Net pay is the amount that lands in an employee's bank account for a pay period - gross remuneration after every deduction, statutory and otherwise, has been subtracted.
What it means
Statutory deductions like PAYE and the employee's UIF contribution come off first, and are non-negotiable. Other deductions - retirement contributions, medical aid, garnishee orders, loan repayments, union dues - reduce it further, in an order payroll systems typically apply consistently to stay compliant with any legal limits on how much can be deducted from pay.
Where it fits in
Net pay is the final line on the payslip, and the figure that must reconcile exactly against the payment instruction sent to the bank. Any discrepancy between calculated net pay and what is actually paid out is a red flag during a payroll audit.
Key rules
- Equals gross remuneration less every deduction applied for the period, statutory and voluntary.
- PAYE and UIF deductions are calculated first and are not subject to employee consent, unlike most voluntary deductions.
- Certain deductions, such as garnishee orders, are capped by law in how much of net pay they may take.
- Must reconcile exactly to the payment instruction issued to the employee's bank account.
