what is net pay

Net pay is the amount of money an employee takes home after all deductions have been subtracted from their gross pay. These deductions can include mandatory taxes (income tax, Social Security, Medicare), as well as voluntary contributions such as health insurance premiums, retirement plan contributions, union dues, and wage garnishments. Net pay is often called "take-home pay" because it represents the actual amount deposited into the employee's bank account or the value of their paycheck. Net pay can be calculated using the formula:
Net Pay=Gross Pay−Total Deductions\text{Net Pay}=\text{Gross Pay}-\text{Total Deductions}Net Pay=Gross Pay−Total Deductions For example, if an employee's gross pay is $3,500 and total deductions amount to $650, their net pay would be $2,850.