{"id":1651,"date":"2018-01-05T09:45:20","date_gmt":"2018-01-05T14:45:20","guid":{"rendered":"https:\/\/sagestaging.wpengine.com\/en-us\/blog\/?post_type=sage_glossary&p=1651"},"modified":"2026-01-16T08:29:42","modified_gmt":"2026-01-16T13:29:42","slug":"what-is-net-pay","status":"publish","type":"sage_glossary","link":"https:\/\/www.sage.com\/en-ca\/blog\/glossary\/what-is-net-pay\/","title":{"rendered":"What is net pay?"},"content":{"rendered":"
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\n\t\t\t\t\t\t\tGlossary definition<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t
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\n\t\t\t\t\t\tWhat is net pay?\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t
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Net pay definition<\/h2>\n\n\n\n

Net pay is an employee\u2019s earnings after all deductions are taken out. Obligatory deductions such as the FICA mandated Social Security tax and Medicare are withheld automatically from an employee\u2019s earnings. Other deductions come in the form of benefits, which may be optional. Health, dental and vision insurance, life insurance, or a retirement fund may be offered through an employer. These costs will come in the form of a deduction from the employee\u2019s gross pay<\/a>, or salary.<\/p>\n\n\n\n

What is the difference between net pay and gross pay?<\/h2>\n\n\n\n

Gross pay is pay before deductions. Jobs advertising a $40,000 salary are referring to gross pay. It may consist of tips, bonuses, tips, commissions, overtime, wages, and so on.<\/p>\n\n\n\n

Net pay is pay after deductions. It\u2019s what\u2019s left over after union dues, wage garnishments, pension contributions, FICA taxes, income taxes, 401K contributions, and similar deductions have been accounted for.<\/p>\n\n\n\n

How do you figure out your net pay?<\/h2>\n\n\n\n

Here is a formula to use to figure out your net pay:
\nNet Pay = Gross Pay \u2013 Taxes and Deductions<\/p>\n\n\n\n

For employers, what does net pay mean?<\/h2>\n\n\n\n

A broader net pay definition includes implications for the employer, such as the obligation to match an employee\u2019s retirement or savings fund.<\/p>\n\n\n\n

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  • Only a portion of an employee\u2019s costs are directly paid to the employee. Net pay refers to the amount an employee takes home, not the amount it costs to employ them.<\/li>\n\n\n\n
  • Retirement plan contributions, employee benefits, and employer FICA taxes are deducted before an employee receives their net pay.<\/li>\n<\/ul>\n\n\n\n

    For employees, what does net pay mean?<\/h2>\n\n\n\n

    \u25cf Net pay is take-home pay. Employees receiving gross pay of $50,000 may only take home $30,000 each year. It refers to income after accounting for retirement contributions, taxes, and so forth.
    \n\u25cf Two employees working identical positions may have identical gross pay, but significantly different net pay. Tax credits, marriage, and similar circumstances can substantially impact take-home pay.
    \n\u25cf Gross pay is an accurate indicator of how well an employee is being compensated, but an inaccurate indicator of spending power.<\/p>\n\n\n

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    Net pay definition Net pay is an employee\u2019s earnings after all deductions are taken out. Obligatory deductions such as the FICA mandated Social Security tax and Medicare are withheld automatically from an employee\u2019s earnings. Other deductions come in the form of benefits, which may be optional. Health, dental and vision insurance, life insurance, or a […]<\/p>\n","protected":false},"author":102,"featured_media":0,"template":"","meta":{"_sage_video":false,"footnotes":""},"tags":[],"class_list":["post-1651","sage_glossary","type-sage_glossary","status-publish","hentry"],"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice Canada English","distributor_original_site_url":"https:\/\/www.sage.com\/en-ca\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/sage_glossary\/1651","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/sage_glossary"}],"about":[{"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/types\/sage_glossary"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/users\/102"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/sage_glossary\/1651\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/media?parent=1651"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-ca\/blog\/api\/wp\/v2\/tags?post=1651"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}