Net pay is what remains after voluntary and required deductions are subtracted from gross pay
Total money earned before deductions Some deductions are required Some may be voluntary
Net pay results when deductions such as the following are subtracted from gross pay: Federal Insurance Contributions Act (FICA) contributions State and Federal Taxes Insurance Savings Retirement Medical reimbursement (pre-tax deduction) Child care reimbursement
Employees may have a variety of benefits and incentives to consider
Benefits are part of an employee’s compensation, over and above wages or salary. They add to the financial value of the job Examples of benefits: › Matching contributions to tax-sheltered annuities, such as 401(k) and 403(b) retirment savings plans › Savings plans › Parking › Health insurance plans (medical, dental) › Child care › Elder care › Paid vacation › Paid sick days › Profit sharing
Incentives are offered as motivation for employees to perform well and may include: › Bonuses › Profit sharing › Free travel or merchandise
The information a worker provides on the W-4 form impacts federal tax deductions and personal income
The information provided on the W-4 form determines how much is withheld from one’s gross pay.