Gross Pay

What is Gross Pay?

Gross pay for employees, also known as gross income on a paycheck, is an employee’s total earnings before taxes or other deductions. It’s the total amount of remuneration before other deductions like social security, insurance, and contributions to pensions are made. Subsequently, net pay, or take-home pay, is the amount remaining after all withholdings have been accounted for. 

How Gross Pay works

An employee can determine their gross pay by looking at a recent pay stub or calculating their hours worked and wage. Gross pay includes the following: annual base salary or hourly base rate, piece pay rate, bonuses, shift differential, commissions, vacation pay, sick pay, and holiday pay.

Whether it’s an hourly rate or an annual pay rate, the calculations depend on the amount agreed upon by both the organization and the employee.

For hourly employees: Multiply hours worked by the hourly pay rate. Here are the details:

• The timesheet or attendance log must be referenced when determining the number of hours worked.
• Ensure to include any applicable overtime hours worked.
• Some benefits that are taxable to the employee are not included in gross pay.

For employees on a salary: Divide the total yearly pay by the number of pay periods within one year. Other payments can be added as necessary.

Conclusion

Processing an employee’s pay correctly can be challenging without the latest information and the right experts who continue to monitor ever-changing regulations. Therefore, when it comes to employees’ pay, it’s important to be well-versed on all forms of payroll deductions and terms, and to explain how they work, while having a full understanding of the rules around the deductions.

For additional information, see terms entitled Gross Wages, Gross Amounts, Gross Income, Gross vs. Net Income.