Anatomy of a Paycheck
Understand paycheck calculations, from gross pay to net pay, for accurate payroll management.
Overview
Paychecks combine an employee’s gross pay minus any pre-tax deductions, tax withholdings, and post-tax deductions to arrive at net pay.
Paycheck calculation
Gross pay
Gross pay is the total compensation an Employee earns before deductions. It covers:
- Regular salary or hourly wages
- Overtime pay
- Bonuses
- Commissions
- Any other earnings for the pay period
Example (2025)
Salary $1,000 + Commission $200 + Bonus $100
Gross pay = $1,300
Net pay
Net pay—often called take-home pay—is the amount an Employee receives after all deductions:
- Pre-tax deductions (for example, medical and dental premiums)
- Federal, state, and local taxes
- Post-tax deductions (for example, wage-garnishment loans)
Example (2025)
Gross pay $1,300 − Medical insurance $100 − Dental insurance $20 − Federal taxes $200 − State taxes $50 − Loan repayment $10
Net pay = $920
In Check
When you calculate pay in the Check Console or through the Pay Calculations API, Check automatically:
- Aggregates all gross-pay components you pass in (salary, commissions, bonuses, and so on).
- Applies pre-tax deductions and wage-base limits for the current year.
- Calculates and withholds the correct federal, state, and local taxes.
- Applies any post-tax deductions.
- Generates the Employee’s net pay and displays it on the payroll run summary.
Alt text: Screenshot of payroll run summary showing gross pay, deductions, taxes, and net pay.
Use the Preview payroll button to confirm each component before you select Confirm and submit.
Recordings
Last updated on May 31, 2024