What does ‘gross pay’ refer to?

Gross pay refers to the total amount of earnings an employee receives before any deductions are taken out. This includes all forms of compensation, such as salary, hourly wages, overtime pay, bonuses, and other forms of additional pay. Understanding gross pay is essential for both employees and employers, as it represents the full value of an employee's labor prior to the impact of taxes and other deductions, such as health insurance premiums or retirement contributions.

By recognizing that gross pay encompasses all earnings before any reductions, one can better comprehend how payroll processing works and the subsequent calculations that lead to net pay, which is the amount employees take home after deductions. This distinction helps individuals understand their compensation package and the financial implications of their employment.