What Is the Difference Between Gross Wages and Net Wages?
Gross wages and net wages both refer to the salary of an employee. What distinguishes them is whether or not deductions have been accounted for.
Gross wages correspond to the salary of an employee before deductions, whereas net wages represent the amount of money an employee actually received after deductions. Net wages are typically lower than gross wages.
What Is Included in Gross Wages?
Gross wages correspond to the total amount of money paid to an employee before deductions.
Gross wages include:
- Hourly wages;
- Overtime pay;
- Holiday pay;
- Vacation pay;
- Sick leave pay.
How to Calculate Gross Wages?
The gross wages of an employee depend on whether they work full-time or part-time and on whether they are salaried or paid on an hourly basis.
The gross wages of hourly workers is calculated by multiplying the number of work hours by their hourly wage. Overtime, tips, and commissions are also added to the calculation.
For example, an employee who works 40 hours per week at a rate of $14 per hour would have a gross weekly pay of $560.
The gross wages of salaried workers is calculated by using their annual salary. Salaried employees are not normally paid for their overtime, but might benefit from commissions. If it is the case, commissions are also taken into account.
For example, the gross weekly pay of a salaried employee earning $50 000 a year would be $961,54 before commissions and deductions.