Consumer 20 Calculating Net Pay
- 1. Calculating Net Pay 1
- 2. Deductions From Gross Pay Net wages or take home pay is the amount remaining after deductions are taken from gross pay. Canadian law requires some deductions, such as: • Canada Pension Plan contributions (CPP) • Employment Insurance premiums (EI) • Income Tax Provincial (Federal 2
- 3. An employer may require other deductions, such as: • group insurance • union dues • private health insurance such as Blue Cross • parking Still others are voluntary, such as: • charitable donations • RPP (Registered Pension Plan) • RRSP (Registered Retirement Savings Plan) contributions 3
- 4. Who has to pay CPP premiums? Employers are responsible for deducting CPP premiums from employees who are 18 to 69 years old, unless the employee is collecting a CPP retirement or disability pension. The employer pays the same premium as the employee. Selfemployed people must pay both the employee and employer portions. Who has to pay EI premiums? Employers are responsible for deducting EI premiums from all employees regardless of age. The employer pays a premium of 1.4 times the employee premium. Selfemployed people do not pay EI premiums, and do not qualify to receive EI benefits. Who has to pay Income Tax? Employers are responsible for deducting income tax (Federal and Provincial) from all employees. Selfemployed people must report all income and then pay income tax when completing an income tax return or by making regular payments throughout the year. 4
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