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Salary Deductions
Many people are very upset when they receive their first paycheck and find that it is not as much as they thought that it would be.
Gross pay is the term used to describe all of the money you earned while working at your job. This is not likely the amount that your check will be made out for.
Net pay is the amount you will receive after taxes and other deductions have been withheld from your paycheck.
Payroll deductions are deductions that are subtracted from you gross pay. The deductions include:
- Federal taxes
- Insurance premiums
- Medicare
- Retirement contributions
- Savings Social Security
- State taxes
- Union dues
Example #1
You worked 20 hours at a rate of $10 per hour. This would give you a gross pay of $200. Your net pay was $160. How much was deducted from your gross pay?
Subtract the net pay from your gross pay.
$200 − $160 = $40
You had deductions of $40
The two largest deductions are usually for Federal Withholding taxes and for Social Security tax (FICA).
Example #2
If you have $55.80 deducted weekly for federal taxes and $29.21 for FICA, what will be the total amount you will pay for each of these for a year? (52 weekly paychecks)
$55.80 × 52 weeks = $2,901.60
$29.21 × 52 weeks = $1,518.92
In a year, you will pay $2,901.60 in federal taxes and $1,518.92 for FICA.
Example #3
Many people like to have an idea of how much they are going to take home on any given week. One way to do this is to know what percentage of your gross pay is your net pay.
Your gross pay is $376.00 and your net pay is $252.92. You will divide net pay by gross pay
252.92 ÷ 376 = 0.67265957
You will then rename the decimal as a percent.
0.67265957 = 67%
Your net pay is 67% of your gross pay.