How do gross earnings differ from net pay?
How are gross earnings reported on pay stubs?
How do taxes and deductions impact gross earnings?
Gross Earnings
Gross earnings are the total compensation an employee earns in a pay period before any deductions, including base salary, hourly wages, overtime pay, bonuses, and holiday pay. For hourly employees, gross earnings are calculated by multiplying hours worked by the hourly rate.
How do gross earnings differ from net pay?
Gross earnings are an employee’s total compensation before any deductions. Net pay is the amount an employee takes home after subtracting taxes, Social Security, and other deductions such as health insurance or retirement contributions. Net pay is lower than gross earnings.
How are gross earnings reported on pay stubs?
Gross earnings appear on pay stubs as the first line of an employee's pay breakdown. The pay stub breaks down different earning components, showing regular pay, overtime, bonuses, and other earnings separately before displaying the total gross amount.
How do taxes and deductions impact gross earnings?
Taxes and deductions do not reduce an employee’s gross earnings; instead, they are calculated based on that amount. While gross earnings represent total pre-tax pay, taxes (like FICA) and deductions (such as health insurance or retirement contributions) determine how much of that gross pay becomes net pay. In other words, gross earnings stay the same, but taxes and deductions reduce the amount the employee receives.
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