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NMLS Consumer Access Photo: Flickr user Steven Dipolo Your gross pay consists of the total amount of money your employer pays you -- typically expressed as either an annual salary or hourly wage. However, take-home pay is a much more useful number, as it tells you how much money you'll actually receive on your paycheck. Here's how to calculate your take-home pay as a percentage of your gross pay, to see how much of your hard-earned money is actually going into your pocket. Calculating take-home pay as a percentage of gross pay Gross pay per pay period can be calculated in one of two ways, depending on whether you're a salaried or hourly employee. If you earn an annual salary, divide that amount by the number of pay periods each year.
After you have both numbers, divide your take home pay by your gross pay, and then multiply the result by 100. This gives you your take home pay as a percentage of gross pay per pay period. It's also worth mentioning that this percentage can vary throughout the year if you receive any bonuses or work any overtime. Generally, the more you earn, the more taxes are taken out of your paycheck as a percentage of your salary. In other words, if you take home 70% of your typical paycheck as a percentage of your gross pay, don't expect to receive 70% of your next one if there's a lot of overtime on it. Example In other words, for every $100 you earn, you actually receive $67.60. The other $32.40 is taken out of your paycheck for taxes and other deductions such as health insurance and retirement savings. This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors. We'd love to hear your questions, thoughts, and opinions on the Knowledge Center in general or this page in particular. Your input will help us help the world invest, better! Email us at [email protected]. Thanks -- and Fool on! We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. |