What is a Pay Stub? (And How to Read Yours)

We all love payday, but there’s more to it than simply collecting your earnings. A pay stub has detailed information about your total earnings and withholdings for the year.

You can track exactly how much money you made, how much is held back for taxes, your pension contributions, and what portion of your total wages you actually get to take home.

Be sure to review your pay stub carefully each time you receive one to make sure your employer has compensated you accurately. The more familiar you are with the information on your pay stub, the easier it will be to see if something’s off.

What is a pay stub vs. a paycheque

A pay stub is a record of an employee’s earnings that employers are legally required to provide on or before payday. It shows how wages are calculated, and includes the pay period, pay rate, hours worked, gross wage (total pay) and net wage (what you take home), plus a list of any deductions.

Pay stubs may accompany your paycheque or be provided on their own if you have direct deposit set up. It may come in paper format or be electronic and available online.

While a paystub offers a record of your earnings over the year to date, your paycheque is the payment itself for the current pay period.

A paycheque is a physical cheque that you receive on payday if you haven’t signed up for direct deposit with your employer. It’s up to you to cash it or deposit it into an account at your financial institution. If your pay is typically sent through direct deposit, you will receive a pay stub that may have a voided copy of the cheque attached.

A helpful way to remember the difference between these two items is to recall that pay stubs provide a long-term snapshot of your earnings and deductions, while your paycheque shows how much you’re taking home this pay period.

» Need a chequing account?: Check out our picks for the best chequing accounts in Canada.

What does a pay stub look like?

Pay stubs can resemble a credit card or bank statement, and they may include a voided copy of your paycheque. They will differ slightly in appearance depending on your employer and your deductions or contributions. Some pay stubs may be more detailed than others, but the general information provided will be the same.

Source: Canada.ca

How long should you keep pay stubs?

It’s a good idea to keep your pay stubs for at least a year, or until your employer gives you your annual T4 slip, which is an official tax document with a summary of your earnings and any deductions for the full year. You’ll want to keep T4 slips for at least 6 years in case you are ever audited by the CRA.

Each year, you can make sure your pay stubs and T4 match. If they don’t, you can let your employer know.

Also, it’s helpful to have a few recent paystubs on hand in case you need to prove your income for a loan application, rental contract or EI application.

Pay stubs are important records, 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

Your pay stub will show you your wages and any taxes taken off of your paycheque. 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 you may see 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.

Vacation Pay

Most employees are entitled to vacation pay at a minimum rate of 4% of their gross earnings in the previous 12 months of employment. Your pay stub will detail how much vacation pay you’ve accrued in the current year.

Deductions/other

Any amounts taken off your gross pay will be broken down into different categories:

Other deductions may include health/life insurance premiums, contributions to an employer-sponsored pension plan, and 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.

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!