Net Pay

What Is Net Pay?

Net pay is the amount of money an employer issues to any employee or non-employee contractor after any deductions and withholdings have been taken out. In other words, net pay is the sum of gross pay or wages minus deductions. On the recipient’s side, net pay is also known as net income or “take-home” pay, because it is the amount they receive to spend at their discretion. 

Issues that impact net pay include voluntary deductions, such as healthcare premiums, retirement fund contributions, and HSA contributions, and involuntary deductions, such as federal and state income taxes, Medicare and Social Security taxes, and wage garnishments. Employees can see an itemized breakdown of these deductions on a properly formatted pay stub, which is included with their paycheck. 

You can read more about net pay, gross pay, withholdings and deductions here: Net Income vs. Gross Income.