TECHNICAL GLOSSARY

What does Gross Pay on a Pay Stub mean?

Gross pay is the amount of money that is made before taxes and other deductions are subtracted from a paycheck. The most important number on a U.S. pay stub is one that indicates the amount of money the employee earned for a pay period prior to deductions.

Gross pay may consist of wages and/or salary, overtime, bonuses, commissions, vacation pay, holiday pay, and other compensation, depending on the employee's pay arrangement. For federal employment tax purposes, compensation for services, such as wages, bonuses, commissions, and certain taxable benefits is generally considered wages.

The amount of money that an employee receives before taxes is deducted is called gross pay.

How Is Gross Pay Calculated?

The formula used for the calculation is based on the method of payment of an employee.

Hourly Employees

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If you are an hourly worker, a simple computation is:

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Regular Gross Pay = Hourly Rate x Regular Hours Worked

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An employee who makes $25 an hour and works 40 hours a week would get $1,000 of his gross pay before taxes and deductions.

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Evaluating total gross pay requires considering additional earning amounts over the normal work week, like overtime.

Salaried Employees

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Typically, a salaried employee is paid a fixed salary each year on a pay schedule set by the employer.

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An annual salary of $60,000, paid twice a month for 26 pay periods would be about $2307.69 per regular pay period before any applicable adjustments or deductions.

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Gross pay is the amount of money you make before taxes and other deductions are applied.