Voluntary deductions

Definition

Voluntary deductions are payroll deductions that employees choose to have withheld from their paychecks. These can include contributions to retirement plans, health insurance premiums, and charitable donations.

5 Must Know Facts For Your Next Test

1. Voluntary deductions require written authorization from the employee.
2. Common examples include 401(k) contributions, life insurance premiums, and union dues.
3. These deductions differ from mandatory deductions like taxes and Social Security.
4. Employers must clearly report voluntary deductions on employee pay stubs.
5. Employees can typically adjust or stop voluntary deductions by submitting a request to their employer.

Review Questions

Related terms

Mandatory Deductions: Payroll withholdings required by law, such as federal and state taxes.

Gross Pay:

The total earnings of an employee before any deductions are taken out.

Net Pay: The amount of money an employee takes home after all deductions have been subtracted from their gross pay.