Net pay is the amount an employee actually receives after income tax, CPP, EI and any other deductions are subtracted from their gross pay, their take-home pay.
Net pay, or take-home pay, is what remains after all withholdings are subtracted from gross pay: income tax, CPP and EI, plus any voluntary deductions like group benefits or pension contributions. It is the amount deposited to the employee each pay period.
Because withholdings are based on estimated annual tax, an employee's net pay reflects an approximation that is trued up when they file their T1, resulting in a refund or balance owing. Employers must remit the withheld amounts (the gap between gross and net) to the CRA on schedule.
From $5,000 of gross pay, $700 income tax, $250 CPP and $80 EI are withheld, leaving $3,970 of net pay deposited to the employee, while the withheld $1,030 plus the employer share is remitted to the CRA.
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