What are gross wages?

Gross wages refer to an employee’s compensation before taxes and deductions are taken out. It is important for both employers and employees to understand gross wages as taxes and deductions are based on a percentage of the employee’s gross wages. Gross wages can be found on a pay stub under the largest recorded number, while Box 1 on the W2 form indicates an employee’s total pay.

Gross vs. Net

In contrast, net salary refers to the actual take-home pay after taxes and deductions. Gross wages include all forms of payment such as base pay, hourly wages, tips, commissions, and bonuses.

How do I calculate gross wages?

Calculating gross wages can differ depending on the employee’s status and hours worked. For example, hourly gross wages can be calculated by multiplying hours worked by the hourly wage, while salaried workers’ gross wages can be calculated by dividing the annual salary by 12. Unemployment benefits are also considered gross wages and are taxable. Understanding gross wages is crucial to a company’s financial operations, employee satisfaction, and compliance with tax law.