Stubbed to death
The real story behind the missing cash on your paycheque
After a month at your first “real” job, you tear open your first pay stub like a chocolate bar. Ah, sweet financial relief.
You’re struck by the sheer number of numbers staring back at you — and the final tally. Who would’ve thought there’d be so many deductions?
It’s common for new employees to experience a bit of shock after receiving their first paycheque, says Mary Cullinan, manager of payroll for Finning Canada and an HR instructor at the Northern Alberta Institute of Technology.
“A lot of people don’t know that if you make $50,000, that’s not what you take home,” says Ms. Cullinan.
She explains that paycheque deductions vary across Canada. Each province has its own tax credits, and some of them have health-care premiums. Some employers will share or cover the cost of the monthly premium.
All Canadian employees can find statutory deductions on their paycheques — the mandatory stuff you pay according to a formula that considers your income level — including Canada Pension Plan (CPP), federal and provincial taxes, and Employment Insurance (EI).
Your paycheque will also reflect any benefits your employer offers you, including health, dental, and pension plan benefits. But, as Ms. Cullinan notes, these are often taxable benefits — so while you can get your teeth cleaned for free, you’ll be taxed on the money your employer paid for the service.
Some of the numbers on your stub will also reflect voluntary deductions — so don’t forget about your commitment to donate monthly to the United Way, or to your company’s social club.
Ms. Cullinan reminds employees that deductions follow the tax cycle. For most people, this means you’ll spend most of the year paying into CPP, for instance, before you’ve paid all you’re meant to. People may notice larger paycheques after this point, until January, when the cycle starts again.
A handful of people — those who’ve dodged child support payments, taxes or loans, for instance — will see even more deductions than the average employee, if their wages are being garnished by the government.
In this case, CPP, EI and tax are deducted first, then the garnished money, and after that, any other deductions, says Ms. Cullinan.
Ms. Cullinan reminds newbies that they may find themselves taxed at higher rates at certain times of the year, if they’re working overtime.
“That’s what a lot of people forget about — they think their taxes should stay the same each paycheque, but they won’t if you’ve put in extra hours.”
Payroll departments are legally obliged to explain deductions to employees, so if you’ve got any issues, give yours a shout, says Ms. Cullinan.
In general, it’s good to check each pay stub and keep them until you’ve filed your taxes, says Ms. Cullinan, in the event there’s an error.