Which of the following best describes net pay?

Net pay refers to the amount of earnings an employee takes home after all deductions have been made from their gross salary. This encompasses all mandatory and voluntary deductions, which typically include federal and state taxes, Social Security contributions, Medicare taxes, health insurance premiums, and retirement contributions. Since net pay is the income remaining after these deductions, it represents the actual amount that can be spent or saved by the employee.

The term "gross pay" describes the total salary before any deductions, while "overtime pay" refers specifically to additional compensation earned for hours worked beyond a standard workweek. Contributions to retirement accounts, while important for long-term financial planning, are part of the deductions that reduce gross pay to arrive at net pay. Understanding net pay is crucial for personal financial management, as it reflects a person's actual disposable income.