Gross Pay vs. Net Pay: Where Does the Money Go?

The biggest shock for new employees is their first paycheck. They do the math: "$20 an hour times 40 hours... I should get $800!" Then they open the envelope and find $620. What happened?

The Deductions Stack

Your money passes through several "filters" before it reaches you.

1. Gross Pay: The theoretical number you negotiated.
2. Pre-Tax Deductions: 401k, Health Insurance (This lowers your taxable income).
3. Statutory Taxes: Federal Tax, State Tax, Social Security/NI.
4. Post-Tax Deductions: Garnishments, Union Dues.
5. Net Pay: What actually hits your bank. Check with a payslip.