Paycheck Terms, in Plain English

The vocabulary between you and your money — each term in a sentence or two, linked to the calculator that does its math.

Gross pay: Pay before anything comes out — the number in the offer letter and the one to verify against your hours. Calculator →
Net / take-home pay: What actually hits your account after taxes and deductions. Net differences between coworkers are usually settings, not errors.
Withholding: Taxes your employer sends to the IRS from each check, per your W-4. It's a prepayment estimate — the real bill settles when you file.
FICA: Social Security (6.2%) + Medicare (1.45%) — the flat 7.65% on nearly every paycheck. Employers pay a matching share; the self-employed pay both.
Marginal tax rate: The rate on your NEXT dollar — what raises, bonuses, and side income are taxed at. Different from your average rate, and the source of most paycheck confusion. Calculator →
Supplemental wages: Bonuses, commissions, severance — withheld at a flat 22% federal rate when paid separately. Withheld ≠ taxed; it reconciles at filing. Calculator →
Exempt / non-exempt: FLSA status: non-exempt gets overtime; exempt (salary + duties tests) doesn't. Salaried does not automatically mean exempt.
FLSA: Fair Labor Standards Act (1938) — the federal law behind minimum wage, the 40-hour week, and time-and-a-half. Calculator →
Regular rate: The legal base for overtime math — includes shift differentials and most bonuses, not just your base hourly. The most commonly shorted number in payroll. Calculator →
Paid in arrears: Checks cover a period that already ended — the standard payroll lag, and the reason first paychecks take weeks. Calculator →
Biweekly: Every 14 days: 26 checks, drifting weekday, two 3-paycheck months a year — and rarely, a 27-check year. Calculator →
Semimonthly: Twice a month on fixed dates: 24 slightly-larger checks, perfect monthly alignment, never a bonus third check. Calculator →
PTO accrual: Vacation earned per pay period rather than granted up front. Matters at quitting time: accrued PTO is often payable. Calculator →
Severance: Exit pay, typically weeks-per-year-of-service, exchanged for signing a release. Convention, not law, for most US workers. Calculator →
Garnishment: Court-ordered paycheck deduction. Federal law caps consumer-debt garnishment at 25% of disposable pay. Calculator →
Disposable earnings: Gross minus legally required deductions only — the garnishment math base. Your 401(k) doesn't reduce it.
401(k) match: Employer money contingent on your contribution — an instant 50–100% return. Not capturing the full match is declining a raise. Calculator →
Vesting: When employer contributions become irrevocably yours. Leaving before a vesting date forfeits the unvested — check it before resigning. Calculator →
OTE: On-Target Earnings: base + expected commission at 100% of quota. A $120k OTE at 50/50 means $60k guaranteed. Calculator →
Tip credit: Employers paying the lower tipped minimum wage on the assumption tips cover the gap — with strict rules about who may share the tip pool. Calculator →
W-2 vs 1099: Employee vs contractor. The 25–40% rate premium contractors need isn't greed — it's the employer taxes and benefits they now buy themselves. Calculator →
Self-employment tax: Both halves of FICA — 15.3% on net self-employment earnings, on top of income tax. The set-aside percentage exists because of it. Calculator →
Per diem: A flat daily allowance for travel expenses instead of receipts — tax-free within federal rates.
FIRE / FI number: Financial Independence, Retire Early. Your FI number ≈ annual spending × 25, from the community's 4% withdrawal guideline. Calculator →
COLA: Cost-Of-Living Adjustment — a raise pegged to inflation. If yours is below CPI, it's a real-terms pay cut with a friendly name. Calculator →