rates will be 5.95%.

Let us understand this with an example.

Suppose the annual income of an employee is over $66,000. So the yearly CPP contribution of the employee will be $66,000 – $3,500) x 5.95/100 = $3,718.75.

Contrarily, if the annual income of an employee is under $66,000. The yearly CPP contribution of the employee will be (the income – $3,500) x 5.95/100.

The second common salary deduction in Canada is Income Tax.

The employers pay the income tax deductions to the government.

Legally, businesses, as well as individuals, needed to pay taxes to support the processes and enhancements of public services.

The income tax deductions vary based on the salaries of the employees.

There are different tax rates for both the federal government and provincial governments. Therefore, the total income tax deduction will depend on the employee’s total yearly income as well as the province in which they reside.

The third common salary deduction is employment insurance. The EI protects the job wages of the employees and offers short-term financial support to people who are eligible, who have a job, or who are incapable of working.

For 2023, the highest insurable income is 1.63 %, and the highest insurable income is $61,500. This suggests that if an employee’s yearly insurable income is $61,500 or more, he needs to pay $61,500 x 1.63/100 = $1,002.45 in EI premiums annually.