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Definition of Deduction:

Payroll deductions or deductions is a payment that the employer makes on their employee’s behalf, out of their earnings. Some deductions are mandatory by law while some others are voluntary. These deductions are the reason why your take home salary is different from what is mentioned as the salary. 

Mandatory payroll deductions:

According to governmental regulations, the employer has to withhold payroll taxes from the employee’s gross salary. Failing to do so will lead to lawsuits and fines. 

Examples of mandatory deductions include: 

Voluntary payroll deductions:

Although not mandated by law, some companies make these deductions voluntarily, making it convenient for the employee, or in some cases employers. 

Examples of voluntary deductions include:

Different ways of Deducting from Payroll:

Pre-tax deductions

To provide benefits without increasing the tax, employers can make pre-tax deductions. These include:

Post-tax deductions

These deductions are made after the employee has paid tax on their income. These include: