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What Do You Mean by Gross Pay?
Gross Pay defines the amount paid to an individual employee before any mandatory subtraction is made from the pay stub. Hence, it is the total amount received by an employee before taxes and deductions are made. Gross Pay is not limited only to earnings received in cash; it includes earnings from all sources.
Employers pay salaries to their employees based on their work for the firm and the time devoted to a task. They are offered a cumulative allowance as their earnings.
Gross Pay includes the following:
- Basic Salary: It is a fixed amount of money that is directly paid to the employee.
- Housing Rent: It is a component of salary that is covered under the housing expense of employees.
- Mandatory Benefits: These benefits are offered to employees over their basic salary and above specific compensation packages. They may be monetary or non-monetary.
- Special Allotment: This includes supplementary allotments extended by an employer to an employee, such as transport allotment.
- Bonus: As an incentive, an employee may receive a bonus from an employer.
How is Gross Pay Calculated?
Gross Pay is calculated by adding an employee’s current salary and allowance before making any deductions, including taxes.
Below is how you calculate gross pay:
Employee on Salary Basis: Your gross salary is the amount you earn at your current position in the company. This is shown in your employment contract, which you signed with the employer when you were offered the position.
Take out your recent earnings statement and calculate how much you earn per month. So, there are 12 months in a calendar year; you will multiply your monthly salary by 12.
For example, if you earn $3,000 per month, the formula will be 3,000 X 12 = 36,000.
Your gross monthly income is $36,000.
Employees on an Hourly Basis: If you work on an hourly basis and your work fluctuates throughout the year, the most precise method to calculate your gross income is to view your payment statement at the end of the year.
The formula for calculating the same hours every week: Multiply the earnings you make by the number of hours you work every week.
For example, if you earn $15 per hour and you work 40 hours per week, the formula would be:
40 X 15 = 600. That means your gross weekly earnings are $600. Multiply it by four weeks to get your hands on a monthly amount: 600 X 4 = 2,400. In the end, multiply this by 12 to get your annual gross income: 2,400 X 12 = $28,800 a year.
How Much Gross Income to File Taxes?
| Single | Married (Jointly) | Married (Separate) | Head of Household | Qualifying Widower |
| $12,950 under the age of 65 | $25,900 if both are under the age of 65 | $5 for all ages | $19,400 if under the age of 65 | $25,900 if under the age of 65 |
| $14,700 if age is 65 or older | $27,300 if one is under the age of 65 and one is older | $21,150 if the age is 65 or older | $27,300 if age is 65 or older | |
| $28,700 if both are at the age of 65 or older |
