Q:

What is the difference between net pay and gross pay?

A:

Quick Answer

The difference between net pay and gross pay is the amount that is taken out of the wages for taxes, benefits and other voluntary deductions. Net pay is the amount that an employee takes home after deductions. Gross pay is the amount that the employee actually earns.

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What is the difference between net pay and gross pay?
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Full Answer

In addition to federal income tax, some states may also require income tax to be deducted from wages. A small percentage is taken out for Social Security, disability contributions and medical benefits if it applies. Some people may choose to also have retirement contributions or payments for additional insurance plans or flexible spending accounts deducted directly from their paychecks.

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Related Questions

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    How do you calculate gross annual income?

    A:

    Locate the gross pay under the "Total Earnings" or "Gross Pay" section of a paycheck and multiply the amount by 12, 24, 26 or 52, according to Cynthia Measom for the Houston Chronicle. Multiply by 12 if payment is once a month or 24 for a pay frequency that is twice a month. Multiply by 26 if the payment cycle is every two weeks or 52 for weekly paychecks.

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    How do you use an online calculator to estimate your take home pay after taxes?

    A:

    Using an online calculate to estimate post-tax pay usually involves filling in information about one's gross pay, pay frequency, allowances, tax status, state and local details and any deductions the person has, suggests PaycheckCity.com. It's helpful to have a recent pay stub available to obtain information about pay, taxes and deductions, suggests U.S. Trust.

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  • Q:

    What does "net pay" mean?

    A:

    Net pay is the amount of a person's paycheck left over after any deductions are taken out. This commonly includes federal and state tax withholding, Social Security and Medicare taxes. In addition, any voluntary withholdings, such as the employee's share of medical insurance, reduce the net pay.

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  • Q:

    What function do payroll codes play for major companies?

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    Payroll codes enable major companies to comply with federal and state income taxes and employee occupational regulations while also allowing the payroll or human resources department to track wage deductions and accruals of wage-related benefits, such as paid vacation time. The use of certain codes is mandated by law.

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