Let's learn about the differences between net pay and gross pay.
Gross pay is your total pay before taxes and deductions, while net pay is your “take-home pay” or what’s left after payroll taxes and other deductions are taken out.
Calculating gross pay and net pay
Let’s figure out how to calculate gross pay and net pay.
In some cases, you may want to give your employee a specific net pay amount as a bonus. Taxes still need to be calculated on this amount. This is called a gross up. We’ll show you how to gross up a paycheque.
Sample paycheque
Let’s figure out the gross pay and net pay with these examples:
- Regular pay: $350
- Overtime: $90
- Bonus: $100
- Other after-tax deductions: $140
Gross pay
To get the employee’s gross wage, add the regular or salary pay and other pay types like overtime, bonus, holiday, and time off pay.
Based on the example paycheque above, the employee’s gross pay would be:
Regular pay ($350) + Overtime ($90) + Bonus ($100) = $540
Net pay
Now that you know how to get the gross pay, deduct the total payroll deduction from the gross pay to get the net pay.
Based on the example paycheque above, the employee’s net pay would be:
Gross pay ($540) - Total payroll deductions ($140) = $400