Your pay stub looks like alphabet soup — gross, CPP, CPP2, EI, fed, prov, net — but the calculation behind it follows one strict order every single pay period, set by the CRA’s payroll formulas. Here is that order, and how to check any stub in about two minutes.

1. Gross pay for the period

Salary divided by pay periods (26 for bi-weekly, 24 for semi-monthly, 12 for monthly), or hours × rate for hourly staff, plus overtime, bonuses, commissions and taxable benefits (a company car or employer-paid insurance can add a “benefit” line that raises taxable pay without adding cash). Vacation pay — at least 4% in most provinces — appears here too for hourly staff.

2. CPP (or QPP) — with the exemption spread per period

The $3,500 annual exemption is prorated: a bi-weekly paycheque exempts $3,500 ÷ 26 = $134.62 before the 5.95% rate applies. Earnings above the YMPE run into CPP2 at 4% up to $85,000 a year. Because deductions are computed per period but capped per year, someone paid a large bonus in one period can over-deduct CPP that period and under-deduct later — the annual maximum rules the year; the return reconciles small differences. In Quebec, substitute QPP at 6.30% and add QPIP at 0.430%.

3. EI premiums

1.63% of insurable earnings (1.30% in Quebec), no exemption, capped at $1,123.07 for 2026. Bonuses and vacation pay are insurable too, which is why a bonus cheque loses a chunk to EI even in November — unless you have already maxed out.

4. Income tax withholding — the estimate, not the verdict

Your employer annualizes the period’s taxable pay, applies the federal and provincial brackets and your TD1 claim amounts (the form you filed claiming the basic personal amount and any other credits), and withholds accordingly. This is why a one-off bonus is “taxed so hard”: payroll annualizes it as if you earned it every period, pushing withholding into a higher bracket. If too much was withheld, filing your return refunds the difference — the withholding is an instalment toward your real bill, never the bill itself. Ontario stubs also embed the surtax and the Ontario Health Premium inside the provincial figure.

5. After-tax deductions, then net

Finally come the deductions that do not affect tax (or affect it elsewhere): workplace pension or RRSP contributions (these reduce taxable pay before step 4 if they are payroll-deducted), union dues (deductible), and benefits premiums (usually not). What remains is the deposit. To check a stub: take your year-to-date figures in December and compare them with the take-home calculator at your full salary — with basic credits, the annual totals should land within a few dollars; differences usually trace to a TD1 claim, a pension deduction, or a taxable benefit.

The stub nobody reads until it matters

Keep your final pay stub of the year. It reconciles to your T4 (or RL-1 in Quebec), and it is the fastest way to spot the two most common payroll errors in Canada: a missing CPP/EI maximum (deductions that never stopped) and a wrong province of employment after a move or a switch to remote work.