What are Gross & Net Wages? How Are They Calculated?

When it comes to payroll management, organizations and HR managers need to understand two important terms: gross pay and net pay. What are the differences and how are they calculated? Having an all-inclusive payroll solution like PeopleCentral can automate the payroll administration process and help compute gross wages and net wages.

What is Gross Wage?

Gross wage is the total amount of salary that your employees get after adding all allowances and benefits, but before any deductions are made. It is the cost to the company (CTC) and includes the following:

  • Basic salary
  • Special allowances
  • House rent allowance
  • Medical allowance
  • Leave travel allowance
  • Conveyance allowance
  • Educational allowance, etc.

Other components of gross salary include overtime payment, salary arrears, fee or remuneration, cash rewards, and others.

What is Net Wage?

Net wage is the amount that your employees receive after all deductions are made. To put it simply, it is the salary that an employee takes home.

The following table will help you understand the differences between gross wage and net wage:

Gross SalaryNet Salary
It is the amount of salary that includes all allowances and benefits but before deductions are made It is the amount of salary that an employee actually takes home
Gross wage includes benefits to an employee such as medical allowance, conveyance, HRA, and others  Net Wage = Gross Wage – All types of deductions like professional tax, pension, income tax, etc.
Gross salary is known as the Cost to Company (CTC)Net salary is also referred to as Take-Home salary
How is Gross Salary & Net Salary Calculated?

Gross salary can be calculated in different facets – from per month to per year. To compute manually, you will need to understand your pay frequency, i.e., weekly, bi-weekly, semi-monthly or monthly. For hourly wages, you need to calculate the total amount estimated for the year.

                             Annual Pay / Pay Frequency = Your Gross Pay

Net salary is calculated by deducting taxes and other adjustments from the gross salary. These would include federal withholdings, medical plans, social security, and taxes.

Calculating gross pay and net salary can be difficult, particularly because there are numerous components that need to be computed here. Thanks to PeopleCentral’s fully automated payroll administration system that seamlessly computes gross pay and net pay, helping save more time and costs.  

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Discover the reasons why our platform has attracted over 100,000 users

"With reference to the payroll as a client we are satisfied with the software. Its very user friendly, easy to use & the support is very efficient. After the payroll has been install in the company our job has really been smooth & efficient."

Kalavathi

Accounts - CKR Contract Services

icon 5

"PeopleCentral is a very powerful tool and i thank the PeopleCentral account manager for actively assisting me several times. The software is also regularly updated base on the requirements of Singapore law."

Lucas Seah

MD - Execllence Singapore

icon 4.8

"We are using PeopleCentral since year 2008 the year in which we incorporated Goodwood. It is running very well and it’s very user-friendly. We are satisfied with your support team as well. They are prompt in their responses."

Surjit Mehendale

A/C Manager - Goodwood Ship

icon 5

"We have been using PeopleCentral product for more than 4 years now. We are impressed with simple ways of processing payroll, bank & CPF payroll feeds and continuous updates to the system. Keep up the good work!"

Vishal Attal

Director - Kaira Global

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Big & Small business trusted us