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FINANCIALLY AESTHETIC · GUIDE 25/37
GROSS PAY, NET PAY, PAYSLIPS & TOTAL COMPENSATION
FA-5.3 · Income, Work & Making Money Young
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WHY THIS PAYS
The salary headline is not what reaches your bank account, and cash pay isn't the whole compensation package.
Gross Pay
Your gross pay is the amount of money you receive before taxes and other deductions are taken out at source.
In addition to your regular pay, your gross pay may include:
- commissions
- bonuses
- vacation pay
- overtime pay
The gross amount represents the total gross compensation before deduction of various social security contributions (employee share). It is equal to:
base salary + bonuses + allowances subject to contributions (e.g., meal allowance) + any overtime pay.
The gross taxable salary is the first amount listed on the payslip. It consists of the gross pay plus paid vacation pay, overtime pay, bonuses, and benefits.
Net Pay
Your net pay is often slightly lower than your gross pay. Your net pay is the amount of money you receive after taxes and other deductions at source. It is the amount deposited into your bank account or shown on your pay check.
Gross pay is the salary before employee social security contributions are deducted. Net pay is the salary after these contributions are deducted.
The total cost to the employer is the gross pay plus employer contributions, which account for between 50 and 60 percent of the gross pay.
These deductions, known as “social security contributions”, are also referred to as deferred wages. Approximately 23% to 25% (for non-executive and executive employees, respectively) must be deducted from the gross pay amount.
It is also important to distinguish between the net amount to be reported (or taxable) and the net pay, with the former being higher than the latter. You pay CSG/CRDS on money you haven’t even received yet!
And since January 1, 2019, it has been necessary to distinguish between “net pay before income tax” and “net pay,” which is paid after income tax has been withheld at source.
The monthly withholding amount is calculated by multiplying the monthly net taxable income by the withholding rate, which is set by the tax authorities.
The Different Meanings of “Net” on a Pay Stub
Social net pay has become the benchmark for determining eligibility for certain social benefits, such as the activity bonus and the RSA. This is the income amount that must be reported on the quarterly income statement submitted to the family allowance fund (CAF) or the agricultural social mutual fund (MSA).
Social net pay is calculated after the deduction of all mandatory social security contributions. It corresponds to:
gross income (salary, allowances, benefits, etc.) - total mandatory statutory social security contributions paid by the employee.
As of July 1, 2023, the pay stub includes a new line item: the “social net”. This social net amount serves as the basis for determining eligibility for the RSA and the activity bonus. This social net amount must be reported in the quarterly income statement submitted to the family allowance fund or the agricultural social mutual fund.
The net pay before income tax is the net amount owing before income tax is withheld at source.
The taxable net income serves as the basis for calculating the amount of income tax withheld at source, which the employer pays to the tax authorities.
The taxable net amount is equal to:
gross pay - employee contributions + the non-deductible portion of the CSG/CRDS at 2.90% + employer contribution to supplemental health insurance
Since 2019, income tax has been withheld at source (PAS). It is paid by the employer to the tax authorities.
The withholding tax rate (set by the tax authorities based on the annual tax return) and the amount in euros withheld at source by the employer on behalf of the tax authorities are shown on the pay stub.
The withholding tax rate is applied to the taxable net income (withholding tax base).
The “net tax owing” corresponds to the amount actually paid by the employer after withholding the monthly amount of tax due at source. The net pay is equal to: gross pay - employee contributions + compensation components not subject to contributions (reimbursement of business expenses, employee contribution to meal vouchers, etc.) - withholding tax (PAS).
These correspond to the sum of taxable net pay and the sum of withholding tax amounts for the entire calendar year. It is these two cumulative amounts that are reported to the tax authorities and appear on the pre-filled tax return.
Withholding Deductions
The information on your pay stub can be difficult to understand. Most pay stubs show your salary before and after deductions.
Your employer withholds income tax, Employment Insurance (EI) premiums, and Pension Plan directly from your gross pay. The money your employer withholds is sent directly to the federal, provincial, or territorial governments.
Other deductions may include:
- contributions toward your fringe benefits
- contributions to an employer-sponsored savings or pension plan
- union or professional dues
Tax Withholdings
A significant portion of payroll deductions goes toward paying income tax. Your employer takes the money from your gross pay and sends it directly to:
- to the federal government
- to your provincial or territorial government
In NA mostly i would say, the provincial tax is a separate deduction. In the rest of Canada and usa ( not sure ), there is a single combined deduction. This covers both provincial or territorial and federal income tax.
When you start a new job, your employer must determine the amount of income tax to withhold from your regular pay. To do this, you must fill out a form called a Personal Tax Credit Declaration.
Each year, your employer sends you a T4 slip, or Statement of Compensation. The T4 slip summarizes your pay, as well as all deductions taken from your pay during the previous tax year.
Employment Insurance (EI) Deducions
EI (Employment Insurance) is a federal program. It provides temporary financial assistance to unemployed Citizen under certain circumstances.
EI is funded by both the employee and the employer. Your employer may deduct your share of the premiums from your pay. If you lose your job, you may be eligible for financial assistance from EI for a certain period of time.
If you contribute to a savings plan or pension plan through your employer, these deductions are also listed on your pay stub.
For example:
- deductions for a Registered Retirement Savings Plan
- deductions from the employer’s pension fund
- deductions from the employee’s savings plan or retirement savings plan
Social Security Contributions, France Side
A portion of your salary is withheld to help fund the social safety net programs from which you yourself will benefit, which primarily include: retirement benefits, unemployment insurance, and health, maternity, disability, and death insurance.
Other standard social security contributions include old-age insurance, widow’s insurance, the APEC contribution (for executives), family contributions, and contributions for work-related accidents and occupational diseases. There is also the CSG (Generalized Social Contribution) and the CRDS (Contribution for the Repayment of Social Debt).
The supplemental health insurance contribution is added to this list. Company-provided supplemental health insurance has been mandatory for all private-sector employees since January 1, 2016. The employer must cover at least half of the supplemental health insurance contribution. The employee’s share of the contribution is included in payroll expenses.
Social security contributions are actually split between the employee and the employer, since the employer also pays contributions on the salary they pay you. These contributions form the basis of the national solidarity system.
As of October 1, 2018, the employee’s unemployment insurance contribution has been eliminated. The “Unemployment Insurance” line item has been removed from payroll expenses.
Since the introduction of the simplified pay stub in January 2018, social security contributions have been grouped into five risk categories:
- health,
- work-related accidents and occupational diseases,
- retirement,
- family,
- unemployment.
The Pay Stub
The pay stub is a document provided to the employee each month. It shows the amount of salary (gross pay, net after social security deductions, net after taxes, net payable, etc.) as well as all social security contributions, both those paid by the employee and those paid by the employer.
A salary stub contains numerous entries and lines, grouped under different headings.
At the top of the pay stub are the names and addresses of the employer and the employee. It also includes information regarding the job held and the employment contract (job title, start date, working hours, etc.) and any applicable collective agreement.
The pay stub may also include a breakdown of paid leave (leave accrued, leave taken, leave currently accruing) and any other absences (RTT, compensatory rest days, etc.). However, this is not mandatory.
Paper or Electronic Paystub
Since 2017, the electronic pay stub has become the standard, with the paper pay stub now being the exception. However, employees retain the right to refuse the electronic pay stub. It is not mandatory.
The electronic pay stub must be accessible and remain available to the employee for 50 years after it is issued or until the employee turns 75.
The electronic pay stub can be viewed in the employee’s secure personal space within their Activity Account, accessible via the website moncompteformation.gouv.fr.
Checking Your Pay Stub
To verify the accuracy of your pay stub, start by reviewing your personal and contractual information. Make sure your name, address, and job title are listed correctly.
Next, verify the gross pay listed, which must match the amount specified in your contract. Make sure that the hours worked and any overtime are correctly recorded.
Social security contributions must comply with the applicable statutory rates. Pay particular attention to employee and employer contributions, as well as withholding taxes.
For vacation entries, make sure that the days earned and taken are accurately recorded.
If in doubt, don’t hesitate to consult a certified public accountant or a legal professional for a thorough review. They can help you identify potential errors or assert your rights if needed.
Finally, keep your pay stubs for annual tracking of your financial situation.
Pay stubs must be retained indefinitely.
Fringe Benefits and Total Compensation
Fringe benefits may include:
- a health and dental care plan
- disability insurance or life insurance
- a pension plan
These benefits can help you save money. Ask about fringe benefits when you’re offered a job. If your employer doesn’t offer fringe benefits, you’ll need to factor these costs into your budget yourself.
Health and Dental Insurance
Your employer’s health care plan may pay for some or all of your prescription drugs, eyeglasses, or dental fees.
Find out if your spouse’s or partner’s employer offers a health care plan. You may be able to save money by comparing plans and choosing the one with the best coverage at the best price.
You can also save money by coordinating the benefits between your plan and your spouse’s plan. If the two plans offer different levels of coverage, you may be able to recover up to 100% of your expenses.
Disability Insurance
Your employer may provide disability insurance benefits. These benefits may cover part or all of your salary if you are unable to work due to an illness or injury.
Life Insurance
Your employer may provide you with life insurance, which allows your recipients to receive money upon your death. This can help them cope with the financial impact of your death. The life insurance you can get from your employer may cost less than term life insurance you purchase on your own.
Questions to Ask Before Enrolling in Fringe Benefits
Before enrolling in fringe benefits, find out about:
- when coverage begins and the waiting period, if any
- the amount you must pay
- what the plan covers
- the coverage provided by the fringe benefits plan for your spouse, partner, child, or other dependent
- the option to opt out of part of the plan
- what your employer offers - either a savings plan or a retirement savings plan - and the amount you and your employer can contribute to it
YOUR NEXT MOVE
Read every payslip, reconcile hours and deductions, and compare offers using total compensation and real costs.
CURRENT-RULES CHECK
Legal protections, tax rates, reporting duties, deadlines and product rules change by country and over time. Use the jurisdiction labels in this guide and check the linked official source before acting.
- Canada Revenue Agency - Starting to work - Canada - pay and tax basics.
- Financial Consumer Agency of Canada - Your first job - Canada - first-job money basics.
