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What Is a Gross Salary?

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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 23 November 2016
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Gross salary is a term that is used to describe the calculation of the total sum of wages that an employee receives as salary. This figure includes any type of addition to the usual or base pay that is stipulated in the employee contract of the worker. Gross salary is usually a starting point for the calculation of the net pay, which is the actual salary the employee will receive by the time deductions have been applied to the gross salary of the employee.

An example of an addition to the basic pay of an employee that will be included in the calculation of the gross pay is overtime pay. For example, assuming an employee at a fast food restaurant makes a basic pay of $400 US Dollars (USD) per week and worked over time to receive $200 USD, the gross pay will be calculated by adding the basic pay and the overtime remuneration in addition to other applicable items like any allowances and bonuses. The total sum of these figures will constitute the gross salary for an employee, though he or she will not get the full gross salary.

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In order to arrive at the net pay, which is the actual amount the employee will receive, adjustments have to be made to the gross pay in the form of applicable deductions. For instance, if the employee is a member of a trade union, such dues may automatically be subtracted from the total pay and remitted to the relevant union. This deduction is in addition to other items like income tax, insurance and social security. The final figure after all of these deductions have been applied is the actual salary the employee can expect to receive from the employer, rather that the gross salary.

The calculation of the gross salary may be done on a periodic basis that is selected by the employee while trying to arrive at a figure depicting such pay. For instance, it may be calculated per month, every two weeks, quarterly or even annually, depending on what the person calculating the sum is trying to achieve. Another issue of note is that the deductions that may be made from the salary of an employee by the employer are limited and are usually determined by the law in place in the region and the terms of the contract between the employee and the employer.

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