Gross Pay vs. Net Pay

Why might the amount in your bank account be lower than the amount you earned? 

When you start work, two of the most important terms to understand are gross pay and net pay. 

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Gross pay 

Your gross pay is your earnings before deductions. 

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It might include: 

• your basic salary or hourly pay 

• overtime 

• bonuses 

• other taxable payments 

 

Net pay 

Your net pay is what remains after deductions have been made. 

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Depending on your circumstances, deductions can include: 

• Income Tax 

• National Insurance 

• workplace pension contributions 

• student loan repayments 

• other permitted deductions 

 

Your net pay is normally the amount that reaches your bank account. 

 

Example 

Gross pay: £1,200 

Total deductions: £100 

Net pay: £1,100 

 

Why should you check your payslip? 

 

Your payslip allows you to see: 

• what you earned 

• what was deducted 

• your tax code 

• your National Insurance contributions 

• the amount you actually received 

 

For employees, National Insurance is taken from wages before they are paid and should appear on the payslip. (GOV.UK) 

 

Key takeaway 

Gross pay → deductions → net pay 

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Do not only look at what enters your bank account. Your payslip helps you understand how that amount was calculated.