What is a Pay Stub? How Do I Read One?

Payday is everyone’s favourite day. Of course, there is more to payday than just collecting your earnings, as any pay stub will indicate. Make sure you understand and read your pay stub so you know exactly how much money you made, what you are paying in taxes, and how much of your wages you actually get to take home.

What is a pay stub?

A pay stub is a record of an employee’s earnings. It shows how wages are calculated, and includes the pay period, pay rate, hours work, net and gross wage, and any deductions.

What’s the difference between a paycheque and a pay stub?

A paycheque is a payment of wages, and a pay stub is a record of wage payments. They are both distributed by employers to their employees after a predetermined pay period.

Since they are very different things, and you definitely don’t want to confuse the two.

A paycheque is a physical cheque that you receive when paid, assuming you haven’t signed up for direct deposit with your employer. Once you receive the cheque, it is up to you to deposit it into an account at your chosen financial institution.

» Need a chequing account?: Here’s how to open a bank account in Canada

On the other hand, a pay stub is a slip of paper that has all the details about the money you earned, how your wages are calculated, and any tax deductions. A pay stub will accompany your paycheque or be provided on its own should you have direct deposit set up. It may be in paper format or electronic and accessible online, depending on your employer.

What does a pay stub look like?

Pay stubs will differ slightly in appearance depending on your employer and your deductions or contributions. Some pay stubs may be a little more detailed than others, but the general information provided will be the same.

Here’s an example of a generic pay stub provided by the government of Canada.

How long should you keep pay stubs?

You should keep your pay stubs for at least a year, or until your employer gives you your annual T4 slip (an official tax document with a summary of your earnings and any deductions for the year) so you can make sure your tax information is accurate.

Remember, pay stubs are important records of your income and serve as proof of income and employment. You should regularly review your pay stubs to make sure you are being paid correctly.

How to read your pay stub

As mentioned above, your pay stub will show you your wages and what you have made and any taxes taken off. Depending on your job and agreement, your pay stub may also show deductions for things like life insurance premiums or corporate pension plan contributions.

Standard terms on a pay stub

Here are some of the general terms to be aware of when reading your pay stub.

Earnings/income

This specifies the type of wage you receive — for example, regular wage (your typical hourly rate) or overtime (usually an increased rate). Your income is broken down by the hours worked at each earnings rate.

Gross pay

The amount you make every pay term before any taxes, deductions, or contributions are taken off. This may also appear as “Earnings this period.”

Net pay

Your “take-home” pay; the amount you will actually receive after accounting for taxes, deductions, and contributions.

Year-to-date

This is the total amount of income and deductions since the start of the year, including the current pay period. Every pay stub will show the current total for the pay period itself as well as your year-to-date totals.

Deductions/other

Whatever amounts are taken off your gross pay. This will be broken down into different categories:

Income tax
Employment Insurance premiums (EI)
Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions

Other deductions may include health/life insurance premiums, contributions to an employer-sponsored pension plan, or union dues, where applicable. These deductions may also have their own section depending on the pay stub format your employer uses.

Standard abbreviations on a pay stub

Pay stubs are pretty short and precise, which means you will see plenty of abbreviations used. Here’s a list of some commonly-used abbreviations that you might find on your pay stub and what they stand for.

CPP: Canada Pension Plan
SIN: Your Social Insurance Number
EIN: Employee Identification Number
(H): Hourly Wage
(S): Salary
Ad Earn: Additional Earnings
Adj: Adjustment
DI/DB: Disability Insurance/ Death Benefits
Exp: Expenses
LWOP: Leave Without Pay
Non Eli/Elig: Non-eligible
LS: Lump Sum
Pen: Pensionable
Ter EE: Term Employees
LIA: Leave with income averaging
NT: Non-Taxable
OT: Overtime
Vac: Vacation
Non-Pen/N-Pen: Non-pensionable

Note that some jobs may have additional terms or abbreviations specific to your role or the business itself. If you are unsure of any terms or abbreviations on your pay stub, don’t be afraid to ask!

You should always track your hours and ensure that your pay stub matches up with what you actually worked. Employers should be keeping track as well, but sometimes mistakes do happen. If you notice something wrong with your pay stub, go to your employer right away so they can fix the issue.