You have two employees that earn the same salary, but one’s taking home more per paycheck. Maybe you’re thinking something's wrong with payroll (which can happen), but usually that’s not what’s going on!
The same salary does NOT mean the same net pay. Gross pay may be the exact same, but withholding and deductions are usually different.
Let’s get into it!
If you need a simple explanation for your employees, this is the one to use:
So even if your two employees earn $60,000 a year, they can still bring home different amounts.
Most paycheck differences start here.
Employees fill out Form W-4 to tell payroll how much federal income tax to withhold from each paycheck.
How an employee fills out their W-4 can change how much they actually bring home. One person may choose to have extra tax taken out of each paycheck.
If they want to revisit that choice, the IRS has a Tax Withholding Estimator they can use.
Helpful forms and tools to keep in your back pocket:
📝 If an employee is questioning why their paycheck does not match their coworker’s, start by checking whether they recently submitted a new W-4.
This is the next place you’ll want to look.
One employee may have family health coverage. Another may only have self coverage. One may be contributing a different amount to their 401(k) or Secure Choice Savings. Another may not be contributing at all.
And not every deduction works the same way. Some deductions reduce taxable wages before taxes are calculated. Others come out after tax.
Did you know that New York has a mandate for retirement plans? Learn more about New York’s Secure Choice Savings here.
This is a big one if you have remote or hybrid employees.
If two employees live or work in different tax locations, their take-home pay may not match. One employee may have state income tax withheld. Another may not. One may also be subject to local tax while another is not.
You don’t need to turn this into a tax lecture. Usually it’s enough to explain that location can affect what comes out of a paycheck.
An employee can also ask for extra withholding on their W-4. Some do this if they have another job or even income outside of a job to make sure they don’t owe when filing for their taxes.
They also might have another deduction coming out of their check like wage garnishments from court-ordered child support, tax levies, student loans, or charitable donations.
That’s why it helps to look at a full paycheck breakdown before assuming something is off.
There’s no reason to overcomplicate it, just simply say something along the lines of, “You may have the same salary, but your withholding and deductions are not exactly the same.”
That difference can come from:
That is usually enough to help employees understand why net pay is different without getting into someone else’s private payroll information.
Before jumping to the conclusion that something is wrong, review:
In a lot of cases, the paycheck is correct. It is just built differently!
Your team has the right to discuss their wages. So if someone comes to you asking about why their coworkers paycheck is different, you cannot reprimand them.
Always double check payroll, but typically it usually comes down to different withholdings & deductions!