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 OnTheClock
When you calculate pay in the OnTheClock Console or through the Pay Calculations API, OnTheClock 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.
Use the Preview payroll button to confirm each component before you select Confirm and submit.