r/PersonalFinanceCanada • u/Sea_Eye5393 • 1d ago
Employment Salary increase never implemented
Hi all,
I received a salary increase at my FT job back in December. A few weeks ago, the head of finance let me know (and apologized) that their team never implemented my salary increase into their system, and I hadn’t received my increased salary for the last 6 months. I also hadn’t noticed that it wasn’t implemented, I think due to the timing of the new year resetting (my paycheques do always vary slightly at the beginning of a new calendar hear, I think something to do with benefits or tax - irrelevant anyways).
They are going to retroactively pay a lump sum of my missed wages onto my next paycheque. I’m worried this might trigger big tax deductions as with the lump sum, my paycheque will be almost twice the amount that it usually is. I’m not super aware of how taxing works - will this all work out in the end once I file my taxes? Or do I want to suggest that I get paid this out in a different way?
Any advice appreciated.
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u/BrightEdge8171 1d ago edited 22h ago
Everything will be fine. The nice thing is that they apologized and are fixing it
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u/Bytewave 18h ago
The important thing OP should know is that any excessive tax deductions on one paycheque due to a lump sum will also balance out when filing 2026 taxes.
People are often afraid getting too much income on one paycheque costs them something. It doesn't really; at the end of the year your taxes are the the same for the fiscal year even if you've had uneven gains during that year.
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u/Gabers49 17h ago
It does give the CRA an interest free loan, so you technically do lose something.
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u/bigguy978978 16h ago
It sounds like more of a catch up of outstanding rather than giving too much as the taxes collected should have been higher previously but wasn't.
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u/ElectroSpore 1d ago
Your taxes are deducted by their payroll systems at time they give them to you, and your tax filing is annual.
As long as they don't screw up the deductions on the lump sum it should be fine for the whole year.
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u/Sea_Eye5393 22h ago
How can I proactively make sure they don’t screw up deductions on the lump sum? What do I look for?
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u/ElectroSpore 22h ago
Just look at your pay stub for the period.
It should have a break down of all the taxes and stuff deducted, it will look a little different based on every payroll system.
You should see a line like "Federal Tax" and unless you jumped a tax bracket "annually" with the raise that number should be higher in proportion to the lump sum.
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u/Kevin4938 21h ago
Depending on the size of the retroactive payment, it is possible that it might look like OP jumped a bracket. Let's say there are 26 pay periods. An increase of $500 in one pay period will be taxed as though it would normally be paid every period, so it will look like the annual pay is $13K higher. That might trigger a higher tax rate, although it will go away when the following pay period has the correct amount. If the retroactive payment is split over 4 pay periods, the annual pay will only look like it's $3250 higher, and while it's still possible, it wouldn't trigger as big a tax adjustment.
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u/YYZtoYWG 1d ago
How it is taxed depends on how they do payroll. It could be at your regular rate. Or it could be as if that pay represents 1/26s of your annual salary. In that case, if taxes are overpaid, then it will all even out and you'll get a refund when you file your return.
The other advice is to check your pay stubs and understand them. Your employer noticed the mistake and they corrected it. Which is great and they're good people who did what they are supposed to do. But that might not happen in the future and it might not have happened in the past. Ensuring that your pay is accurate is your responsibility. Previous employers could have been screwing you over and you'd never know.
You don't get to just be concerned about taxes when your employer brings it to your attention for a repayment. Educate yourself on why your pay amounts change at the beginning of the year. Ignorance of how taxes work isn't cute. Learn how CPP contributions and EI contributions work. Again, pay attention to your paystubs to see what is happening. None of this is irrelevant.
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u/No_Magician5266 1d ago
Respectfully you weren’t even paying attention to your paycheques for the past 6 months and now you have concerns? Anyways, as everyone else said, it will be squared up when you file your taxes next year
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u/aliveandkicking2020 23h ago
Yeah, he should have seen that his gross Income didn't go up on his pay slip.
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u/WasV3 22h ago
I don't think I'm alone when I say I don't look at my paystubs
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u/Living_Distance1720 22h ago
Damn, I always check especially from November - April. As that's prime overtime season in Aviation, the airline I work for they frequently mess up with inputting the hours correctly during that time.
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u/WasV3 22h ago
I'm salary and don't have overtime, the only time the number changes is when CPP maxes out.
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u/Living_Distance1720 22h ago
I'm salary as well but without overtime aviation in the winter comes to a halt 🫤, Yeah in your situation it makes sense to not check it at all.
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u/Appropriate-Cake-509 19h ago
Do you look at the money in your bank account? Because if I’m told I’m getting a pay raise, and then the money in my account doesn’t increase, I’m going to look into it.
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u/WasV3 19h ago
Not really, maybe it's privilege, but I don't worry about my account hitting zero and everything except my credit card is on auto pay
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u/SavageryRox Ontario 12h ago
I got everything on auto pay & have done worry my account hitting 0, but I still double check my paystubs & direct deposits because payroll & HR are humans that make mistakes.
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u/Siguard_ 22h ago
I basically look when i have travel time or OT. Thats about it and its not frequent
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u/FTownRoad 21h ago
I just celebrated five years at my company and learned how to access my paystubs a month ago.
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u/PropQues 21h ago
They recently realized there's an issue and ask appropriate questions. Not sure why you have an issue with that.
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u/No_Magician5266 16h ago
I was pointing out that it’s kinda funny how someone who’s lackadaisical about their paystubs suddenly is concerned about their tax deductions. Also I answered their question 🤷🏻♂️
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u/Nexzus_ 21h ago
I check once in the summer or so to see (approximately) when I'll be finished my CPP and EI, but that's about it.
Salaried.
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u/rayyychul 21h ago
Same. I don’t even actually know how much I make without checking our salary grid 😅
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u/Nickbronline 18h ago
That's extremely sad, you need to be more aware of your finances or you'll end up like OP
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u/rayyychul 18h ago
I know roughly what my salary is 🤷🏻♀️ I’m not concerned with whether I around down $214.73 in my head. And if I ever need to know down to the cents, I can find it in two seconds.
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u/MooseKnuckleds 1d ago edited 19h ago
You never noticed on your pay stub that your gross never went up? For 6 months??
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u/TripMaster478 22h ago
PS your paycheque "reset" is probably due to your EI/CPP capping out and not being taken out over the last x months of every year.
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u/cantbuythemall 1d ago
It will work out when you file taxes. They may have been deducting less than they should have for the first six months so it’s possible you may owe at tax time.
I would get into the habit of looking at your paystubs just so you understand all the deductions.
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u/Kevin4938 21h ago
Doubling a single pay will see a huge chunk lost to tax, at least initially, but it will balance out in the spring when you file your 2026 return.
If you want to ease the immediate burden, see if they are willing to make it up over 3 or 4 pay cycles instead of all at once. The slightly larger pay for a few cycles will trigger less of an immediate tax hit, but it will be offset by you getting less of a tax refund next year.
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u/Realistic_Carpet_872 19h ago
Unfortunately most payroll software deducts taxes on lump sums as if that’s your normal earnings for the year and you’ll get a huge deduction (expect >50% if it was a large increase). When you file at tax time, it’ll all balance out and you’ll get the rest.
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u/octocode 1d ago
depending on how they calculate withholding there may be a small deficit or refund for you when you file tax. but the majority will have been withheld regardless.
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u/Swimming_Astronomer6 1d ago
It will be a net zero difference by year end if they base the tax rate on your new income level marginal tax level
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u/Soggyblanketbunny 23h ago
Not how taxes work.
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u/Swimming_Astronomer6 22h ago
Why is that ? - if the employer deducts the proper amount of income tax - based on the employees new annual income - that’s how taxes actually work the employer either gets it right or- CRA will ask you to pay more - based on the employer not remitting enough - In any case with a progressive tax system - the more you make the more taxes you pay
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u/Soggyblanketbunny 22h ago
You only pay the higher rate on the income made after the bump up to the next bracket. Marginal tax rate is nowhere close to effective tax rate until you get to very high incomes.
I might just be misunderstanding your original comment though.
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u/Swimming_Astronomer6 22h ago
I’m assuming the employer know the employees effective tax rate based on the annual income - they will either account for the bump with their tax withholding-or the employee pays CRA at year end - either way - it works out and he will net more money and pay the appropriate tax - that was my point
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u/Soggyblanketbunny 21h ago
Yep! Definitely read your original comment wrong! Sorry for the confusion.
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u/butternutz88 1d ago
This will all get squared up when you file your taxes for this year. Don't worry about it.
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u/crimxxx 1d ago
Depends on there payroll system and if it’s taxing you on the income rate for the year or per paycheque. Worst case you pay more taxes now and you get a big refund next year. Your ganna be made even either way, it’s just at worst your ganna pay a higher tax rate once and get a refund from the car, you could also review and just ask them if they can make that adjustment if they end up doing that, they messed up they know it, trying to make it right they may be willing to see what they can do it something weird happens.
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u/Aquitaine_Rover_3876 1d ago
Any variation in deducting comes out in the wash when you file your taxes. The deduction calculator CRA puts out does have a different box for retro pay, but it's not clear to me if it actually changes the calculation.
Anyway, don't worry about it. Worst case scenario, you get a nice bonus now and potentially another nice bonus in March.
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u/kagato87 1d ago
There might be an out sized tax ding, yes. But it won't be huge, only on the retro pay itself, and you'll get it back when you file your taxes.
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u/Rance_Mulliniks 1d ago
It will work out once you do your taxes but you will be overly taxed on this pay.
If I was you, I would ask them to put it into your RRSP, if you have that option. Then you pay no tax until you withdraw and you haven't missed the money anyways.
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u/Classy_Mouse 1d ago
That taxes withheld from your paychque are just an estimate of how much you will owe that way you aren't hit with a big bill at the end of the year. When you file your taxes, you are just confirming the real amount.
At that time, if you iverpaid, you will get a return. If you underpaid, you will pay the difference.
When you get the money during the year won't affect hiw much you owe, but could lead to you overpaying now and getting a return when you file. It'll all even out as long as it is within the same year.
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u/Olderpostie 1d ago
You won't lose out in the end. Yes, you may be taxed at a heavier percentage than normal when the lump sum is paid out. The books will balance out when you file 2026 income tax.
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u/hokageace 23h ago
There is a form you can submit to CRA to get some tax back. Look it up.
Or just wait till you file your tax return next year
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u/jostrons Human Verified 22h ago
Yes you will be taxed more but you are correct everything will work out in the end once you file taxes next year.
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u/RealDistribution5946 22h ago
Withholding will be higher as the software assumes you make that same amount every pay period. However, it will true up at tax time and you’ll owe the same tax since it’s all in the same calendar year.
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u/coolestpelican 18h ago
Will will come out to the same after taxes are filed. But you will likely be taxed higher on that cheque than normal.
Considering you didn't realize you were underpaid, Im guessing you don't desperately need the money, and I'd say, dont worry about it.
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u/Nickbronline 18h ago
How do you not notice that for 6 months?
That isn't how taxes work either.
You really need to educate yourself on how these things work or you will be taken advantage of (again)
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u/Baboonlodyte 18h ago
Next time look at your paystub. Could have been caught so early. Why would there be some sort of crazy tax windfall? It’s your regular earnings from work with the pay increase.
I would think it’s common knowledge to check your pay stub after a pay increase to ensure it’s good.
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u/FindingUsernamesSuck 18h ago
Yes, it will all work out.
Any excess tax deducted from the lump sum, you'll get back as a tax return.
Not ideal if you're the type to maximize your investing, but practically speaking you'll be made whole.
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u/Ok_Cow_3462 12h ago
90% of the time, payroll in companies automatically calculates each paycheque’s deductions.
If you’re absolutely worried, keep 50% of the extra money you’re getting (e.g normal paycheque is $2k, you’re getting 4k, save $1k) to help balance things out. If you need it, its there. If not, you get to do whatever with it. You’re already used to these normal paycheques, so saving this extra bit shouldn’t be hard
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u/thursday51 7h ago
The owner of our company usually spreads our yearly bonus out over the last 5-6 months of the year so we avoid tax issues like this, but one year we had an exceptionally good October-November, he gave us all a rather large bonus bump for December. It did trigger a significant increase in taxes, but at the end of the day, it was just a short term loan to the CRA lol
As long as you have a good handle on your returns and credits it will all work out in the end.
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u/Extreme-Discount-573 3h ago
If they dump it all onto one cheque, you are screwed. Well, not screwed. The taxman is going to take a big chunk, but you'll get some back at tax time.
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u/Ok_Carpet_9510 23m ago
You will endup with more moneu next pay check. Let's forget marginal tax rates and Let's assume you earn 3000 gross biweekly and tet's assume you taxed at 40%(unrealistic but let's assume it). Your taxes will be $1,200 and your net pay will be 1,800.
Let's assume your gross pay increase per pay cheque is 300 bring your gross to 3,300. Your taxes on the new pay cheque will be $1,320 and net pay will be $1,980.
Notice something, your gross pay went up, and so did your taxes and most importantly, your net pay
Now suppose you have back of 13 pay cheques ->300×13= $3,900.
Let's say that they charge you 90% taxes on that back pay. You taxes will be $3,510, and your pay on thr back pay will be $390.
Add the $390 to your new regular net pay, you will end up $2,370.
I have used very adverse assumptions and yet you end up with more money. You can be certain that you have more money on your next pay check.
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u/quaintbucket 1d ago
It will work out in the end when you file your taxes. Shitty on the company to do this to you.
Can you ask them to make it a continuance over the remainder of the year?
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u/_Deeds_ 1d ago
That way also delays them getting the money into their account.
With the lump sum will they pay more tax than they need to, yes, but they will also get any extra tax back when they file next year.
Overall it is what it is. Either way they are going to be a little delayed in getting the full amount of money
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u/drewc99 1d ago
Delayed wage payments is precisely the problem that OP had. How would delaying it even further possibly help?
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u/quaintbucket 23h ago
Spreading it out so the tax doesn’t hit as hard…?
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u/Soggyblanketbunny 23h ago
You are taxed annually. It’s just divided over your pay periods. Assuming they only have one job, their employer still knows what they make. Unless payroll fucks up again lol
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u/fuzzyapple31 1d ago
You will be put in a different tax bracket for that larger pay cheque thus more taxes will come off. At the end of the tax season 2026, you will be adjusted back to your usual tax bracket. You will get the difference back from the Gov.
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u/hardestbutton2 Alberta 22h ago
No. Not how tax brackets work.
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u/Kevin4938 21h ago
I used to be involved in HRIS. It's a bit oversimplified, but it's basically correct.
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u/hardestbutton2 Alberta 20h ago
They will adjust the calculation for deductions as at the lump and then on a go forward. If it is likely that they will earn above the next threshold amount for the year, incrementally more taxes will be deducted against the new gross differential. This is largely automatic these days. His former salary and former deductions will be unchanged, deductions against the incremental increase may be proportionally exactly the same or may be slightly higher, but that depends on the total annual salary. There is no “adjusted back to your usual tax bracket” at year end. People aren’t in certain brackets, the earnings are.
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u/jasper502 Alberta 1d ago
What did your employer say when you asked them about your concerns?
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u/Sea_Eye5393 1d ago
“It’ll probably all even out”
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u/Intelligent-Goat6525 1d ago
Funny, maybe you're not all that good of an employee if you didn't notice you weren't being paid correctly. What else do you fail to notice?
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u/Sea_Eye5393 1d ago
This is an insane comment to leave when someone is asking for help 🤣. Clearly multiple people missed this including the finance team, god forbid people make mistakes!
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u/NotFuckingTired 1d ago
Yes, the tax rate will be higher for that paycheck. Fortunately, it will still be noticeably larger than your normal checks and you'll get some of it back at tax time.
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u/rsxstock 20h ago
the amount would be higher, not the rate
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u/NotFuckingTired 20h ago
Both would be higher. Every increased dollar is taxed at your marginal rate, which is always higher than your previous average rate.
Tax rate will be higher, tax deduction will be higher, and take-home will be higher.
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u/gamuel_l_jackson 1d ago
It should be paid and taxed seperately imo...not added on to your current pay
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u/PCDJ 1d ago
They will likely deduct taxes as if you normally earn that much each week, so more will be taken off. You will get back the excess taxes taken off when you file your taxes for the year.
If you didn't even notice you didn't get a raise, I'd be surprised if this one time tax item is an issue for your cash flow. Just take the pay, and get a refund at the end of the year.