Gross Pay vs Net Pay

What’s the difference?

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Gross pay is how much money you make

based on your hourly rate of pay and the

number of hours you worked.

Suppose you worked a 36 hour week at

BeBe’s Better Burgers.

Your hourly pay is $6.75.

Your gross pay would be

36 times $6.75, or $243.

Your net pay is the money you actually get

to take home. Have you ever heard of the

expression “take home pay?” Well that is

net pay.

You might ask why you don’t

get to take home your gross pay.

That’s a great question!

Let’s see if we can find an

answer.

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When you receive your paycheck,

sometimes called a pay stub, you will notice

that money has been deducted or taken

from your gross pay. Everyone is required to

pay certain taxes. These taxes are taken

from your gross pay each pay period.

Gross

Net

It helps to know what these taxes or

deductions are. They are often listed in an

abbreviated form. Some of these

abbreviations are FT for federal tax, ST

for state tax, Med for Medicare, SS for

social security, and FICA for Federal

Insurance Contribution Act. Social security

and FICA are the same thing so you will not

see both of them only one or the other of

them.

You may have other deductions in addition

to those mentioned above. You may have a

health insurance deduction or perhaps a

deduction for uniform rental.

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Another abbreviation you might see on the

pay stub is YTD. This stands for year to

date. In other words, it is a total amount of

each of the taxes or deductions you have

made as of the current pay period.

Your check or stub is sometimes divided into two

sections. One section is for your current earnings

and one is for your deductions or withholdings as

seen in the picture above. The section for

deductions is divided into two categories, current

and year to date, YTD. For example, your current

federal tax deduction is $53.40, but your total

federal taxes, withheld through this pay period, is

$185.

So in closing, learn how to read your

pay stub.

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“Some people mistakenly fail to review

their pay stub after receiving their check

from an employer. If you begin to learn how

to read the different deductions from your

check stub, you can better budget your

money and know what to expect your net

amount to be each time you get paid.

Although your employer will decide what

exactly is printed on your pay stub, most

businesses will include the same basic

elements. ”

Quote by Heather Topham Wood

Created by

Genny Simpson

3/17/2013