Net pay
Net pay is the amount payable to an employee after subtracting employee deductions from gross pay. Deductions may be owed to tax authorities, pension schemes or other recipients. Those withheld amounts remain liabilities until remitted. Net pay is therefore neither the full staff expense nor the total cash commitment arising from payroll.
Worked example
Gross pay of $3,000 less employee income tax of $500 and an employee pension deduction of $150 gives net pay of $2,350.
Common mistake
Paying only the net wage does not settle amounts withheld for third parties or the employer’s own contributions.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | F2 | Direct | July 2027–August 2028 |
| ACCA | K1 | Direct | July 2027–August 2028 |
Related terms
Also called: Take-home pay, Net wages