When a family makes a compensation offer, it is critical that you are extremely clear as to what your Gross Wages and Net Pay will be. Gross Wages refers to the amount of compensation prior to taxes, while Net Pay is the amount after taxes have been withheld. Net Pay is frequently referred to as “take-home” pay because it’s how much you take home once your taxes have been taken out.
Almost all corporate employers make offers in terms of Gross Wages. Families, however, are typically unfamiliar with payroll and tax processes, so you should not assume anything. It’s important to clarify that the offer represents the Gross Wages. If that is the case, then you can use our Employee Paycheck Calculator to translate the Gross Wages into your Net (“Take-Home”) Pay.
If the family offers you a Net Pay amount, we advise you to convert that into Gross Wages, since all compensation must be reported to the government in terms of Gross Wages – and it’s the figure that will be used to calculate all your benefits. To protect yourself and eliminate any chance of confusion by either party, we suggest printing a payroll scenario from our calculator that clearly defines the Gross and Net figures and discussing it with the family.
Once the proper taxes are taken out of your paycheck and remitted to the state and federal tax agencies, you’ll be eligible for important benefits and protections (Social Security, Medicare, Unemployment, etc.).
Note: The amount of taxes withheld from each of your paychecks is a function of how much you make and also what you elected on Form W-4 (marital status and # of allowances). For more information about completing Form W-4, click here.
