Payroll

What’s the Difference Between Net Pay and Gross Pay?

When it comes to payroll and paychecks, there are two important terms to understand: net pay and gross pay. What’s the difference? 

  • Gross pay is the amount of money your employees receive before any taxes and deductions are taken out. For example, when you tell an employee, “I’ll pay you $50,000 a year,” it means you will pay them $50,000 in gross wages.
  • Net pay is the amount of money your employees take home after all deductions have been taken out. This is the money they actually get on payday.

Want to learn more about calculating a paycheck? Then check out the video below to see how it all works.

This article provides general information and shouldn’t be construed as tax advice. Since tax rules may change over time and can vary by location and industry, please consult a CPA or tax advisor for advice specific to your business.