How to Read Your Canadian Pay Stub — CPP, EI, and Tax Deductions Explained

A Sample Canadian Pay Stub

Before diving into each deduction, here is what a typical pay stub looks like for a Canadian employee earning $75,000 per year ($2,884.62 gross per bi-weekly pay period) in Ontario:

In this example, the employee takes home $2,113.20 out of a gross pay of $2,884.62 — about 73 cents of every gross dollar. The remaining 27 cents goes to income tax, CPP, and EI. Here is what each deduction means.

Deduction #1 — Federal Income Tax

The largest deduction for most employees is federal income tax. Your employer calculates this withholding based on your annualized salary and Canada's progressive federal tax brackets, minus the Basic Personal Amount credit of $16,452 for 2026 — the amount of income that is effectively tax-free at the federal level.

The amount withheld each pay period is an estimate. Your true federal tax bill is only finalized when you file your T1 tax return. If too much was withheld throughout the year, you receive a refund. If too little, you owe the difference.

Deduction #2 — Provincial Income Tax

On top of federal tax, your employer withholds provincial income tax based on the province where you work. Each province has its own tax brackets and rates. Ontario's provincial rates range from 5.05% to 13.16% depending on your income level.

Quebec is unique — provincial tax there is remitted directly to Revenu Québec rather than through the CRA, which is why Quebec residents also receive a separate provincial tax slip (RL-1) in addition to their federal T4.

Deduction #3 — CPP Contributions

The Canada Pension Plan contribution is mandatory for all employed Canadians aged 18–70 outside Quebec. In 2026, the employee CPP rate is 5.95% on earnings between $3,500 and $74,600, for a maximum annual employee contribution of approximately $4,230.

Once you hit the maximum contribution for the year, CPP deductions stop appearing on your pay stub for the remainder of that calendar year — and you will notice your take-home pay increase slightly as a result.

Deduction #4 — CPP2 Contributions

Since 2024, a second-tier CPP contribution (CPP2) applies to earnings between $74,600 and $85,000. The CPP2 rate is 4.00%, for a maximum additional annual contribution of approximately $416. If your annual earnings are below $74,600, you will never see this deduction on your pay stub.

Deduction #5 — EI Premiums

Employment Insurance premiums fund the EI program, which provides income replacement for Canadians who lose their jobs, take parental leave, or become seriously ill. The 2026 employee EI rate is 1.63% on insurable earnings up to $68,900, for a maximum annual employee premium of $1,123.

Like CPP, once you reach the annual maximum EI premium, no further EI deductions appear for the rest of the year. Also like CPP, your employer pays a share on your behalf — 1.4 times your premium — which does not appear on your stub.

Why Your Paycheque Is Not Simply Salary ÷ Pay Periods

Many new employees expect their net pay to be their annual salary divided evenly across pay periods. In reality, total mandatory deductions typically amount to 25–35% of gross pay for mid-range earners, depending on province and income level.

2026 Deduction Limits at a Glance