Gross Pay vs Net Pay What’s the difference?
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Gross pay is how much money you make based on your hourly rate of pay and the number of hours you worked. Suppose you worked a 36 hour week at BeBe’s Better Burgers. Your hourly pay is $6.75. Your gross pay would be 36 times $6.75, or $243. Your net pay is the money you actually get to take home. Have you ever heard of the expression “take home pay?” Well that is net pay. You might ask why you don’t get to take home your gross pay. That’s a great question! Let’s see if we can find an answer. Images from MSClipArt
When you receive your paycheck, sometimes called a pay stub, you will notice that money has been deducted or taken from your gross pay. Everyone is required to pay certain taxes. These taxes are taken from your gross pay each pay period. Gross
Net
It helps to know what these taxes or deductions are. They are often listed in an abbreviated form. Some of these abbreviations are FT for federal tax, ST for state tax, Med for Medicare, SS for social security, and FICA for Federal Insurance Contribution Act. Social security and FICA are the same thing so you will not see both of them only one or the other of them. You may have other deductions in addition to those mentioned above. You may have a health insurance deduction or perhaps a deduction for uniform rental.
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Another abbreviation you might see on the pay stub is YTD. This stands for year to date. In other words, it is a total amount of each of the taxes or deductions you have made as of the current pay period.
Your check or stub is sometimes divided into two sections. One section is for your current earnings and one is for your deductions or withholdings as seen in the picture above. The section for deductions is divided into two categories, current and year to date, YTD. For example, your current federal tax deduction is $53.40, but your total federal taxes, withheld through this pay period, is $185.
So in closing, learn how to read your pay stub.
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“Some people mistakenly fail to review their pay stub after receiving their check from an employer. If you begin to learn how to read the different deductions from your check stub, you can better budget your money and know what to expect your net amount to be each time you get paid. Although your employer will decide what exactly is printed on your pay stub, most businesses will include the same basic elements. � Quote by Heather Topham Wood
Created by Genny Simpson 3/17/2013