what is gross pay

Gross pay is the total amount of money earned by an employee before any deductions or taxes are taken out. It is the amount that an employer uses when discussing compensation with employees, such as $60,000 per year or $25 per hour. Gross pay is also usually referenced on federal and state income tax brackets. The method for calculating gross wages largely 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 employees, gross pay is calculated by multiplying the number of hours worked by the hourly rate. Gross pay is different from net pay, which is the amount of money an employee receives after taxes, benefits, and other payroll deductions are withheld from their wages.