Gross Pay vs Net Pay

Gross pay is before deductions

For hourly pay, gross pay comes from hours multiplied by the applicable rate, with overtime shown where it applies. For salary, it is the salary amount for the period. Gross pay is the starting point for reading the rest of the statement.

Net pay is what was paid

Net pay is gross pay minus deductions. Deductions may include Social Security, Medicare, income tax and other amounts. The pay stub should show the deductions as separate lines so the employee can follow the calculation.

A worked example

The nanny template sample has $800.00 gross pay. Subtract $49.60 Social Security and $11.60 Medicare: $800.00 − $49.60 − $11.60 = $738.80 net pay. The example has no income tax withheld.

Use estimates carefully

A paycheck calculator can estimate take-home pay from gross pay using entered assumptions. Actual withholding depends on payroll information and can differ from an estimate. For hourly and yearly gross comparisons, use the hourly-to-salary converter.

Check the arithmetic

Before sharing a pay statement, compare the gross amount, every deduction and the net amount to the actual payment. Make sure the statement records wages actually paid and that the totals agree.

A simple way to read a statement is to begin with gross, review every deduction line, and then compare the result with net pay. For the example above, subtracting the two listed amounts from gross produces the stated net amount. The same check can catch a transposed figure or a line that was left out of the total.