I am Noah. You just finished your first full week at a brand new job! You did the math in your head: twenty hours times fifteen dollars an hour equals three hundred dollars. You are already planning how to spend it. But then, you open your first paycheque, and the number is only two hundred and forty dollars. Wait—where did the other sixty dollars go? Did the boss make a mistake? No, you’ve just met the reality of payroll deductions! Today we are talking about the difference between what you earn and what you take home. Understanding these numbers is the key to creating a budget that actually works. Let’s decode your paycheque together.I am Maya. Almost every worker in Canada has a portion of their pay taken out before they ever see it. I will explain the “Big Three” government deductions: the Canada Pension Plan, Employment Insurance, and Income Tax. These are mandatory, and they pay for the services we all use every day. We will look at current federal tax tables and compare how much is deducted at different income levels, like fifteen thousand, twenty thousand, or twenty-five thousand dollars. It is important to remember that these deductions aren’t just “taxes”—they are investments in your future and a safety net for when you need it most.I am Liam. Beyond the government taxes, your employer might take out other amounts that you’ve agreed to. I will look at “voluntary” and “contractual” deductions like union dues, private pension plans, or dental and health benefits. While these make your paycheque smaller today, they can be a massive “pro” for your life. Imagine having a thousand-dollar dentist bill paid for because of a small deduction from your pay! We’ll explain why some people actually choose to have more money taken out of their pay to save for the future or support their favorite charities.And I am Chloe. In your math or business class, you will need to learn how to estimate your “Net Pay” so you can plan for things like rent or a car payment. We will use secondary data to describe how these deductions are calculated. Understanding your pay stub is a vital life skill. It tells you exactly how much the government is getting, how much you are saving for retirement, and how much is going into your pocket. Being motivated to work means understanding the full value of your compensation, including the benefits you might not see in cash. Let’s look at the math behind your earnings.The first thing you need to know are two very important terms: Gross Pay and Net Pay. Gross Pay is the total amount of money you earned based on your hourly wage or salary before anything is taken out. If you earn fifteen dollars an hour and work ten hours, your Gross Pay is one hundred and fifty dollars. Net Pay—which many people call “Take-Home Pay”—is what is left after all the deductions are subtracted. The difference between the two is where the magic (or the frustration) happens! While it can be annoying to see money “disappear” from your check, these deductions are what pay for the society we live in. They pay for the roads you drive on, the schools you attend, and the hospitals that take care of you. They aren’t just fees; they are your contribution to Canada.The first mandatory deduction is the Canada Pension Plan, or C-P-P. A small percentage of your pay is saved by the government and given back to you when you retire. Think of it as a forced savings plan for your older self! The second is Employment Insurance, or E-I. This is a safety net. If you lose your job through no fault of your own, E-I provides you with temporary income while you look for a new one. The third and largest deduction is Income Tax. The amount taken depends on how much you earn. Canada uses a “progressive” tax system. This means if you earn fifteen thousand dollars, a very small percentage is taken. But if you earn twenty-five thousand, the percentage goes up! Using federal tax tables, we can estimate that most students will see about fifteen percent of their pay go toward these three things.Beyond the government, you might see “Other Payroll Deductions.” If you work in a unionized workplace, you will pay Union Dues. This money pays for the people who negotiate your salary and protect your rights. You might also see a “Benefit-Plan Contribution.” This is often a great deal! For a few dollars a month, you get “Extended Health Care” that covers things like glasses, dental work, or massage therapy. Some employers also offer a “Private Pension” where they match the money you put in. This is essentially “free money” for your retirement! While these deductions make your Net Pay smaller today, they are a massive pro because they protect your health and your future wealth. Always look at your pay stub to make sure these amounts are correct.A pro-tip for your budget: never plan your life based on your Gross Pay! If your rent is based on your Gross Pay, you will run out of money for food very quickly. Always use your Net Pay for your monthly budget. In your action plan, you should use technology like a “Payroll Calculator” to estimate your take-home pay before you even start a job. This allows you to see if a job offers enough money to cover your expenses. Motivation comes from knowing that even though your check is smaller than you expected, you are building a pension, staying insured, and paying for the services that make our country great. In our next video, we will talk about how to use this Net Pay to build a long-term financial plan.
