What is Gross Pay?


What is Gross Pay?


Gross pay is the actual amount of salary of a person but it is not what a person gets while working in any organization because of the policies which may differ from firm to firm but the total amount of salary is called gross pay. Gross pay is independent of tax reduction by the government and the company deductions like provident fund, medical allowance, travel allowance and deductions for any absentees.

Gross pay includes regular hourly or salaried pay and it also includes any overtime paid to the employee during the pay period. 

For both salaried and hourly employees, the calculation is based on an agreed-upon amount of pay. That is, both the employee and employer have agreed that this is the pay rate. The pay rate should be in writing and signed by both the employee and employer. 

For hourly employees, that pay rate might be negotiated by a union contract. For salaried employees, that rate might be in an employment contract or just a pay letter. In each case, the gross pay rate should be agreed to and signed before the employee begins working. 

Calculating gross pay is quite easy. You just add your net pay and the taxes deduced from your pay

Gross pay = Net pay + tax reduction

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