Question

What is net pay? What is net pay?

Answer 1

Answer:

Net pay is an employee’s earnings after all deductions are taken out. Obligatory deductions such as the FICA mandated Social Security tax and Medicare are withheld automatically from an employee’s earnings. Other deductions come in the form of benefits, which may be optional. Health, dental and vision insurance, life insurance, or a retirement fund may be offered through an employer. These costs will come in the form of a deduction from the employee’s gross pay, or salary.

Answer 2

Net pay refers to the amount an employee takes home, not the amount it cost to employ them. Retirement plan contributions, employee benefits, and employer FICA taxes are deducted before an employee receives their net pay.
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