Take-home pay, often called net salary or net pay, is the actual amount an employee receives after all required deductions are taken out of their gross earnings. These deductions can include taxes, insurance premiums, retirement contributions, and any wage garnishments.
What Take-Home Pay Really Means
Net pay is the portion of wages employees bring home after payroll deductions are subtracted from their total earnings. Since the passage of the Current Tax Payment Act of 1943, U.S. employers have been legally required to withhold income taxes directly from employee wages and remit them to the IRS, which typically results in a paycheck smaller than the gross wage.
Common Payroll Deductions
Employers must deduct federal income tax, and often state and local income taxes as well. Other common deductions include FICA taxes (for Social Security and Medicare), health and dental insurance premiums, and employee contributions to retirement plans such as a 401(k).
For businesses looking to streamline these deductions and ensure compliance, Beyond offers tools and services that make managing payroll deductions straightforward and stress-free.