Statutory deductions are amounts your employer must take off your paycheque because the law requires it. In the United States that usually means federal income tax, Social Security, Medicare, and often state income tax.

In most of Canada it means income tax, Canada Pension Plan (CPP), and Employment Insurance (EI). In Quebec, QPP and QPIP replace the usual CPP and EI labels. Those withholdings prepay your tax and fund programs you may use later, such as retirement or unemployment benefits. Other stub lines, like union dues or a health plan, are extra.

Related Lessons:

• Click Here for our lesson on Tax Basics You Need to Know
• Click Here for our lesson on Payroll Best Practices
• Click Here for our lesson on How Canadian Taxes Impact Your Personal Finances