Gross pay and net pay

Gross pay is what an employee earns before deductions; net pay is what they take home after income tax, CPP, EI and other deductions come off.

Also called: gross pay, net pay, take-home pay, gross wages, gross to net

What gross pay and net pay means

Gross pay is the total an employee earns for a pay period before anything is taken off: wages or salary, overtime, vacation pay paid out, commissions, and taxable benefits. Net pay, often called take-home pay, is what is left after deductions. It is the amount that lands in the employee's bank account.

The gap between the two is made up of source deductions (income tax, CPP contributions and EI premiums) and any other deductions the employee has agreed to or the law requires, such as benefit premiums or a garnishment.

The difference matters when you hire. Wages in an offer letter and a job posting are gross figures, and employment standards, such as the minimum wage, apply to gross pay. Employees, though, budget around net pay, so a clear pay statement saves you a lot of questions.

How it works

Start with gross pay. Add up hours times the hourly rate (or the salary for the period), plus overtime, holiday pay and any other earnings. Add the value of taxable benefits to work out the amounts that tax, CPP and EI apply to.

Take off source deductions. For 2026, CPP is 5.95% of pensionable earnings above the per-pay share of the $3,500 basic exemption, and EI is $1.63 per $100 of insurable earnings outside Quebec. Income tax depends on the employee's TD1 claim and province, and comes from the CRA's payroll deductions tables or payroll software.

Take off any other deductions, such as benefit premiums or union dues. Your province's employment standards law limits what you can deduct from wages and when you need the employee's written agreement, so check before taking anything else off.

The result is net pay. Show the steps from gross to net on the employee's pay statement, and keep the records. Remember that your employer share of CPP and EI is a cost on top of gross pay; it does not come off the employee's pay.

Is it the same in every province?

Gross and net pay work the same way across Canada. What changes by province is the provincial income tax built into the deduction tables, and in Quebec the pension and EI deductions (QPP and lower EI rates) and Quebec income tax.

Example: From gross to net for a weekly pay

Paolo runs a 7-person cleaning company in Victoria, British Columbia. His cleaner, Jess, works 40 hours at $22.00 an hour, so her gross pay for the week is $880.00.

Paolo's payroll takes off income tax (from the British Columbia tables and Jess's TD1), CPP at 5.95% after the weekly share of the exemption, and EI of $14.34 ($880.00 times 1.63%). What remains is Jess's net pay. Paolo's employer CPP and EI are paid on top and do not reduce Jess's pay.

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Questions about gross pay and net pay

Is the minimum wage gross or net?

Gross. The minimum wage is the rate before any deductions are taken off.

What is the difference between gross and net pay?

Gross pay is the total earned before deductions. Net pay is what the employee receives after income tax, CPP, EI and other deductions.

Does the employer's share of CPP and EI come off gross pay?

No. The employer share is an extra cost to you. Only the employee's share comes off their gross pay.

Official sources

General information for Canadian employers, not legal advice. Rules differ by province and territory and change over time, so check with your provincial employment standards office (or the federal Labour Program if you are federally regulated) before you rely on it. See employment standards by province.

Checked against official sources on 4 November 2026.