Learn about the difference between net pay and gross pay, and how to gross up a paycheck from a specific net pay amount.
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.
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 paycheck.
Let’s figure out the gross pay and net pay with these examples:
- Regular pay: $350
- Overtime: $91.42
- Bonus: $100
- Social Security and Medicare taxes: $141.42
- Other after-tax deductions: $100
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 paycheck above, the employee’s gross pay would be:
Regular pay($350) + Overtime($91.42) + Bonus($100) = $541.42
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 paycheck above, the employee’s net pay would be:
Gross pay($541.42) - Total payroll deductions ($100 + $141.42) = $300
Gross up a paycheck
If you want to pay your employees with a desired net pay amount but with taxes and deductions taken out, you need to figure out the gross pay amount to run payroll.
For example, you want to reward your employee with a $300 net pay bonus, and you want to withhold Social Security, Medicare, $100 for federal income tax (FIT), and 100 for other deductions.
If you're using QuickBooks Desktop Payroll, check out Gross up a paycheck in QuickBooks Desktop Payroll to learn more.
If you're using QuickBooks Online Payroll, run the payroll as a bonus check, and we’ll figure out the total pay or gross pay for you. Otherwise, follow the steps below to get the gross pay:
- Total the tax percentages.
Social Security 6.2% + Medicare 1.45% = 7.65%
- Subtract the total from 100%
100-7.65 = 92.35
- Convert that number to a percentage by moving the decimal two positions to the left.
- Add $100(FIT) and $100(other deduction) to the net amount
$100 + $100 + $300 = $500
- Divide the new net amount by the amount in step 3
500 / .9235 = 541.42
- The gross amount to be used is $541.42.
The net amount will be $300 after withholding social security, Medicare, FIT, and other deductions.