Amounts withheld from an employee's gross pay before they receive their net pay.
Payroll deductions are amounts subtracted from an employee's gross pay before the net pay is calculated. Deductions fall into two categories: mandatory deductions (income tax, national insurance/social security, court orders) and voluntary deductions (pension contributions, union dues, health insurance premiums, salary sacrifice schemes). Payroll software automatically calculates and applies all deductions, generates a detailed payslip breakdown, and remits mandatory deductions to the relevant authorities.
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