What a Canadian Pay Stub Must Show About Deductions and Vacation

The short answer

Every employer in Canada has to give employees a written pay statement with each wage payment, and the law sets what it contains. Federally regulated employers, such as banks, airlines and telecom companies, fall under the Canada Labour Code. Section 254.1 of that Code says an employer may only deduct from wages in the cases the Code permits, such as deductions required by a federal or provincial law, deductions authorized by a court order or a signed agreement, and overpayments. The federal Canada Labour Standards Regulations add record-keeping duties, including the amount paid each pay day and the details of each pay and deduction made that day.

Provinces and territories write their own minimums, so the list changes depending on where the employee works. In Ontario, section 12 of the Employment Standards Act, 2000 requires a written statement on or before each pay day that sets out the pay period, the gross wages and how that amount was calculated, and each deduction. British Columbia asks for the employer's name and address, hours worked, the wage rate, overtime hours, any vacation or statutory holiday pay, and the amount and purpose of each deduction. Manitoba requires a date and a reason for every deduction. For most readers, the working answer is this: gross pay, deductions with their reasons, net pay, the pay period, and any extra item the province names.

Year-to-date totals are the item many employees expect and many payroll programs print. The provincial and federal rules do not clearly list them as a legal requirement, so treat them as good practice rather than a universal duty. They do have a practical use. An employee can add up the year-to-date CPP and EI lines and see whether the annual ceilings are being reached at the right point in the year.

How the figures are worked out, step by step

The arithmetic is the same whatever the province, apart from the rates that differ in Quebec. The figures below are the 2026 rates as published by secondary payroll guides. Check them against the Canada Revenue Agency's own payroll deduction tables before you rely on them, because the CRA sets the rates each year.

1. Start with gross earnings for the pay period. This includes regular wages, overtime, bonuses and any vacation pay paid with the wage. Deductions are taken from this figure, not from the net.
2. Work out Canada Pension Plan (CPP) contributions. For 2026 the employee rate is 5.95 per cent on earnings between a $3,500 annual basic exemption and $74,600. For a bi-weekly pay schedule, the exemption is divided by 26 pay periods, which gives about $134.62 per period.
3. Work out the second CPP layer, CPP2. For 2026 it is 4 per cent on earnings from $74,600 up to $85,000, and it applies only to the part of pay above the first ceiling.
4. Work out Employment Insurance (EI) premiums. For 2026 the employee rate outside Quebec is 1.63 per cent on insurable earnings up to $68,900. Quebec's EI rate is 1.30 per cent, and Quebec employees also pay the Quebec Parental Insurance Plan premium and contribute to the Quebec Pension Plan instead of CPP.
5. Withhold federal and provincial income tax. The amount depends on the employee's TD1 claim codes and the CRA's payroll deduction tables, which the CRA publishes as form T4127. This step is the one most employers do with software, and it is the one a manual check is least likely to match exactly.
6. Add any other deductions that are permitted, such as pension contributions, union dues, benefit premiums or a court-ordered garnishment. Each one should be listed with its amount and purpose.
7. Subtract all deductions from gross pay to get net pay. Check that the net figure matches the amount actually paid into the bank account or issued as a cheque.

One worked example

Take an employee in Ontario paid a salary of $60,000 a year, paid bi-weekly over 26 pay periods, with vacation pay of 4 per cent paid on each pay. The salary gives $2,307.69 of regular wages per period. The 4 per cent vacation pay on that amount is $92.31, so gross pay is $2,400.00. In this example vacation pay counts toward the earnings used for CPP and EI.

The full-year check works the same way. On an annual salary of $60,000 with no vacation pay, CPP is $60,000 less $3,500, multiplied by 5.95 per cent, which is $3,361.75. EI is $60,000 multiplied by 1.63 per cent, which is $978.00. If a pay stub shows different year-to-date figures from these, the difference is worth looking into before the year ends.

Cases that change the answer

Resignation or termination

When employment ends, the pay statement changes. Under section 12.1 of Ontario's Employment Standards Act, 2000, an employer must give a statement of wages on termination that explains how termination pay, severance pay and vacation pay were calculated, unless that information is given another way. The federal rules also require employers to pay outstanding wages and any vacation pay owed when employment ends, and the Canada.ca termination page lists these items. A final statement therefore often carries more lines than a regular one.

Casual, part-time and contract staff

Contract type and hours do not remove the duty to show vacation pay. Alberta's employment standards guidance says vacation pay applies regardless of whether the worker is full-time, part-time or casual. Alberta also gives no vacation entitlement to employees with less than one year of service unless the contract says so, though the employer must still pay 4 per cent of wages if employment ends. Ontario allows vacation pay to be paid on each pay only where that is agreed in writing, and in that case the statement must show it as a separate item.

Caps and exclusions

Caps are where many stubs go wrong. CPP and EI stop once an employee reaches the annual ceiling for the year. The CPP exemption means the first slice of earnings is not pensionable. The employer's share is not taken from the employee's wages, so it should not appear as an employee deduction, though some employers show it for information. Vacation pay rates also vary by province. British Columbia's Employment Standards Act, section 58, sets vacation pay at least 4 per cent of total wages after five calendar days of employment, rising to 6 per cent after five consecutive years. Vacation pay must be paid at least seven days before the vacation starts, or on scheduled paydays if the employer and employee agree in writing or a collective agreement provides for it.

Court orders and other deductions

A court-ordered garnishment, such as child support, is allowed under the Canada Labour Code, but it still has to be itemized on the stub with its amount and purpose. Other deductions need written authorization. Several provinces, including Manitoba and British Columbia, ask for the reason on the statement itself, so a deduction labeled only as 'other' does not meet the rule.

Common mistakes

The most frequent error is showing a net figure with no breakdown. A stub that only states gross and net leaves the employee unable to check anything, and it fails the detail rules in most provinces. The second error is putting vacation pay into regular wages. Ontario and British Columbia both expect vacation pay to be visible as its own item, so an employee can see what the vacation rate produced.

A third mistake is using last year's CPP and EI maximums in January. The ceilings change most years, and the 2026 EI ceiling is not the same as the 2025 figure. A fourth is forgetting the CPP exemption, which makes CPP look about $200 a year too high at the lower salary levels. Finally, employers in Quebec sometimes use the rest-of-Canada template. Quebec uses different plans and premiums, so a Quebec employee's stub should show QPP and QPIP rather than CPP.

What to check with HR or a lawyer

Some points are not settled by a rate table. Ask HR or your payroll adviser whether vacation pay is paid on each pay or accrued and paid when taken, because the stub must match that choice. Check whether the province where the employee works sets extra stub items, and whether the employee works in more than one province. Confirm how garnishments and union or benefit deductions have been authorized in writing. Where a deduction could reduce pay, or where hours or duties are changing, agree the change with the employee and check the notice, consultation and severance rules that apply in that province or under the federal Code.

This explains the rule in general terms; it is not legal or tax advice for your case.

How employers take routine payroll checks off their staff

Much of the work behind a pay stub is repetitive: copying hours from a timesheet, checking that each deduction has an authorization on file, comparing year-to-date totals with the ceilings, and checking that net pay matches the bank file. An AI worker can run these checks on every pay run and flag anything that does not fit the rules, while a person still reviews the flags, approves the run and answers the employee's questions. Payroll staff then spend their time on the exceptions that need judgement.