How to decipher a pay slip
A pay slip is a legal document that associates workers with their employer. This document is an integral part of being an employee and is provided at each pay. However, recent research has shown that many workers in Canada do not fully understand the information on their pay slips and do not always ask their employer for explanations. Our experts encourage employees to better understand the importance of this document and the information it contains.
Understanding its importance
A Payments Canada study recently brought to light a major issue for workers in Canada: a lack of understanding of their pay slip. Early findings indicate that 47% of workers do not pay enough attention to payroll details.
Moreover, many people are uncomfortable asking their employer to explain the details about their payroll deductions. Nowadays, employees are more likely to check that the money is in their bank account rather than pay attention to the details on their pay slips.
Yet, pay slips are a direct reflection of the conditions established between a company and its employees. It is a very important document that is worth being understood and questioned if necessary. Furthermore, it outlines an employee’s remuneration and assigns them the status of salaried employee, which differentiates them from a self-employed worker.
Since a mistake could be detrimental for companies and their employees, it is completely normal to monitor your pay slips and ask questions to your employer when necessary; employees are responsible for the accuracy of their information.
Pay slip standards are implemented according to several factors. Each province has its own employment or labour standards that govern the issuance of pay slips and the information they contain. For instance, a Quebec-based company will not be subject to the same compliance regulations as an Ontario-based company.
Note that for unionized employees, pay slips will be governed by a collective agreement that must reflect the minimum standards of the province of work or the Canada Labour Code (federal charter).
There are many advantages to doing business with a payroll management service provider: in addition to taking on the complex administrative task of payroll, the provider ensures compliance with the requirements of the province in which a company is located.
In Quebec, the Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST) allows you to generate a sample pay slip based on previously established criteria: if you are an employer, you can use this tool to create a personalized pay slip.
The pay slip: step by step
Certain legal information must appear on all pay slips issued, but pay slips can vary in appearance from one employer to another. Very often, a pay slip includes several easily identifiable sections: employee identification, company information, gross pay, deductions and net pay.
The National Payroll Institute (NPI) has studied payroll best practices in order to offer an explanatory table for the minimum standards recommended in the creation of a pay slip. Employers can refer to it and use it as a guide.
|Employee Name||Vacation Payments||Allowances (living)|
|Employer Name||Statutory/Public/General Holiday Pay/Hours||Other Earnings/Payments/Benefits|
|Pay Period Date||Overtime Wages||Gross Earnings|
|Payment Date||Overtime Banked Time Taken||Itemized Deductions|
Table of NPI’s Recommended Minimums
The gross earnings corresponds to the earnings for a given period, before the various deductions are applied. Deductions are common to all workers, but certain acronyms vary from one company to the next and from province to province. Some of the most well-known acronyms are:
- Employment insurance (EI);
- Canada Pension Plan (CPP) and Quebec Pension Plan (QPP);
- Quebec Parental Insurance Plan (QPIP);
- Canadian income tax (CIT) and Quebec income tax (QIT).
An employer may make other deductions and use lesser-known acronyms, so it is important to be able to explain them as needed. More information on salary deductions is available on the Canada Revenue Agency’s website. In Quebec, visit the Revenu Québec website.
Your net pay is the amount you receive after deductions. It is normal that this amount is smaller than the gross earnings displayed: it corresponds to the actual amount that the employee receives and which will be deposited into their bank account.
Certain elements, such as vacation banks, are not required on pay slips, but employers must keep a record to be able to provide this information if requested by an employee. However, when vacation is paid, it must be indicated on the pay slip.
Additionally, certain confidential information must never be indicated on a pay slip, such as social insurance numbers, banking information, etc.
There are many tools available to assist employers in helping their employees understand their pay slips. By providing explanatory documents or setting up a communication plan for their teams, employers can help solve issues uncovered by the Payments Canada study.
Why not create a pay slip template? This resource could be made available to employees and serve as a company reference document. Such an initiative could be all the more useful for onboarding and integrating new employees who may be hesitant to ask questions.
Issuing pay slips
Pay slips can be issued in paper or electronic format.
To upload an electronic pay slip, it is mandatory to use a secure platform to ensure the information is protected at all times. In addition, employees must have access to their pay slips to consult, download, and print them, if necessary.
In Quebec, employers must be able to provide their employees with a paper pay slip if requested. The pay slip must be delivered in person in a sealed envelope and it cannot be left unattended.
Although it is important to keep an eye on each pay slip, you can advise your employees to pay particular attention to the first one that will be issued to them, because errors occur often and must be corrected as soon as possible.
First, it is important to check the section regarding employee identification: last name, first name, and home address. If the pay slip includes employment information, such as a job title and company name, the employee should verify that information too.
Next, hours worked and compensation details must be verified. Since this information directly affects the remuneration of employees, it is important to check that the pay corresponds to the hours worked and that it falls within the correct period.
Your employees will be taxed according to the information on their pay slips, hence the importance of verifying this data: tax corrections may be necessary in the event of an error.
How to decipher a pay slip? As a first step, employers can provide a relevant answer to this question by making an effort to help their employees better understand their pay slips. They can create a sample explanatory document that is accessible at all times, especially for their new employees.
Furthermore, a pay slip always contains the following sections:
- Employee information
- Company information
- Gross earnings
- Net pay
Once these sections are identified, the information on the pay slip becomes easily comprehensible. It is important to verify the accuracy of the remuneration and the period in which it falls. The regular deductions will be added to this in order to provide the employee’s net pay.
As the details and presentation of the information may differ from one company to another, it is important to provide more information on certain elements, such as the acronyms for the various deductions.