Numbers matter. They matter not just in sales and profits, but also payroll. Whether you are the owner of a business or one of the workers of the business, it helps to know what the numbers on pay stubs mean. After all, it’s a reflection of one’s hard work. For those who are running payroll, accuracy in numbers is the name of the game. Yes, errors can happen from time to time. However, it is always best to prevent them. In this article, let’s learn more about gross wages.
What are “gross wages”?
Gross wages refers to the amount that an employee is paid before anything is taken from it. Meaning, before taxes and other deductibles are subtracted or withheld from it. Gross pay is typically what initially attracts job seekers to a certain position. However, workers must understand that they must not get fixated on gross wages because it will always be larger than what they will take home in their paycheck.
Why are gross wages significant?
Gross wages are significant because they are the starting point of many calculations. A person’s gross wages are what can determine the amount of taxes that are due. Several payroll taxes are withheld from gross wages. These are Social Security, Medicare, federal, and state taxes.
An understanding of gross wages is important because employers need to withhold the correct amount of taxes. For employees, knowing where deductions are coming from will avoid confusion and miscommunication.
Are gross salary and net salary the same?
No, the gross salary and net salary are not the same. Gross pay is the starting point of all calculations. This is the number before any taxes and other deductions are taken away. On the other hand, net pay refers to the amount that an employee receives after taking out payroll taxes and deductions. Simply put, net salary or net pay is the money that an employee brings home.
Gross Salary - Deductions = Net Pay
Where can I find a record of my gross wages?
If you would like to know how much your gross wages are, take a closer look at your paystub. It will indicate your gross wages and any deductions that have been withheld or taken from your gross wages. As we have mentioned above, your gross wages are the amount that you have been paid before subtracting taxes and other deductions. Because of this, it is usually the largest number that you will find on your paystub, near the top. If you need further help in finding out your gross wages, you can always speak with your company’s HR team.
What makes up my gross wages?
Many things can contribute to your gross wages. The base pay makes up the majority of your gross wages. The base pay is the salary, hourly pay, or tips if you are a tip-based worker.
Aside from your base pay, here are other forms of additional compensation that are part of your gross wages:
Pay for special assignments
Employer-paid insurance premiums
Gross Pay = Base Pay + additional compensation
How are gross wages calculated?
Calculating gross wages depends on different factors. If you want to compute a worker’s gross wages, consider asking the following questions:
Does the employee work part-time or full-time?
Is the employee an hourly worker or salaried?
Do you want to get daily, weekly, monthly, quarterly, or annual gross wages?
Although companies can use payroll calculators and software, it is beneficial to know how gross wages can be computed manually.
How do you calculate gross wages for hourly workers?
If you are an hourly worker, simply multiply your hourly pay by the number of hours worked.
Elizabeth is an hourly employee and is paid $10 per hour. She worked 40 hours for the week. What is her gross pay?
$10 × 40 hours = $400
Based on the computation above, Elizabeth’s gross pay for the week is $400.
Lila is an hourly employee and is paid $12 per hour. She is a full-time employee and worked 45 hours in total for the week. What is her gross pay?
To get Lila’s gross pay for the week, compute her regular pay and her overtime pay and then add them together. Keep in mind that, in most U.S. states, overtime pay is calculated as time and a half. Meaning, it is 1.5 times the employee’s hourly pay. Overtime hours will be those hours worked beyond 40 hours.
Lila’s regular pay is:
$12 × 40 hours = $480
Lila’s overtime pay is:
$12 × 1.5 = $18
$18 × 5 hours = $90
Add the regular pay and overtime pay to get gross pay:
$480 + $90 = $570
Lila’s gross pay for the week is $570.
Edward gets paid $40 per hour with a schedule of 40 hours per week. He gets paid every two weeks.
$40 × 40 hours = $1,600 per week
$1,600 × 2 weeks = $3,200
Edward’s gross wages for 2 weeks is $3,200.
How do you calculate gross wages for salaried workers?
In computing the gross pay of salaried workers, remember that the starting point is the annual salary. For example, if you want to get the monthly gross pay, divide the annual salary by 12. If you want to get gross pay biweekly, divide the annual salary by 24.
Liezl’s annual salary is $60,000. What is her monthly gross pay?
$60,000 ÷ 12 =$5,000
Liezl’s monthly gross pay is $5,000.
We can get her biweekly pay by dividing $60,000 by 24 which will be $2,500.
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