You usually get it every two weeks, but rarely study it closely. A quick guide to understanding your payroll.
An employee’s payroll lists the gross salary received in a given period (1) and the deductions that apply to it. The amount received after their withdrawal is net wages (9).
Initially, you will find your hourly rate, as well as the number of hours worked (2) for the reporting period. Overtime will be added if applicable or, in the case of our example, hours worked at a different rate (3). You will also find there statutory holidays or vacation hours (4) that have been paid to you, as well as bonuses.
If you have paid in cash for tuition, a dinner with a client, or a trip, the required amount will be added to your salary. If it is accepted by your employer, of course!
The payroll shows the amounts paid to you in each category during the reporting period, as well as the amount accumulated since the beginning of the year.
Then there are deductions (5). The most common are:
– The Quebec Pension Plan (QPP), a mandatory contribution that aims to fill your wool sock before you retire. CPA and tax expert Luce Morin mentions that in 2022, the QPP portion for employees will be 6.15% of pay, up to a maximum insured amount of $64,900. This means that once you have accumulated and contributed $64,900 in gross salary, no further QPP deductions from your salary will be made until the start of the next fiscal year.
– Employment Insurance (EI), for its part, is a deduction of 1.58% on the maximum insured amount of $60,300.
– The amount for the Quebec Parental Insurance Plan (QPIP) is also deducted from your gross salary. The employee contribution rate is 0.494% with a maximum insurance income of $88,000.
– Added to this are tax deductions (6) withheld at source, both at the federal and provincial levels. They are calculated according to the tax group to which your income belongs.
– If applicable, you may also have to pay for group insurance (7) offered by your employer, i.e. pay contributions to a private health insurance program that offers services not covered by the Régie de l Quebec health insurance.
– Membership or professional dues, in other words membership dues to a trade union or professional association, can also be deducted from your salary.
– If you have requested this from your employer, a portion of your income from work may also be automatically transferred to your Registered Retirement Savings Plan (RRSP) (8).
Please note that deductions are indicated for the current period, but accrued since the beginning of the year are also indicated on the payslip.
Several conclusions may change, reminds Luce Morin. “For example, the percentage of withholding taxes, as well as contributions to employment insurance and QPP may differ from year to year. And because QPP and EI have caps, people who earn more than these will have more money in their pocket once they reach the cap,” she elaborates.
In case of error
Sometimes errors occur; That’s why she recommends checking each of her payrolls. “If there has been an inaccuracy in the withholding tax credit, it is usually corrected when the taxpayer files their tax return. But for other contributions, you may never see the amounts you overpaid unless they are properly reported on your tax returns at the end of the year,” she warns.
Indeed, if the calculation of the QPP contribution is incorrect, for example, and you did not notice this in your case, the T4 and Releve 1 issued by the employer at the end of the year will also be incorrect. However, errors are rarely found in these documents, which represent the totals for the entire financial year. So keep your eyes in line!
>> Read also: Know all the benefits of your RRSP contributions