Gross Pay vs. Net Pay: Differences and How to Calculate

A team member works 44 hours at $18 an hour and earns $828 for the week. Their paycheck says about $682. That $146 gap is the difference between gross pay and net pay. You’re usually the one who gets asked about it.

Gross pay vs. net pay comes down to timing. Gross is what your team earns. Net is what they take home. This guide covers both definitions, the math, and what changed for hourly teams in 2026.

Gross pay is what a team member earns before anything comes out. Net pay is what lands in their bank account after taxes and deductions.

The difference between gross pay and net pay is deductions. Gross pay is total earnings before taxes and withholdings. Net pay is the amount left after they come out. Gross pay is listed first on a pay stub, and net pay is the last line. Use gross to compare offers and net to plan a budget.

Gross pay is also different from gross income. Gross income can include business revenue and other earnings. We cover that in our guide to gross vs. net income.

Gross pay is everything a team member earns in a pay period before a single dollar is deducted. It’s the starting point for every payroll calculation. Our gross pay definition covers the terms you’ll see, like gross wages and gross earnings.

Gross pay usually combines several types of earnings:

Kris Herbert, owner of The Gym Venice, puts it this way: “In California, you have to give an hourly rate, which is minimum wage, on top of a commission. Homebase has a slot for the commissions, for additional earnings, for the deductions, and it makes it so simple to see.”

Before. Gross pay is the full amount earned before any taxes or deductions come out. It’s the number you quote in a job offer, such as $18 an hour or $50,000 a year. Lenders and landlords ask for it when they check income.

For hourly team members, multiply the hourly rate by hours worked. Pay overtime at 1.5 times the regular rate for hours over 40. The Fair Labor Standards Act (FLSA) requires this for most hourly employees. Then add any tips or bonuses.

Here’s the math for a team member who earns $18 an hour and works 44 hours:

For salaried team members, divide the annual salary by the number of pay periods. Then add any bonuses or commissions for that period.

A $52,000 salary paid biweekly works out to $2,000 gross per paycheck. Our hourly salary calculator can do the conversion for you.

Net pay is what a team member takes home after taxes and deductions come out of gross pay. Many people call it take-home pay, and the net pay meaning is the same either way. It matches the deposit in their bank account. It’s also the number they use to cover rent, groceries, and car payments.

After. Net pay is calculated once all taxes and deductions are removed. Gross pay of $3,000 with $800 withheld leaves $2,200 in net pay. That’s the amount that deposits on payday.

Not all deductions work the same way. The difference changes how much a team member takes home.

Pre-tax deductions come out before income taxes are calculated. Common examples are traditional 401(k) contributions, health insurance premiums, and health savings account (HSA) and flexible spending account (FSA) contributions. Because they lower taxable income, they cost less than they look. A $200 traditional 401(k) contribution reduces take-home pay by about $156 for someone in the 22% federal tax bracket.

Post-tax deductions come out after taxes are calculated. Roth 401(k) contributions, supplemental life insurance, and wage garnishments fall here. A $200 post-tax deduction takes the full $200 out of the paycheck.

Explaining which choices are pre-tax helps your team pick benefits with the full picture.

Between gross pay and net pay sits a list of deductions. Some are required by law. Others are chosen by the team member.

Social Security and Medicare together are called FICA, short for the Federal Insurance Contributions Act.

Team members choose these, usually at onboarding or open enrollment:

Many employers offer health premiums through a cafeteria plan. This plan lets team members pay for benefits before taxes. Those premiums skip Social Security and Medicare tax. Traditional 401(k) contributions don’t.

Take the $828 paycheck from the start of this guide. Here are the deductions for a single team member in a state with income tax and no benefit elections:

Same gross, much smaller take-home. The federal figure is an illustrative estimate for a single filer, using the 2026 standard deduction of $16,100 and a simplified annualized calculation. The state figure is a placeholder. Actual withholding depends on the team member’s W-4, state, and the IRS withholding procedures.

Say a team member earns $52,000 a year in Texas, which has no individual income tax on wages. They’re paid biweekly, so gross pay is $2,000 per paycheck. They put 5% into a traditional 401(k) and pay $100 for health insurance through a cafeteria plan.

This is a simplified estimate for a team member paid 26 times per year, with the pre-tax deductions above. Social Security and Medicare apply after the health premium comes out. They still apply to the 401(k) contribution. Actual federal withholding depends on the team member’s W-4 and IRS procedures.

Sometimes you work backward. A candidate might need to take home $4,000 a month, and you need to know the salary that requires.

Divide the target net pay by 1 minus your total deduction rate. With a 30% deduction rate, divide by 0.70. Net pay of $5,000 needs about $7,143 gross, and $3,000 needs about $4,286. Your rate depends on state and benefit choices, so pull it from a recent pay stub.

Every paycheck runs through this math across hours, overtime, taxes, and deductions. We turn approved timesheets into payroll and calculate wages, overtime, and taxes. Your team can view their pay stubs in the app. You review the numbers instead of building them.

A pay stub shows how gross pay becomes net pay. Earnings sit at the top and deductions in the middle. Net pay is the bottom line, often labeled “Take-Home Pay” or “Net Amount.” Year-to-date totals show running gross and net for the year.

Net pay should match the deposit in the team member’s bank account. Some states require specific details on pay stubs, so check your state labor laws. Nobody should need a decoder ring to read a pay stub. Need a layout? Use our free pay stub template.

Stephanie Girten, practice manager at North Orange Vet Clinic, shares what her team likes most: “The most popular feature with my associates is the earning tab so they can see how much their paycheck is going to be!”

Your team can see their hours, estimated pay, and pay stubs in the Homebase app. That means fewer “why is my check smaller?” texts to you.

Two federal tax deductions apply for tax years 2025 through 2028. The overtime deduction covers only the premium portion of overtime pay, the part above the regular rate. It tops out at $12,500, or $25,000 for joint filers. The tips deduction tops out at $25,000 and covers qualified tips in eligible occupations. Both phase out above 150,000ofmodifiedadjustedgrossincome(300,000 for joint filers).

These are deductions, not exemptions. Team members generally claim them on their tax returns, and married taxpayers generally need to file jointly. Withholding may also change if a team member submits an updated Form W-4 and you apply the IRS withholding procedures. Social Security and Medicare still generally apply to full wages. Gross pay stays the same either way. Learn more from the IRS overview of the overtime deduction.

For the 2026 tax year, employers must separately report qualified tips and qualified overtime compensation as required by IRS rules. That makes accurate records matter. Cherie Chua, co-founder of Luxe Bites, says: “It’s just so clear-cut to see the breakdown, and if you ever have to edit it, you just unlock the time sheet.”

We track overtime as it builds up and calculate tips with your payroll, so your pay records stay accurate all year. Our tip manager handles the tip math.

Each number answers a different question:

For hourly team members with variable pay, average net pay over the last three months. Budget from that floor.

A $50,000 salary costs more than $50,000. You match Social Security and Medicare at 7.65%, which adds $3,825. Unemployment taxes, workers’ comp, and any benefits you subsidize come on top. Our guide to new employee cost walks through the full math. To keep the total in check, learn how to manage labor costs.

Job offers list gross pay. First paychecks show net pay. Walk new hires through a sample deduction breakdown, especially if they’re contributing to benefits. Add it to your employee onboarding process so payday holds no surprises.

Gross pay drives your overtime, tax withholding, and FICA calculations. Net pay is what team members receive. Mixing them up leads to penalties and pay disputes. See our guide to payroll tax withholding for the details.

Gross pay is the total a team member earns in a pay period before anything is withheld. Net pay is what they take home after taxes and deductions. The formula is gross pay minus deductions equals net pay. Gross pay is the larger number, and it’s the figure on job offers.

After. Net pay is what remains once income taxes, Social Security, Medicare, and benefit deductions come out of gross pay. It’s the amount that lands in a team member’s bank account, also called take-home pay. Gross pay is the figure before any of those are taken out.

Neither is better, because they answer different questions. Gross pay is the number for comparing job offers, applying for loans, and calculating labor costs. Net pay is the number for budgeting, since it’s the money a team member can spend. Use gross to negotiate and net to plan.

Gross. A posting that says $60,000 a year or $25 an hour lists pay before taxes and deductions. Take-home pay will be lower. By how much depends on state, filing status, and benefit choices. Walk new hires through a sample breakdown before their first paycheck.

Start with gross pay. Subtract pre-tax deductions like 401(k) and health premiums. Then withhold income taxes, Social Security, and Medicare. Subtract post-tax deductions and garnishments. What’s left is net pay. A payroll tool runs these steps each pay period using current tax tables.

Yes. Take-home pay, net pay, and paycheck amount all describe the same figure: gross pay after taxes and deductions. Pay stubs usually list it near the bottom as net pay. It should match the amount deposited in the team member’s bank account.

It depends on state, filing status, and deductions. Social Security and Medicare alone take 7.65%, or $2,295, leaving $27,705 before income tax. Federal and state income tax and benefit deductions come out on top of that. Take-home pay will land below that figure.

Employers may use an optional flat 22% federal withholding rate for separately identified bonuses, subject to IRS rules. Social Security, Medicare, and state tax come out too. A $5,000 bonus leaves $3,517.50 after 22% federal withholding and FICA, before state tax. That’s withholding, not final tax owed. See how bonuses are taxed and IRS Publication 15.

Gross pay is what your team earns. Net pay is what they receive. The formula is gross pay minus deductions. You fund gross wages plus your share of payroll taxes, so plan around both.

We turn your timesheets into paychecks, apply the right taxes and deductions, and make pay stubs easy for your team to view. Ready to stop doing the math by hand? Try Homebase Payroll.