Gross wages refer to the total amount of money an employee earns before any deductions are made, such as taxes, benefits, or wage garnishments. Gross wages are important because they provide the basis on which certain payroll calculations are made, including taxes and employee take-home pay. Gross wages may include, but are not limited to:
- Regular pay by the hour, salary, or piece
- Overtime pay
- Bonuses and incentives
- Commissions
- Reported tips
- Retroactive pay increases
Calculating gross wages depends on how the employee is paid. For salaried employees, gross pay is equal to their annual salary divided by the number of pay periods in a year. For hourly workers, gross pay is calculated by multiplying the hourly rate by the hours worked during a pay period.
It is important to note that gross wages are different from net wages. Gross wages are the total amount an employee earns before any deductions are made, while net wages are the amount an employee takes home after deductions have been made.
