Complete Guide on How to Gross-Up Wages

how to gross up wages

While calculating wages, it is crucial to consider two terms- gross wages and net wages. Don’t know what gross wages are? Well, you have reached the right place. In this article, we are going to explain to you what gross up wages are. We will also tell you how to gross up wages.

So, let’s dive in. 

An Introduction to Gross Wages

The salary an employee receives before the deduction and taxes is called gross wages. Since gross wage is the amount before reductions, it is significantly higher than the net-home pay or net wages. 

If you are an employee, you should learn about gross wages and how to gross up wages. Your deductions and taxes are calculated on the basis of gross wages. Also, employers calculate the state and federal income taxes along with medicare based on the gross income wages. 

In case an employee’s withholding is under-withheld, the missing amount has to be paid over in the months to come. In case an employee’s withholding is over-withheld, the employee has to ask for a refund immediately. If not, they have to wait until it is time for the yearly tax filing. Whatever it is, a mistake means you have to take care of additional paperwork leading to wastage of time. 

Net Salary vs. Gross Salary

The wage you receive as an employee before deductions and taxes is the gross salary. While net salary is the wage you receive in the paycheck after the deductions and taxes. In simple words, it is the pay that you actually take home. 

how to gross up wages

In order to calculate the net salary, you first have to calculate the gross pay and subtract the deductions and taxes from the gross pay. Always try to ask your company HR about how to gross up wages.

Things Included in the Gross Wages

Gross wages comprise all the pay before the taxes and other important deductions are taken out. Most of the employee’s gross wages consist of the base pay, like the hourly pay, salary, tips, etc. 

Gross wages include-

  • Hourly Wages
  • Salaries
  • Commissions
  • Piece Rate Pay
  • Overtime
  • Holiday Pay
  • Bonuses
  • Tips
  • Sick Pay
  • Vacation Pay

Calculating Gross Wages

The calculation of gross wages depends on if the employee works part-time or full-time or if the employee is hourly or salaried. Gross wages can be calculated on a monthly, weekly, or daily basis. 

It is easy to calculate the gross wages. You can use an online calculator to calculate the gross wages as it can easily get complicated as you will have to consider various types of wages that might come up in a scenario. 

In hourly employees, the gross pay is calculated by multiplying the total hours worked with the hourly wage. 

For instance, an employee working for 20 hours a part-time per week gets a wage of $10 per hour. So, his weekly gross pay is $200 (20x$10). While a full-time employee working with the same hourly pay would receive $400 (40x$10). 

In case the employee receives overtime pay, you have to calculate that in the gross wages. In the US, overtime is calculated as time and half.  So, if the full-time employee receives pay for 5 overtime hours, the extra pay would be $5 (10×1.2). So, the employee receives a gross pay of $400 + $60 = $460. 

Bottom Line: How to Gross Up Wages

It is crucial to be careful when you calculate the gross wages. In case you calculate incorrectly, your staff might owe you money during tax time. Thus, give them the best possible option and answer their queries about how to gross up wages.

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