What is gross pay?
Gross pay is compensation before taxes and other deductions are removed. Depending on the worker and pay arrangement, it can include salary, hourly wages, overtime, commissions, bonuses, and other taxable compensation.
What is net pay?
Net pay is the amount remaining after the applicable deductions are subtracted from gross pay. It is sometimes called take-home pay, although the final payment amount can also be affected by reimbursements or other adjustments.
Why are the numbers different?
The difference between gross and net pay is the total effect of taxes and other deductions. A simplified relationship is:
Gross pay − deductions = net pay
Example
If gross pay is $1,500 and the listed taxes and authorized deductions total $350, the simplified net pay would be $1,150. Real payroll calculations may include additional rules, adjustments, or non-taxable items.
What should you review?
- Confirm that hours and rates produce the expected earnings
- Check every tax and deduction line against the payroll record
- Verify that additions or reimbursements are handled correctly
- Recalculate the final net amount before finishing
For tax treatment or payroll compliance questions, consult a qualified payroll, tax, or accounting professional.
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