Gross Wages

What are Gross Wages?

Gross wages are the beginning point for all employee payments. It is defined as the full amount an employee earns, before factors like taxes and withheld deductions are applied to the paycheck. The amount earned depends on the employment status and wage rate set by the employer. For a salaried employee, the annual salary is the gross wage. An hourly employee can calculate gross wage by multiplying the hours an employee has worked by their hourly wages.

Gross wages can be found on a pay stub, and it should be the largest number. You can also see the taxes and deductions taken out of your paycheck to see the difference between your gross pay and take-home pay. 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.

How Gross Wages work

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 Pay, Gross Amounts, Gross Income, Gross vs. Net Income.