Gross-to-Net (GTN)

What is Gross-To-Net (GTN)?

Gross-to-Net is a process that calculates net pay by subtracting deductions and deductions from an employee’s gross pay. Gross pay is the employee’s wages before any tax deductions are made. Net pay is the employee’s wages after taxes and deductions are applied. Gross-to-Net elements indicate which reductions and deductions should be taken. For gross-to-net pay, one or more earning amounts (such as regular pay and overtime pay) are specified along with the taxes and deductions for the employee, and a net pay amount is calculated.

How to utilize Gross-To-Net

To calculate a net amount, multiply the gross by the tax rate, then subtract these results from the gross.

Net Pay = Gross Pay – Deductions

Deductions usually include federal income, unemployment, social security, and medicare taxes as specified by FICA (Federal Insurance Contributions Act).

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 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 vs Net Income.