What is gross pay? Meaning and how to calculate it
Gross pay is the total an employee earns in a pay period before any taxes or deductions come out: salary or hourly wages plus overtime, bonuses, commissions and taxable tips. A $60,000 salary paid every two weeks is $60,000 / 26 = $2,307.69 gross per paycheck. What lands in the bank account is net pay, which is always smaller.
Gross pay is an employee's total earnings for a pay period before taxes, benefit contributions and other deductions are withheld.
How to calculate gross pay
Salaried: annual salary divided by the number of pay periods. $60,000 is $5,000 monthly, $2,500 semimonthly (24 periods), $2,307.69 biweekly (26) or $1,153.85 weekly (52). The biweekly and semimonthly numbers differ because there are two extra paychecks a year. See biweekly payroll and payroll schedules.
Hourly: hours times rate, plus overtime. Under the federal Fair Labor Standards Act, non-exempt employees earn at least 1.5 times their regular rate for hours over 40 in a workweek. At $20 an hour and 45 hours: 40 x $20 = $800, plus 5 x $30 = $150, so gross pay is $950.
Add bonuses, commissions and taxable tips for the period. Employer-paid benefits, such as the employer share of health premiums, are not part of gross pay.
Gross pay vs net pay
The same $60,000 paycheck, worked through to net pay:
| Line | Amount |
|---|---|
| Gross pay ($60,000 / 26) | $2,307.69 |
| 401(k), 5% pre-tax | minus $115.38 |
| Social Security, 6.2% of gross | minus $143.08 |
| Medicare, 1.45% of gross | minus $33.46 |
| Federal income tax (illustrative) | minus $200.00 |
| Net pay | $1,815.77 |
Rates from IRS Topic 751 (2026). Federal income tax is an illustrative figure; the real amount comes from the W-4 and IRS Publication 15-T. Texas has no state income tax. Checked October 2026.
Gross pay is the number that sets most taxes. In this example FICA is figured on the full gross pay, because IRS Publication 15 treats traditional 401(k) deferrals as subject to Social Security and Medicare. Income tax is figured on gross pay minus pre-tax deductions.
Where gross pay shows up
- Pay stub: the first line, for the period and year to date. See what a pay stub shows.
- Form W-2: the wages reported for federal income tax are not gross pay. They are gross pay minus pre-tax deductions such as a traditional 401(k). The Social Security and Medicare wage amounts are closer to gross. See reading a W-2.
- Loans and leases: lenders often ask for gross income, so use the yearly gross from your offer or the year-to-date figure.
For employers, gross pay is also the base for the true cost of a hire: gross wages plus employer taxes and benefits. Our employee cost calculator adds them up for any state.
Frequently asked questions
What is gross pay?
What does gross pay mean on a pay stub?
What is the difference between gross pay and net pay?
Is gross pay before or after taxes?
How do I calculate gross pay for hourly work with overtime?
Sources (5)
- IRS: Topic 751, Social Security and Medicare withholding rates (updated Sep 24, 2026) (checked Oct 16, 2026)
- US Department of Labor, WHD: Fact Sheet 21: Recordkeeping requirements under the FLSA (rev. July 2008) (checked Oct 18, 2026)
- US Department of Labor, WHD: Minimum wage (checked Oct 16, 2026)
- eCFR: 29 CFR 541.600, salary basis threshold (checked Oct 16, 2026)
- IRS: Publication 15 (Circular E), Employer's Tax Guide, for use in 2026 (checked Oct 16, 2026)
This page is general information, not tax, legal or accounting advice. Rules and rates change, so check the official source linked above before you file or sign a contract. Read our disclaimer.