Calculating income: employed

Base salary: the straightforward case

A salaried T4 employee with a stable base is the simplest income file to calculate: annual salary divided by twelve, supported by a recent pay stub, an employment letter confirming position, start date and salary, and typically the most recent Notice of Assessment or T4 to cross-check. The employment letter matters more than new agents expect — it is the document that confirms the job is real, current, and not about to end, and lenders will query anything in it that reads as vague or templated.

Guaranteed vs. variable pay

Not all employment income is treated the same way. Guaranteed components — base salary, a fixed car allowance, guaranteed shift premiums — are counted at their current, full value. Variable components — bonus, overtime, commission earned as an employee rather than as self-employed — are typically averaged, commonly over the most recent two years, and only included at all if there is a reasonable expectation the pattern continues. A bonus that has grown steadily for three years reads very differently from one that spiked once and disappeared; the averaging convention exists precisely to smooth out the second case without unfairly penalizing the first.

• Guaranteed base salary — used at full current value.
• Overtime and bonus — typically two-year averaged, subject to a letter confirming likelihood of continuance.
• Commissioned employees (not self-employed) — usually averaged similarly, cross-checked against T4s and NOAs.

Probationary periods

A new job on probation is not an automatic decline, but it is a flag that needs handling directly rather than glossed over. Lenders typically want a letter from the employer confirming the position is expected to be made permanent, and some will condition the approval on the probationary period ending before funding. The worst outcome is submitting the file as if the new job were simply another year of stable employment and letting the underwriter discover the start date buried in a pay stub.

Part-time, seasonal and multiple jobs

Part-time and seasonal income is generally averaged over a documented history — often two years — rather than annualized from the most recent pay period, because a recent uptick in hours may not be representative. A borrower working two part-time jobs needs both incomes documented and averaged on their own timelines; lenders will look for continuity in each role separately rather than treating combined recent income as a single trend line.

Pension, EI and parental leave

Pension and retirement income is generally straightforward to document and use at face value once confirmed with a T4A or pension statement. Employment Insurance and parental leave benefits are usually acceptable as income during the leave itself where the file is being underwritten while the borrower is on leave, alongside a letter confirming the intended return-to-work date and the salary they will return to — the underlying job's income is what ultimately gets used, not the temporary EI benefit rate, once the return date is confirmed.