Home → Guides → Payroll Basics
If this is your first job, or your first Canadian job, payroll terminology can be confusing. This guide starts from zero: no assumed knowledge, just the basics explained simply, from gross vs. net pay to the statutory holidays in 2026 that can change a paycheque.
Gross pay vs. net pay
Gross pay is what your employer agrees to pay you, the number in your offer letter. Net pay (or take-home pay) is what actually lands in your bank account, after several deductions come off. The gap between the two is usually 20–30% of your gross pay, depending on your income and province.
The deductions, one at a time
- Income tax (federal + provincial): funds government services, calculated on a sliding scale based on income.
- CPP: builds toward your retirement pension, starting around age 60–65.
- EI: funds benefits if you lose your job or take certain types of leave.
Salary vs. hourly, what’s the difference?
A salary is a fixed annual amount, divided across your pay periods. An hourly wage is paid per hour worked, so your paycheque varies with hours. Both are taxed exactly the same way, see our Salary vs. Hourly guide for more detail.
One piece of paperwork shapes your deductions from day one: the federal and provincial TD1 forms you fill out when you start a job, which tell your employer how much tax to withhold from each paycheck.
What Payroll Actually Is
Payroll is the full process of paying employees: calculating what each person earned, subtracting the right deductions, sending the net pay, and remitting the withheld amounts to the government. Understanding the basics helps you spot errors on your pay stub and understand why your take-home pay is lower than your salary.
Pay Frequency: How Often You Get Paid
Canadian employers use five common pay frequencies. Weekly means 52 paychecks a year. Biweekly, the most common, means 26 paychecks, with two months a year containing three paychecks. Semi-monthly means 24 paychecks on fixed dates like the 15th and 30th. Monthly means 12 paychecks. Use our biweekly vs semi-monthly comparison if your employer is switching schedules.
Gross Pay vs Net Pay
Gross pay is everything you earned in the period. Net pay, also called take-home pay, is what remains after federal tax, provincial tax, CPP or QPP, and EI are deducted. The gap between gross and net is typically 20 to 35 percent. Our gross pay vs net pay guide walks through a worked example.
The Four Mandatory Deductions
Every Canadian paycheck has the same four mandatory deductions. Federal income tax follows national brackets. Provincial income tax follows your province’s own brackets, which is why the same salary produces different take-home pay in Alberta versus Quebec. CPP (or QPP in Quebec) funds your retirement pension. EI funds employment insurance benefits.
TD1 Forms: Why Your Deductions Vary
When you start a job, you fill out federal and provincial TD1 forms declaring your tax credits, starting with the basic personal amount. If you work two jobs at once, claim the basic personal amount on only one TD1, or you will be under-withheld and owe at tax time.
Reading Your First Pay Stub
Your first pay stub has a simple structure: gross pay at the top, each deduction listed separately, and net pay at the bottom. Our pay stub guide explains every line and abbreviation in detail.
Common Payroll Mistakes to Watch For
The most common errors are wrong pay frequency setup, missing TD1 credits causing over-withholding, CPP or EI deducted after you already hit the annual maximum at a previous job, and overtime paid at straight time instead of time and a half.
Payroll and Your Taxes
Everything withheld from your paychecks is a prepayment toward your annual tax bill. Too much withheld means a refund; too little means a balance owing when you file. Learn about cutting your income tax with RRSP contributions, tax credits, and other strategies. When employment ends, termination and severance rules determine your final payout.
Frequently asked questions
Why is my first paycheque smaller than I expected?
This is completely normal. Deductions typically total 20–30% of gross pay. Use our paycheck calculator before starting a new job to know what to expect.
Do I need to do anything to set up my payroll deductions?
Your employer will typically ask you to complete a TD1 form when you start, which determines your basic tax credit amount. Most people use the default and don’t need to do anything special.
Canada Paycheck Calculator · Pay Stub Guide