You've just started your first job, and you're making $60,000 a year. This means your monthly paycheque should be $5,000. Right? Not so fast. You have a whole range of payments to make to the Canada Revenue Agency (formerly Revenue Canada) and to other places.
1. Canada Revenue Agency (CRA) Deductions
The main deductions by CRA are for Employment Insurance, Canada Pension Plan (or Quebec Pension Plan in Quebec), and income taxes. Here's what they're all about:
Employment Insurance (EI)
Until the mid-1990s, EI was known as UI (Unemployment Insurance). At that time, the government changed the name and made it harder for people to collect benefits. Essentially, EI is a safety net for people who lose their jobs due to a shortage of work, or who need temporary leaves, such as for lengthy illness.
Here are the basic rules regarding EI:
- You can collect EI benefits only if you've paid into EI through your earnings. Currently, your employer deducts 1.80% of your pay as EI premiums, up to a maximum of $720.00 a year (which is based on maximum insurable earnings of $40,000). In addition, your employer contributes to EI 1.4x what you contribute, so up to a maximum of $1,008.00 a year.
- In the case of leaving your job, you can collect EI benefits only if you were laid off due to a shortage of work. You can't collect if you quit your job or were fired for poor performance.
- To collect, you have to have worked a minimum number of hours during the previous year. The number ranges from 420 to 910 hours (which equates to about 11 to 24 weeks of full-time work), depending on the province/territory and the unemployment rate in your specific region of the province/territory.
- EI pays you 55% of your regular earnings from your last job, up to a maximum of $435 per week. The number of weeks you can receive EI ranges from 14 to 45 weeks, and depends on the unemployment rate in your region and the number of weeks you worked. After your EI runs out, you have to find a job or apply for social assistance. You also can apply for EI to cover the cost of returning to school.
The government expects you to actively look for work while collecting EI benefits. If you don't, you may lose your EI benefits. Therefore, you might be asked to show your EI officer at the local Human Resources and Skills Development