What is meant by 'Net Pay'?

Net Pay refers to the amount of money an employee takes home after all deductions have been made from their gross income. This includes not only taxes but also other deductions such as social security contributions, health insurance, or retirement contributions. As such, it reflects the actual amount that can be spent or saved by the individual.

Choosing 'B' as the definition captures the essence of Net Pay, as it specifically highlights that this figure is derived from gross income after subtracting various mandatory and voluntary deductions. Understanding this concept is crucial for personal budgeting and financial planning, as individuals often focus on their net pay to determine their spending capacity.

In contrast, other options do not accurately depict the definition of Net Pay. For instance, identifying income before tax and deductions does not incorporate those reductions and pertains more to gross income. Total earnings including bonuses may refer to a higher figure that does not consider deductions, while gross income minus savings does not align with the concept of net pay, as it misrepresents what Net Pay is about by incorporating savings instead of deductions.