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Net vs. Gross Salary

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When you receive a job offer, the salary figure might sound pretty good, but you don’t get to keep all of it. Gross salary is the figure you start with, but deductions such as taxes and your contributions for certain benefits can take a significant bite out of your pay. The amount you actually take home after all these deductions is your net salary.

Mandatory Deductions

There are some deductions over which you have no control. The law requires your employer to withhold a portion of your pay to cover federal, state and local income taxes, as well as Social Security, which claimed 6.2 percent of gross pay as of 2013. In some states, employers also are allowed to deduct the cost of uniforms and tools from employee pay, as long as it does not cause the employee’s earnings to fall below the minimum wage.

Voluntary Deductions

Health and life insurance are highly desirable, but most employers require employees to make a contribution, deducted from gross pay, towards the cost of these and similar benefits. You also may decide to have your employer set aside funds from your salary for your 401(k) plan. If your employer matches your 401(k) contributions, this deduction may increase your overall earnings, even though it lowers the amount you take home. Typically, you have to opt in for these deductions in writing so that there are no surprises when you see your paycheck.