04 Jun What are Gross Wages?
Gross wages are the total amount paid by an employer to an employee. It is the amount that is earned before any deductions are made.
What do gross wages mean?
The gross wages figure includes hourly wages, salaries, bonus, commission, and overtime. Every amount that an employer pays to an employee forms part of gross wages. However, it is important to remember that the bulk of gross wages will usually be represented by salary or wages.
Which are the deductions that are made from gross wages to arrive at net pay? Deductions could be made for:
⇨ Social security taxes.
⇨ Medicare taxes.
⇨ Amounts for health insurance and dental insurance.
There could be other deductions as well. Gross wages may be reduced by pension contributions and charitable contributions. The employer could also withhold federal income tax and state income tax.
In certain circumstances, there could be other deductions. An employee’s salary could be reduced by tax garnishments, debt obligations, or child support.
It’s apparent that an employee’s net pay could be substantially less than the gross figure. Of course, that depends upon the amount that is deducted and the other payroll withholding that the gross wages are subject to.
Example of gross wages
Robert Swanson earns an hourly wage of $23. Payment is made on a weekly basis. In the first week of January, he worked for 40 hours. His gross wages for the week are $920. (40 X $23)
Gina Pressler is a salaried employee. Her yearly salary is $54,600. Her employer makes two payments per month and there are 24 pay periods every year. Gina’s gross pay for the first pay period in January is $2,275. ($54,600 divided by 24).
Gross wages refer to the total remuneration paid to an employee before any deductions are made.