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This question is about salaries.
What is net compensation?
Net compensation is the amount of money you earn in terms of salary or wages after your employer has made deductions concerning your gross compensation.
Deductions to employees' gross compensation can be mandatory or voluntary, meaning the number of deductions can vary from employee to employee.
Here are the taxes that employees must pay associated with regular and overtime wages:
Federal income tax. Federal income tax is based on an employee's overall earnings. It also incorporates the employee's W-4 withholding allowances.
State income tax. Certain states also impose additional state income taxes, not just federal ones. Each state and local government that does this has its tax rates. These rates can be fixed or graduated concerning the taxable income of employees.
FICA taxes. FICA taxes are taxes deducted from an employee's overtime time wages and regular wages for Social Security and Medicare. The Social Security tax percentage is 6.2%. The Medicare tax percentage is 1.45%.
Employers normally must pay overtime wages for employees who work over eight hours a day or more than 40 hours a week.
Here is the formula to calculate net compensation:
(Gross compensation) - (tax withholdings + total other deductions) = net compensation
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