Income tax, CPP, and EI amounts withheld from pay and later remitted through the Canadian payroll system.
Source deductions is the Canadian payroll term for the amounts an employer withholds from an employee’s pay and later remits to the government.
In ordinary Canadian payroll language, the term usually centers on income tax, CPP contributions, and EI premiums when those amounts apply. It is one of the most important payroll terms because it connects the employee paycheque to the employer’s remittance duty.
Source deductions matters because it explains why gross pay and net pay differ. It also helps readers understand that payroll is not finished when the employee is paid. The employer still has to remit the amounts that were withheld.
This term is especially useful because it ties together:
In Canadian payroll, source deductions usually include:
Payroll calculates those amounts during the run, shows them on the pay stub, records them in payroll reports, and then passes them into the employer’s remittance process. That is why source deductions sits at the boundary between employee-facing payroll and employer administration.
| Payroll amount | Source deduction? | Why it belongs or does not belong |
|---|---|---|
| Income tax withheld | Yes | Payroll deducts it from the employee’s pay and remits it later |
| Employee CPP contribution | Yes | Payroll withholds it from pensionable earnings when CPP applies |
| Employee EI premium | Yes | Payroll withholds it from insurable earnings when EI applies |
| Employee benefit premium | Usually no | It may reduce net pay, but it is not one of the core statutory source deductions |
| Employer CPP or EI share | No, but closely related | It is part of the employer’s remittance obligation, not an amount withheld from the employee |
Outside Quebec, employers usually remit source deductions to the CRA. In Quebec payroll, the employer may have to split the follow-up work between the CRA and Revenu Quebec depending on which deduction is involved.
An employee has gross pay of $2,300. Payroll withholds:
$280$95$38$40The first three amounts are source deductions. The benefit premium still reduces net pay, but it is not part of the source-deduction set. Payroll therefore has to treat the pay stub lines differently when it moves from the pay run to remittance and year-end reporting.
The umbrella idea is stable, but exact lines and labels can vary by employer, payroll system, Quebec context, and worker situation. The core point is that source deductions are the withheld amounts payroll later remits.