Base pay is the salary in your contract. Gross pay is base plus everything else that runs through payroll — overtime, bonus, commission, shift differentials. Take-home is what actually reaches your account after tax and deductions. A published wage figure is close to gross; an offer is usually quoted as base; and the only one you can spend is the third.
Three numbers, and only one reaches your account
Base pay is the salary in the offer letter. It is the number everybody quotes and the only one that is genuinely fixed.
Gross pay is base plus everything else that runs through payroll — overtime, commission, shift differentials, bonus when it is paid. It is the figure on your tax documents.
Net pay is what lands in your account after taxes and deductions. It is the only one you can spend, and it is the one nobody negotiates over because nobody discusses it.
What comes out, in order
Federal income tax withholding, based on what you told your employer on your W-4. Social Security at 6.2 per cent up to the annual wage base, and Medicare at 1.45 per cent with no cap plus an additional 0.9 per cent above a threshold. Then state income tax in most states, and local tax in some cities.
Then your own deductions: retirement contributions, health premiums, and anything else you elected. Those are choices rather than obligations, which is what makes the net figure so personal.
Why two people with identical salaries take home different amounts
State income tax alone can differ by ten percentage points or more between states. Somebody in a state with no income tax keeps materially more of the same salary than somebody in a high-tax state, before anything else is considered.
Then filing status, dependents, retirement contribution rate, and which health plan they chose. Two colleagues on the same base can differ by hundreds of dollars a month in net pay without either of them doing anything unusual.
The deductions that are not really costs
A retirement contribution reduces your net pay and increases your assets. Treating it as a cost is a common mistake that makes people under-contribute, particularly where an employer match is available — declining a match is declining part of your salary.
Pre-tax deductions also reduce taxable income, so a dollar into a traditional retirement account or a health savings account costs you less than a dollar of net pay. The exact figure depends on your bracket, which is why the effect is easy to underestimate.
Why published pay figures are gross, always
Wage surveys report wages and salaries before deductions, because deductions are personal and an employer survey cannot know them. Every median and percentile you read is a gross figure.
So comparing a published median against your own take-home is comparing two different things and will always make you look underpaid. Compare gross to gross, then work out net separately for a specific offer.
When comparing two offers
Start with base for the negotiating conversation, because that is what moves and what everything else is calculated from. Then add the reliable variable pay — commission with a track record, a formula bonus at target, and a guaranteed employer retirement contribution.
Then run net separately for each, because state tax and benefit costs can reverse the ranking. An offer $5,000 lower in a state with no income tax frequently beats the higher one, and nobody notices because the comparison stops at base.
The withholding trap in a raise
A raise or a bonus can be withheld at a higher rate than your eventual tax liability, particularly for supplemental wages, which makes the first payment look disappointing.
That is withholding, not tax. It reconciles when you file, and the right response is to check your W-4 rather than to conclude the raise was smaller than agreed.
What to ask for in an offer
Base, the bonus structure with what it actually paid last year, the employer retirement contribution as a percentage, and the monthly premium for the health plan you would choose. Those four turn a base number into something you can compare.
This is general information rather than tax advice, and your own position depends on your filing status, state and elections.
Common questions
Which number is in a published wage figure?
Closest to gross. It covers straight-time pay including commissions and production bonuses, but excludes annual discretionary bonuses, overtime premiums and all employer benefit contributions.
Which number should I negotiate on?
Base, because everything else is calculated from it and because it is the only part that is not conditional. Improving base improves the bonus, the match and the next raise with it.
Why does my take-home vary between paychecks?
Withholding is calculated per pay period, so a bonus, overtime or reaching an annual contribution cap can all change the proportion deducted without your base changing at all.
How do I compare two offers in different states?
In take-home, not gross. State income tax alone can move the comparison by several per cent, and that is before regional prices are considered.
Is a published figure comparable to my total compensation?
No. The published figure has no employer benefit contributions in it, and those are a substantial share of a typical package. Comparing them makes an ordinary offer look generous.
What is the difference between base, gross and net pay?
Base is the salary in the letter; gross adds overtime, commission and bonus; net is what reaches your account after taxes and deductions.
Are published salary figures gross or net?
Always gross. Wage surveys report before deductions, because deductions are personal and an employer survey cannot know them.
Why did my raise look smaller than expected?
Supplemental wages can be withheld at a higher rate than your eventual liability. That is withholding, not tax, and it reconciles when you file.