How Canadian Paychecks Are Calculated

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Every Canadian paycheque follows the same path from gross to net — salaried or hourly, Ontario or Nunavut. Here’s how it works.

Step 1: Start with gross pay

Gross pay is your earnings before any deductions — your salary divided by pay periods, or your hourly rate multiplied by hours worked. This is the number your job offer quotes.

Step 2: Federal income tax

Federal tax is calculated on a progressive bracket system — 14% to 33% for 2026 — with a basic personal amount that’s tax-free. Only the portion of your income within each bracket is taxed at that bracket’s rate.

Step 3: Provincial or territorial income tax

Your province or territory applies its own separate tax brackets and basic personal amount on top of federal tax. This is why take-home pay varies by province even at the same salary — see our province-by-province calculators to compare.

Step 4: CPP (or QPP in Quebec)

A percentage of your income (5.95% for CPP, 6.30% for QPP) goes toward your future retirement pension, with an additional CPP2/QPP2 contribution on income above $74,600. See our CPP vs. CPP2 guide for details.

Step 5: EI (or EI + QPIP in Quebec)

A smaller percentage funds Employment Insurance, which pays benefits if you lose your job or take certain types of leave. Quebec residents pay a reduced EI rate plus a separate QPIP premium, since Quebec runs its own parental insurance program.

Step 6: Net pay

What’s left after all deductions is your net pay — the amount that actually lands in your bank account. This is the figure your pay stub shows as your take-home pay.

Try it yourself

Related guides

Gross Pay vs. Net Pay · CPP vs. CPP2 · Payroll Deductions Calculator