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Net Pay Vs. Gross Pay

What’s the difference? Think of net pay as take-home pay and gross pay as your total pay before taxes and taxable deductions.

Net Pay

Take-home pay or what's left after payroll taxes and deductions are taken out.

Example: I want to cut Lee a holiday bonus cheque for $800. For Lee to net the whole $800, I need to add the taxes to his net pay to figure out his gross pay. In reality his bonus is $801.19, which is $1153.85 + (352.66 taxes) = $801.19.

Gross Pay

Total pay before applicable payroll taxes and deductions are taken out.

Example: I only have $700 for Lucy's bonus and I need to enter $1000.00 as her gross or total pay, and then subtract the taxes and deductions from it. That means her net pay will be less than Lee’s. Her bonus cheque will be $675.40, which is $1000.00 - ($324.60 taxes) - $(0 deductions) = $675.40.

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