What is gross pay?
Gross pay is the total amount you pay an employee before any taxes or deductions come out. It includes their base or hourly wages plus extra earnings like overtime, bonuses, or commissions.
Think of gross pay as the "big number" on a paycheck before everything is deducted. Deploy Homebase payroll to calculate gross pay accurately for your employees.
How to calculate gross pay
Calculating gross pay depends on how your employees are paid:
- Hourly employees: Multiply the number of hours worked by their hourly wage. If they worked overtime, add that too.
- Salaried employees: Divide their annual salary by the number of pay periods in the year.
- Employees with bonuses or commissions: Add any extra earnings to their regular pay for that period.
Or—skip the calculations! Homebase Payroll automatically determines gross pay, making payroll easier.
What’s included in gross pay?
Gross pay isn't just base wages. It can also include:
- Overtime pay
- Bonuses
- Commissions
- Paid time off (vacation, sick leave, holidays)
- Tips (if applicable)
- Expense reimbursements (if taxable)
Understanding gross pay helps you correctly calculate taxes and ensure accurate payroll processing.
Why does gross pay matter for employers?
Gross pay is the foundation for payroll calculations. Here’s why it matters:
- Tax withholding: Payroll taxes, such as Social Security, Medicare, and federal/state income taxes, are deducted from gross pay.
- Benefits contributions: Retirement plans, health insurance, and other benefits are often based on gross earnings.
- Legal compliance: Minimum wage laws, overtime rules, and other labor regulations rely on gross pay calculations.
Gross pay vs. net pay: what’s the difference?
While gross pay is the total amount an employee earns, net pay is what they actually take home after deductions. Here’s a simple breakdown:
- Gross pay = Total earnings before deductions
- Net pay = Take-home pay after taxes, benefits, and other deductions
Ensuring accurate payroll deductions is essential as an employer—Homebase payroll can handle it for you.
How to simplify payroll with Homebase
Managing payroll—including gross pay, deductions, and taxes—can get complicated fast. That’s where Homebase payroll comes in. With Homebase, you can:
- Automatically calculate gross and net pay for every employee
- Withhold and file payroll taxes without the stress
- Stay compliant with wage laws and tax regulations
- Save time so you can focus on growing your business
Sign up for Homebase today and simplify payroll with ease!