What is Net Pay?
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Last modified 6/3/2020 10:26:07 AM EST |
Added by 123PayStubs Team
Net pay is the total amount of money an employer pays after deducting taxes and voluntary deductions from employee's gross wages. It is not inclusive of the tax, Medicare, or Social Security payments.
In order to determine the net pay, gross pay has to be first calculated based on how the employee is employed: hourly or exempt employee. Then, the employer withholds a certain percentage of pay for taxes and other deductions.
Net Pay = Gross Pay - Payroll Taxes - Other Deductions
Here is a list of other deductions:
- Medicare and Social Security taxes
- Deductions toward any type of insurance or retirement savings plan
- Voluntary deductions for charity
The net pay is usually less than the gross wages. Also, it is the amount that the employee receives every payday, and they can view it at the bottom of the pay stub in 123PayStubs.