Gross Pay vs Net Pay: What's the Difference?
Gross pay is what you earn; net pay is what you take home. The deductions that bridge the gap — FICA, withholding, and benefits — explained in plain terms.
Every paycheck shows two totals. Gross pay is the full amount earned before anything is taken out. Net pay — the amount deposited or printed on the check — is what remains after all deductions. The gap can be 20–35% for a typical W-2 employee.
What comes out of gross pay
Deductions fall into two buckets: mandatory and voluntary. Mandatory deductions include federal income tax (based on your W-4), Social Security (6.2% on wages up to the annual cap), Medicare (1.45%, plus an additional 0.9% above $200,000), and any state or local income tax. Voluntary deductions include health insurance premiums, 401(k) contributions, FSA/HSA contributions, and union dues.
Calculating it yourself
To estimate net pay: start with gross, subtract pre-tax deductions (401k, health premiums), apply the federal and state tax withholding rates from your W-4, and subtract FICA (7.65% total). A net pay that is dramatically lower than expected is usually explained by a high W-4 withholding election or a large voluntary deduction.
Why it matters for overtime
Overtime under the FLSA is calculated on your regular rate, which is a gross figure. If you work extra hours your gross pay rises but so do your FICA taxes and income tax withholding. Use the overtime calculator to see both gross and approximate net for any number of overtime hours.