Global HR Glossary

What is Gross Pay vs. Net Pay? 

Gross Pay is the total earnings of an employee before any deductions. This includes wages, salaries, bonuses, and other forms of compensation.

Net Pay, also known as take-home pay, is the amount an employee receives after all deductions are applied. These deductions can include taxes, health insurance, and retirement contributions. 

The key differences between the two are:

• Gross pay is the total earnings before deductions. 
• Net pay is the amount left after deductions. 

To calculate gross pay, simply multiply an hourly wage by the hours worked or divide an annual salary by the number of pay periods. For example, an employee earning $60,000 annually has a gross pay of $5,000 per month. 

In contrast, someone making $20 per hour and working 160 hours in a month would earn $3,200 gross. Gross pay is the starting figure, while net pay reflects the actual amount employees take home.