What does net pay refer to for an employee?

Net pay refers to the amount an employee actually receives in their paycheck after all taxes and other deductions have been subtracted from their gross salary. Gross salary is the total earnings before any deductions, which includes base pay as well as any bonuses or commissions.

When an employee receives their paycheck, it reflects their net pay, which is crucial for understanding how much they will actually take home. This figure is important for budgeting and financial planning purposes and is calculated by taking the gross pay and subtracting federal and state taxes, retirement contributions, health insurance premiums, and any other voluntary or mandatory deductions.

In contrast to the other options, net pay is specifically about what ends up in the employee's bank account after those deductions, making it a vital figure for both employees and employers in managing payroll.