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If money is tight and you’re struggling to get by, you’re not alone. Forty-four percent of Canadians report living paycheque to paycheque, according to a recent survey by Leger.1 When every dollar counts, something as small as a late or incorrect payment from your employer can have a big impact on your finances.
While it’s your employer’s responsibility to provide accurate payment, mistakes happen. To safeguard your income, make sure you understand how to review your paycheque and confirm you’re getting every dollar you’ve earned.
Here we explain what a payroll error is, how it can affect your finances, and the steps to take to perform a paycheque review.
What is a Payroll Error?
Payroll is the process of compensating employees for the work they do. It involves calculating wages, withholding taxes, and pension deductions, and sending employee checks on time.
A payroll error occurs when your employer overpays, underpays, misses a paycheque, or deducts the wrong amount for benefits. The mistake can come from a manual entry error, calculation mistakes, missing information, or a larger payroll system glitch.
How Can a Payroll Error Affect You?
If you’re like many Canadian families and you don’t have wiggle room in your budget, a payroll error can have serious consequences. If your paycheque is short, this can throw off your budget and prevent you from paying your bills on time. Late payments can result in late fees, interest charges, and damage to your credit score.
Even an overpayment error can lead to issues. Let’s say your employer forgets to deduct taxes and overpays you for a two-week pay period. You might not notice the error when it happens, but if your employer has to deduct twice the amount of taxes on your next paycheque, this could seriously impact your budget.
To protect yourself and your income, make sure you’re reviewing each paycheque.
How to Double Check Your Pay?
With a busy life, it’s easy to let certain tasks go on autopilot, such as receiving your paycheque. If your employer auto-deposits your money, you might never look at your pay stub to ensure you’re receiving the correct amount.
Performing a quick paycheque review every payday can help identify errors quickly, so you and your employer can work on a remedy.
To conduct a paycheque review, look at your paper check or log into your employer’s online payment portal to view a digital copy of your pay stub.
Once you access your pay stub, you can review your payment details. Here are some of the key components you’ll find on your pay stub and what they mean.
- Pay period. The dates you’re being paid for. Common pay periods are weekly or bi-weekly.
- Pay rate. This is the amount you’re paid for a specific unit of work. For example, you might see an hourly, daily, or annual rate.
- Gross pay. The amount of money you make during a pay period before any deductions.
- Net pay. The amount of money you’ll take home after taxes and deductions.
- Mandatory deductions. Includes provincial and federal taxes, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI).
- Additional Deductions. Depending on your work and situation, you might see additional deductions including pension plan contributions, group insurance, or contributions to your registered retirement savings plan (RRSP).
If you identify an error, contact your employer directly or reach out to the company’s human resources or accounting and payroll department to alert them. If your employer doesn’t respond, you can reach out to your provincial labour board.
Debt Management Strategies
If your debt is an issue, even when your employer pays you in full and on time, you may want to speak to a debt expert, like a Licensed Insolvency Trustee (LIT).
A LIT can review your financial situation and recommend the debt solutions available. While there are many individuals and companies offering debt help, LITs are the only professionals in Canada who can administer government-regulated debt relief programs, including Consumer Proposals and Bankruptcies.
Consumer Proposal
If you’re struggling to pay your bills, but you have a steady paycheque, your LIT might recommend a Consumer Proposal. In a Proposal, you work with your LIT to create an offer to pay your creditors a percentage of your debt, extend the time you have to pay, or both. You have up to five years to complete a Proposal, and it can help you avoid filing for Bankruptcy.
Bankruptcy
For most people, Bankruptcy is the last resort. But Bankruptcy is not designed to punish; it’s meant to give Canadians who are down on their luck a fresh financial start. Once you declare Bankruptcy, you can stop making payments directly to your unsecured creditors. Any wage garnishment or creditor lawsuits will stop immediately.
While your LIT will sell some of your assets to raise money for your creditors, you won’t lose everything. There are provincial and federal exemptions that protect some of your assets. In Bankruptcy, most of your unsecured debts are eliminated.
Speak to a Licensed Insolvency Trustee
If a small paycheque error is enough to derail your finances, it might be time to ask for help. A LIT will review your finances and help you come up with a plan to move forward. You don’t have to navigate your debt alone; we can help. For a free, no-obligation consultation, call us at 1-888-371-8900 or complete our online contact form.
