# salary raised has changed my "in hand" pay cheque..Pls help



## liza9 (Nov 8, 2010)

Hello,

I am in desperate need of your guidance.

I am a new immigrant in Canada. Recently got a job. My salary was Cnd $49000.00/year, when I joined. I was getting Cnd $1560.00 biweekly.

The company raised salary very marginally and now it is Cnd $50,050/year. After this raise my "in hand" biweekly cheque went down to Cnd $1451.00.

Based on my current financial responsibilities and constraints, I donot want to invest in any tax saving scheme like RRSP (offered by the company, as it needs tie-up with the company for minimum two years or else i loose my RRSP money, as it cannot be transeferred). 


*ADDITIONAL DETAILS:
Added On Date Nov 09th, 2010. 7:57pm*
Dear Cal, the-royal-mail, jamesbe, brad, OptsyEagle, andrewf, OhGreatGuru, sprocket1200 and slacker,

Hello again and lot many thanks for your guidance.

Some clarifications are as follows. 

I am in my late 30s. I am a PR of Canada and will leave Canada, forever, after three years, for sure. I am NOT interested in citizenship of Canada. 


This has happened in my FIRST and SECOND paycheques. I have joined the company since one month only, F/T.

1: Dental and all coverages are same, as before. No change in that amount.

2: The HR is NOT responding to my email, since last 4 days. I talked with HR personally, they say: it might be because of rise in salary. They may check with payroll department and inform me. As it is quite a big company, I am not sure how much time they will take.

3: EI and CPP amounts are ALMOST (very slightly higher in second pay cheque, rise of $9.00) same, in both cheques.

4: Deductions (EI and CPP) are very marginally changed, as the raise in salary is $1000/year. 

5: There is change in taxes. First paycheque shows $211 as federal IT and second paycheque show $349 as a federal taxes.

6: There are NO other deductions.

I truly hope, this helps in solving the mystery.

My concerns are as follows:

a: The raise of $1000 can so much affect tax slab? Rathe than gain in "take home" salary, I am loosing $2600.00/year (includes my next pays for a year. IE. Loss of $100/biweekly pays * 26 pays = 2600)

b: What is OP?

c: Currently, I am not contributing in RSP or RRSP? What is it!!?? I am sure, you will understand that I am very new in the country and I need more of a "take home" salary, at present.

d: If RSP or RRSP helps me, please advise me on it.

e: I am going to leave Canada after three years, for sure. So, what will happen to this RSP or RRSP amount?

f: What will happen to my CPP and EI?

Thanks a lot again,
Looking forward for reply/s. 

I already have my TFSA.

What is most important for me is, I must have maximum "in hand" salary ($1560), at this point of my life.

I have following two options, as I think so.

1: Ask to manager for reversal of salary to Cnd $49,000.00 and get biweekly cheque of Cnd $1560.
OR
2: Invest in any tax saving scheme, where I can withdraw money anytime.

Now, my questions are as below:

Which option is better? Go for pay cut?

Is there any tax saving scheme, where I can save my taxes?

Do you see any other option, in my case?

I will appreciate caring and professional advise.

Liza


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## slacker (Mar 8, 2010)

Sorry, I was wrong. Please disregard original reply.


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## liza9 (Nov 8, 2010)

Thank you Slacker, for your reply.
Even, I am surprised by this. 
My first in-hand salary was $1560 after tax deduction and after the increment of salary by $1000, my in-hand salary was $1451. My manager's reply to my query was, as I am in higher bracket after raise in salary, I end up paying more tax and less in-hand salary. He denied my request for reversal of salary raise.
I need help and guidance in knowing "Something that doesn't add up".
If you need any more info, I will provide to get this mystery solved....


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## sprocket1200 (Aug 21, 2009)

slacker, you are so very wrong!
your NET pay can easily be less.

to the OP, there are two easy ways. you can fill out a tax withholding form (TD-1 i think) and ask them to pay only the minimum (make sure you save enough for what may be payable during tax time).

or you can do the RRSP thing, then have them NOT take off tax since you will get it back anyway. the RRSP people will have the form to fill out to do that. if your company has an RRSp matching plan i would suggest this approach. you will create wealth faster by doing this.


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## OhGreatGuru (May 24, 2009)

liza9 said:


> Hello,
> 
> I am in desperate need of your guidance.
> 
> ...


First of all, you should go to your Pay & Benefits Dept. and find out exactly why your net pay is lower. Is it taxes? (I wouldn't think so - your increase wasn't enoough to maek much difference in your tax bracket) Are you now enrolled in a their RSP plan, and if so, is it compulsory? Just exactly what are the new deductions? It may be a simple error on their part. Has your employment status changed, along with your salary, so that you are now enrolled in more company benefits?


_I donot want to invest in any tax saving scheme like RRSP (offered by the company, as it needs tie-up with the company for minimum two years or else i loose my RRSP money, as it cannot be transeferred)_ This doesn't quite make sense. If you leave the company before your pension contributions are "vested", they have to retrun your contributions. If it is vested, you may have lost the use of the RSP money until your retirement, but you haven't lost the money.


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## andrewf (Mar 1, 2010)

A pay increase will never lead to a decrease in net after-tax income, regardless of whether you go into a higher tax bracket. Every adult person in Canada needs to understand this. So many people don't. There is one point in Quebec where an increase in pay faces a marginal effective tax rate, but that is due to clawback in benefits,


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## OptsyEagle (Nov 29, 2009)

It's not your tax bracket. Tax brackets are applied to your "next" dollar earned. Your income will always go up when you get a raise. You need to look at all your deductions. Your taxes will be higher but not by the $100 or so that you are missing. Something else that is being deducted, has gone up. Look for it. That is your problem. It may be an error or it may be correct, but as I said, your issue is more than just income taxes.


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## brad (May 22, 2009)

Here's one possibility: I'm not sure if the OP is earning enough to have maxed out her EI and CPP contributions earlier this year, but if so then the raise may have required additional payments into those systems that are lowering the take-home pay.

Every year when January rolls around I get a cut in take-home pay compared with the previous six months or so, because I max out my EI and CPP contributions by May or June, so for the last six months of the year I don't have those contributions withdrawn from my paycheque. I used to get a raise every January but my take-home pay was actually lower than it had been in December despite the raise, simply because I was paying into EI and CPP again.


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## jamesbe (May 8, 2010)

Yes but I wouldn't expect the number to stay lower for the entire year (IE: $1000 pay bump == $1200 extra taxes) That doesn't make sense.

The other thing the OP should double check is their understanding of their company benefits. It sounds to me like if they invest in their RRSP within the company plan they probably also get a matching contribution in the form of a DPSP. If they leave the company before the 2 years are up then yes the DPSP portion will be lost but NEVER will the company retain your RRSP money.


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## the-royal-mail (Dec 11, 2009)

OP, can you please speak to the benefits or payroll people at work to get an understanding of this? Then let us know?


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## Cal (Jun 17, 2009)

Yeah, it could be something as simple as your company now has a different dental coverage provider and the amount taken off of your pay has also changed.

Best to check with Human Relations dept.


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## liza9 (Nov 8, 2010)

Dear Cal, the-royal-mail, jamesbe, brad, OptsyEagle, andrewf, OhGreatGuru, sprocket1200 and slacker,

Hello again and lot many thanks for your guidance.

Some clarifications are as follows. 

I am in my late 30s. I am a PR of Canada and will leave Canada, forever, after three years, for sure. I am NOT interested in citizenship of Canada.


This has happened in my FIRST and SECOND paycheques. I have joined the company since one month only, F/T.

1: Dental and all coverages are same, as before. No change in that amount.

2: The HR is NOT responding to my email, since last 4 days. I talked with HR personally, they say: it might be because of rise in salary. They may check with payroll department and inform me. As it is quite a big company, I am not sure how much time they will take.

3: EI and CPP amounts are ALMOST (very slightly higher in second pay cheque, rise of $9.00) same, in both cheques.

4: Deductions (EI and CPP) are very marginally changed, as the raise in salary is $1000/year. 

5: There is change in taxes. First paycheque shows $211 as federal IT and second paycheque show $349 as a federal taxes.

6: There are NO other deductions.

I truly hope, this helps in solving the mystery.

My concerns are as follows:

a: The raise of $1000 can so much affect tax slab? Rathe than gain in "take home" salary, I am loosing $2600.00/year (includes my next pays for a year. IE. Loss of $100/biweekly pays * 26 pays = 2600)

b: What is OP?

c: Currently, I am not contributing in RSP or RRSP? What is it!!?? I am sure, you will understand that I am very new in the country and I need more of a "take home" salary, at present.

d: If RSP or RRSP helps me, please advise me on it.

e: I am going to leave Canada after three years (will not come back or might return just as a tourist), for sure. So, what will happen to this RSP or RRSP amount?

f: What will happen to my CPP and EI, once I leave Canada forever? I am NOT interested in citizenship of Canada.

Thanks a lot again,
Looking forward for reply/s.


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## OhGreatGuru (May 24, 2009)

_a: The raise of $1000 can so much affect tax slab? Rathe than gain in "take home" salary, I am loosing $2600.00/year (includes my next pays for a year. IE. Loss of $100/biweekly pays * 26 pays = 2600)_

Either they made a mistake in deducting too little in taxes before, or they have made a mistake in deducting too much now. Press them for a rational explanation (because your increase in gross salary should not have caused such a large change in income tax withheld.) They may also have made a change in their assumptions about your basic tax dedctions, which affects how much tax they have to withold. (There is number for that Revenue Canada Declaration form, but I can't remember it.) 


_b: What is OP?_

Abbreviation for Original Poster - ie the person who started the discussion thread.

_c: Currently, I am not contributing in RSP or RRSP? What is it!!?? I am sure, you will understand that I am very new in the country and I need more of a "take home" salary, at present.

d: If RSP or RRSP helps me, please advise me on it._

Registered Retirement Savings Plans are a tax-sheltered savings and investment account. Contributions can be deducted from your income for the purpose of determing your income tax owing. There are numerous rules about how much you can contribute, and what tax you pay when yu make withdrawals. Read the Canada Revenue Agency guide on the subject, or borrow a book from the library about RRPS.


_e: I am going to leave Canada after three years, for sure. So, what will happen to this RSP or RRSP amount?_

If it is a personal RRSP (one to which only you have contributed) you could withdraw the money, pay the income tax on it, and keep what's left. Or you can leave it invested in the account, and make withdrawals at some in the future. But you will eventually be taxed on withdrawals.

If it is a plan to which your employer has also made contributions, you normally cannot touch the money until retirement age, although most provinces have introduced provisions allowing early collapse for "small" accounts. 

_f: What will happen to my CPP and EI?/I]

There are no refunds on CPP. You will be entitled to a small Canada Pension when you reach retirement age. EI is Employment Insurance. There are no refunds.

If you are sure about leaving Canada in 3 years, it is probably not worth your while to open an RRSP. From the sound of things you ned th cash in hand anyway._


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## OptsyEagle (Nov 29, 2009)

I took your numbers and entered them into the CRA'S Payroll Deductions Online Calculator. 

https://apps.cra-arc.gc.ca/ebci/rhpd/startLanguage.do?lang=English

I used a biweekly pay period and the province of Ontario (you did not state your province) 

I first took your salary of $50,050 or $1,925 per pay. Your calculations resulted in the following required deductions:

Income Tax = $348.13
CPP = $88.62
EI = $33.30

When I entered $49,000 or $1,884.62per pay your deductions should have been:

Income Tax = $335.56
CPP = $86.63
EI = $32.60

So your $40.38 per pay raise should have resulted in $15.27 in extra deductions for an increase in take home pay of about $25.00.

So, unfortuneately, it would appear to me that your employer's mistake was made on your 1st pay, not the last. 

Variations in the numbers above to your actual pay may include a difference province of work, and perhaps some personal tax credits that you may have elected when filling out your T1 when you first obtained employment. You may also have other deductions for group benefits, union dues and who knows what else, all that should be itemized on your pay stub. 

In any event, if they did take too much tax, you will get it back at the end of the year when you file your taxes, but it appears to me the only mistake was that they did not take enough tax from you on your first pay cheque. This will all get reconcilated when you file your tax return for 2010.

Good luck.


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## OptsyEagle (Nov 29, 2009)

One last note. When I look closer at the payroll numbers it seems to me that the difference is almost all in the provincial income taxes. It looks like your employer only charged you federal tax and not any provincial taxes on your first paycheque, but then fixed this error on your second.

Unfortuneately both federal taxes and provincial taxes are due on all incomes in Canada.

I wish it went the other way for you. Good luck.


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## liza9 (Nov 8, 2010)

*I think, I am near solution, coz of your guidance,,*

Dear OptsyEagle and OhGreatGuru,

Thanks again for point-by-point answers.
I am in Ontario.
I will talk to HR and press them to clarify.
Hope this works.
Meanwhile, if you come across any plan (based on my condition and requirements), do post it.

Wishing you great days ahead (Blessing and wishes works...)
Liza


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