Lower take‑home pay in January is common in Ontario because CPP and EI deductions restart at the beginning of every calendar year. These programs have annual maximums, so once January arrives, your contributions reset and begin coming off your paycheque again.
Use our calculator to estimate your take-home pay, and visit the take-home pay hub for more detailed information.
While these patterns are common, the actual impact depends on your income, pay frequency, and deductions. This page explains why the change happens, but the only way to see how it affects your pay is to calculate your take‑home pay using your own details.
CPP and EI restart every January
Contributions to the Canada Pension Plan (CPP) and Employment Insurance (EI) usually reach their annual maximum by the end of the year. In January, these deductions reset, which can temporarily reduce take-home pay at the start of the year.
If you earn $80,000 per year in Ontario and are paid bi-weekly (about $3,076 per paycheque), you likely reach the EI and CPP contribution limits by the fall. Once those annual caps are hit, deductions stop and your late-year paycheques are higher.
When January arrives, CPP and EI reset to zero. Contributions begin again from your first paycheque of the year, which can reduce take-home pay by roughly $200–$300 per pay period compared to December — even though your salary hasn’t changed.
CPP and EI have annual maximums
Depending on a person’s income, CPP and EI deductions can reach their annual caps earlier in the year. Once capped, these deductions stop, which reduces total deductions and increases take-home pay for the rest of the year.
Your pay cycle can affect the drop
Take-home pay can vary depending on whether you are paid biweekly or monthly. In some cases, hours worked in December are paid in January, which combined with reset deductions—can cause a temporary dip in take-home.
Bonuses or overtime can change tax withholding
Bonuses or overtime increase your gross pay for a specific pay period. When income spikes, payroll systems apply higher withholding to estimate annual taxes. This doesn’t mean you’re taxed at a higher rate for the whole year—it’s a temporary calculation. As a result, take-home pay may appear lower on paycheque that include bonuses or overtime.
Use the Ontario take-home calculator to estimate your pay.