Lesson 2: Personal Taxes - Paystubs

   Constructing Knowledge

Being able to read and understand a paystub is important. Paystubs are a summary of your earned income and all the mandatory and voluntary deductions that are taken off your paycheque by your employer. It is good practice to review monthly paystubs for possible errors in both income and deductions.

The following paystub example is a complex paystub for an administrative assistant who has multiple deductions. More than likely, the paystubs you will receive for your first few jobs will not have as many lines.

Three details you should note are:

  • the gross pay for the employee
  • the net pay for the employee
  • the benefits that the employer pays in full, on behalf of the employee




Each of the categories and lines are explained below.

Earnings


Regular Earnings - This shows hourly pay rate and hours worked.

Banked time taken - Some employers do not pay overtime. Instead they allow you to bank the time and take it off later.

Vacation taken - Some employers pay a certain amount of annual vacation time, meaning you get paid while on vacation.

Sick used - Some employers pay an employee for time they take off due to being sick. There is usually a maximum amount per month or per year.

Earnings total - This is the gross pay for the employee, before deductions.

Deductions


Income Tax - This is the federal and provincial income tax, a mandatory deduction studied in this lesson.

Employment Insurance (EI) - This is a mandatory deduction studied in this lesson.

Canada Pension Plan (CPP) - This is a mandatory deduction studied in this lesson.

Local Authorities (Local Authorities Pension Plan or LAPP for short) - This is a voluntary pension plan.

Extended Health Care - This is a voluntary extended health benefits package, which will cover a negotiated amount of extra health care not covered by a provincial plan. Items may include prescription drug coverage, physiotherapy, and massage. The employee does not pay anything for this benefit.

Dental - This benefit allows portions of visits to a dentist or other dental professionals to be covered. The employee does not pay anything for this benefit.

Vision - This benefit allows for portions of eye care and glasses/contacts to be covered. The employee does not pay anything for this benefit.

Life (non-union) - This is a life insurance policy. The designation of "non-union" is showing that the plan may be different from another plan in the company, which may be part of a union.

AD & D - This is short for Accidental Death and Dismemberment which is another form of Life Insurance. The insurance is only paid if the cause of death, or severe injury (which severely limits one's ability to work), is by accident.

Voluntary Personal - This is a deduction that the employee is requesting the employer take off each cheque. What this money is used for cannot be determined by looking at the paystub.

EDB (non-union) - Extended Disability benefit covers a portion of an employee's pay in the event she is unable to work for an extended period of time.

Health Spending Account - This is another health-based benefit, where the employee is not paying the amount. A health spending account extends beyond the other health benefit maximum amounts, and funds can be spent at the discretion of the employee. These accounts are typically "use it or lose it", meaning that if the money isn't spent in a certain amount of time, the employer will receive the money back.

Group Lotto - The employee pays into a group lottery fund. This is not a very common deduction to see on a paystub.

Staff Fees - Many employers will allow small fees to be collected to use for coffee funds/staff activities. The specific use of this money can't be determined by just looking at the paystub.


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