Net Pay

What is Net Pay?

After all deductions and withholdings have been made, the employer issues the employee’s or non-employee contractor’s net pay. Net pay is the total gross pay or earnings less any deductions. Since the recipient receives the money to spend as they see fit, net pay is also known as net income or “take-home” pay.

Why Net Pay Matters

Both voluntary and involuntary deductions, such as federal and state income taxes, Medicare and Social Security taxes, and wage garnishments, impact net pay. Voluntary deductions include healthcare premiums, retirement fund contributions, and HSA payments. Employees can see an itemized summary of these deductions on a properly structured pay stub that comes with their paycheck.