Q:

What is the difference between net pay and gross pay?

A:

Quick Answer

The difference between net pay and gross pay is the amount that is taken out of the wages for taxes, benefits and other voluntary deductions. Net pay is the amount that an employee takes home after deductions. Gross pay is the amount that the employee actually earns.

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What is the difference between net pay and gross pay?
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Full Answer

In addition to federal income tax, some states may also require income tax to be deducted from wages. A small percentage is taken out for Social Security, disability contributions and medical benefits if it applies. Some people may choose to also have retirement contributions or payments for additional insurance plans or flexible spending accounts deducted directly from their paychecks.

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Related Questions

  • Q:

    What is a net salary?

    A:

    Net salary, also known as take-home pay, is the amount of a person's gross income that remains after all payroll taxes and deductions are removed by the employer. It is called take-home pay because it is the actual amount of the paycheck or direct deposit.

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  • Q:

    What is the difference between salary and wages?

    A:

    Even though the terms are sometimes used interchangeably, wages usually refer to hourly pay, whereas salaries refer to annual pay. Wages are calculated by counting the number of hours worked and multiplying it by an hourly rate, while salaries are calculated annually and divided by the number of payments received.

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  • Q:

    How much can you pay an employee under the table before claiming it on taxes?

    A:

    The Internal Revenue Service notes that for tax year 2014, an employee can be paid up to $1,900 in a calendar year before the employer and employee are responsible for paying taxes on the amount. After the $1,900 threshold is reached both employer and employee are responsible for taxes.

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  • Q:

    How much do workers at McDonald's get paid?

    A:

    McDonald's does not have a set wage schedule for its employees, therefore wages vary considerably, depending on location worked, experience, hours worked and the actual position held. Analysis from career site Glassdoor has shown that hourly, non-managerial employees throughout the United States average between $7.50 and $8 per hour.

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