Net Pay

The deductions that turn gross pay into net pay

Net pay is gross pay minus two kinds of deductions: what tax law requires, and what an employee or a court has put in place.

The required kind typically includes federal, state, and local income tax withholding, plus the employee's share of Federal Insurance Contributions Act (FICA) taxes — Social Security and Medicare, which the employer matches separately. These come out because tax law requires them, wherever they apply.

The other kind covers things like health insurance premiums and retirement contributions an employee signed up for, plus wage garnishments ordered by a court or agency. A garnishment isn't something the employee chose, but it's calculated the same way as the rest: subtracted from gross pay on the way to net pay.

Net pay starts from gross pay. See Gross Pay for what that figure includes before any deductions. For a side-by-side comparison of the two, see Gross Pay vs. Net Pay.

Why net pay changes from one paycheck to the next

A change in net pay almost always traces back to a single input.

Net pay is the number your employees check against their bank deposit, so it's the first thing they notice when a paycheck looks different. A new or changed benefit election, an updated Form W-4 or state withholding form, a bonus taxed differently than a regular paycheck, or a new or ended wage garnishment can each move net pay on its own, with nothing else about the employee's pay changing.

Before assuming something went wrong, check if any of these changed. For how a wage garnishment specifically affects a paycheck, see Wage Garnishment.

Once you know what can move the number, you're better positioned to catch an input error before you run payroll.

What to check when an employee asks about their paycheck

Start with what changed, not with whether something's wrong. The same handful of inputs are usually behind it.

A W-4 withholding form change isn't retroactive. It affects future payrolls once the change takes effect, which is why an employee may not see it reflected immediately.

Reviewing net pay across a pay run before you approve it is a practical way to confirm you entered those inputs correctly. Catching an input error before payroll runs costs less than explaining one after.

SurePayroll® By Paychex applies tax withholding to gross pay to calculate net pay — you confirm the inputs, and SurePayroll supports the calculation.

Where to check the federal withholding numbers behind net pay

These IRS resources cover federal withholding in more depth.

• Form W-4 and the Tax Withholding Estimator — the IRS tool an employee can use to check whether their current withholding matches what they want taken out.

• Federal income tax withholding methods (IRS Publication 15-T) — the methods employers and payroll systems use to calculate federal withholding from an employee's Form W-4.

• Federal income tax rates and brackets — the current brackets that determine how much federal income tax is withheld.

Related terms

• Gross pay vs. net pay — a side-by-side comparison of the two terms and how to explain the difference to employees.

• Federal withholding — what determines how much federal income tax comes out of a paycheck.

• Payroll deductions — the comprehensive category net pay's deductions belong to, covering both required and voluntary types.

• Gross pay — the starting figure net pay comes from, before deductions.

• Wage garnishment — how a court or agency order affects an employee's paycheck.

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