Which type of deductions are compulsory by law?

Prepare for the WJEC GCSE Business Studies Test with interactive quizzes and detailed explanations. Enhance your knowledge on key business concepts and boost your exam confidence.

Multiple Choice

Which type of deductions are compulsory by law?

Explanation:
Deductions that are required by law are statutory deductions. These are taken from gross pay because the government mandates them, with examples like income tax through PAYE and National Insurance contributions, and, where applicable, student loan repayments or auto-enrolment pension contributions. They’re taken before the employee receives their net pay, and employers remit them to the appropriate authorities. Optional deductions depend on an agreement with the employee (such as union dues or charitable donations). Net pay is the take-home amount after deductions, and wage refers to the pay earned before deductions, not a deduction itself. So the type described as compulsory by law is statutory deductions.

Deductions that are required by law are statutory deductions. These are taken from gross pay because the government mandates them, with examples like income tax through PAYE and National Insurance contributions, and, where applicable, student loan repayments or auto-enrolment pension contributions. They’re taken before the employee receives their net pay, and employers remit them to the appropriate authorities. Optional deductions depend on an agreement with the employee (such as union dues or charitable donations). Net pay is the take-home amount after deductions, and wage refers to the pay earned before deductions, not a deduction itself. So the type described as compulsory by law is statutory deductions.

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