Net Pay Definition

Net pay, or take-home pay, is the amount an employee receives after taxes and deductions are subtracted from their gross wages.

Net Pay Extended Definition
Also known as “net wages,” “net income,” or “take-home pay,” net pay is the amount that remains after subtracting taxes and deductions from an individual’s gross income.

These taxes and deductions include:

  • Federal income tax
  • Medicare and Social Security taxes
  • State and local income taxes
  • Health and dental insurance premiums
  • Retirement contributions
  • Contributions to flexible spending accounts

The remaining money, or net pay, is used by an employee to pay general living expenses, including housing, food, and discretionary items.

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Last Updated By

Rachel Blakely-Gray | Apr 28, 2023

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