gross pay

What is gross pay?

What is gross pay?


Gross pay refers to the total amount of money an employee earns before any taxes or deductions are taken out. This includes regular hourly or salary income, as well as any additional income sources like overtime pay, bonuses, or commissions.

For example, if an employee earns a salary of $50,000 per year, that is their gross pay. However, this isn’t the amount they’ll actually take home, or their net pay. From the gross pay, employers will deduct certain amounts for things like income taxes, Social Security and Medicare contributions (FICA), health insurance premiums, retirement contributions, and possibly other deductions.

In summary, gross pay is the total income an employee earns, but not necessarily the amount they’ll end up with in their pocket after all deductions are taken into account.

You will find your gross pay, your total earnings before deductions, on your paystub. This includes regular wages, overtime, and bonuses. Your paystub breaks down this gross income into various allocations, including taxes, benefits, and other deductions, and calculates your net pay or take-home pay. It plays a crucial role in managing personal finances and verifying income. The paystub is also referred to as the take home pay calculations.


Difference between gross pay and net pay.


Gross pay and net pay are two key terms in payroll and personal finance, and the difference between them is quite straightforward.

1. Gross Pay:

This is the total amount of money you earn before any deductions or taxes are taken out. It includes your basic salary or wages, as well as any extra money you make from overtime, bonuses, commissions, and other sources of income related to your job. The IRS refers to gross pay as Adjusted Gross Income (AGI)

2. Net Pay:

This is the amount of money you actually take home after all deductions are made from your gross pay. These deductions may include federal, state, and local income taxes, Social Security and Medicare taxes (also known as FICA taxes in the United States), health insurance premiums, retirement contributions (such as 401(k) or 403(b) contributions), union dues, or any other deductions that might apply to you.

So, in simple terms, gross pay is what your employer pays you before any deductions, and net pay is what you actually receive after all those deductions are taken out. Net pay is often referred to as “take-home pay.”


Typical Deductions from Gross Pay



Basil Abbas

Basil is the Founder and CTO at ClockIt. With over 10 years of experience in the products space, there is no challenge that is too big in front of him be it sales, marketing, coding, etc. A people person and loves working in a startup for perfection.