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A salary paid net of any applicable withholding or

A salary paid net...

A salary paid net of any applicable withholding or
deductions... if the negotiated salary was $100 paid net of any applicable withholding or
deductions, the check would be for $100, yes?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I am negotiating a salary using a model contract which uses the phrase "paid net of any applicable withholding or
deductions ". I just want to make sure I am anticipating correctly the take home pay.

Accountant's Assistant: Is there anything else the Accountant should be aware of?

Not at this time

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Answered in 21 minutes by:
3/25/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,695
Experience: Taxes, Immigration, Labor Relations
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"net of any applicable withholding" in contracts usually referred to mandatory withholding.

But even mandatory withholding sometimes hard to predict for many reasons including changes in the law.

So employees most likely will negotiate gross pay and if you want to estimate net take home pay - you will use rough percentage - depending on your income range - 15% - 35%

Please elaborate.

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Customer reply replied 28 days ago
I am hung up on the phrase "net of applicable withholdings". In my mind, that means that the negotiated salary is equal to the take home pay. In other words, the company will have to gross-up to cover taxes so that the agreed upon salary is "net pay"

That actually means - the payer should know what your withholding will be - and that is not possible in most situations.

While you may want to keep that in mind for your expectations - I would be very surprised if your employer would agree with such contract.

I suggest to negotiate gross pay - and just consider possible withholding for your personal purposes.

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Customer reply replied 28 days ago
But "net of" does mean that the negotiated salary would be after taxes, yes? (i.e. $100,000 salary "net of withholdings" is equal to $100,000 take home pay)

Negotiated wages will be gross.

If you negotiate $100,000 wages

there will be additional withholding - and you may expect net take home pay ~$80,000

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Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,039
Experience: Adjunct Professor
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Hey! I'm Carter, I'm a CPA and can help you with this.
Net if applicable withholding or deductions is the salary after withholding. So, you would take home $100,000.
It is rare that companies offer that. You can set withholding at whatever level you want and even massively over withhold, which is why you don't see that. It is more common that the company will pay the Social Security and FUTA.
Your best bet while negotiating is to ask them what the verbiage means in terms of that contract so everyone is on the same page.
Let me know if you need anything else. If not, please leave a rating. Thanks!
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Customer reply replied 25 days ago
The actual specific language of the contract, which has already been agreed to, is as follows:
"Employer shall provide the Manager with an annual salary in the sum of ONE HUNDRED THOUSAND Dollars ($100,000.00). This annual salary rate shall be paid to the Manager in equal installments on the schedule as other employees and shall be paid net of any applicable withholding or deductions required by the Applicable Laws and Authorities."
So, in other words, this wording is tantamount to a gross-up agreement, yes?
Thanks for your help.
Yea it is.
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,039
Experience: Adjunct Professor
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Customer reply replied 25 days ago
Many thanks!
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