Subscribe Feed (RSS)Do you understand everything that is written in the pay slip? Or do you wonder about all the deductions in your salary? You receive every month a pay slip that mentions the amount of salary you expect to receive. Oftentimes your monthly salary slip reflects your gross pay. It means that it is your total remuneration for the month which you have worked in the company. It is your payment for rendering your service and skills to the organization.
Generally gross pay is not the best figures to rely if you are looking forward to budget your income for the month. This amount still includes the amount allocated for the tax, insurance, social security system, loans if you have and other related monthly fees. However, once these are deducted from the gross salary, you have the net pay. It is the exact and real amount that goes to your salary bank account.
You do not need to have background of accounting or finance to understand the calculation of your gross salary. All you need is a drop of common sense. The initial step is to know if you are being paid on hourly or salaried basis because this two makes a difference in the calculation. The hourly as the name suggested is based on the number of hours you worked for the company. Let us say you agree with your new employer that you will be paid on $20 per hour. If work for 40 hours in a week, it means your gross income in the end of the month is $800. It is the number of hours worked multiplied to the agreed hourly rate.
On the other hand, the salaried is based on the agreed annual salary which is then divided into the number of months that you agree to work. Let us say you agree with your employer that your annual salary is $ 100,000 and your working period is ten months. It means that your monthly salary is $10,000 every month.
This is the simple calculation of your monthly gross pay.
Another thing to consider in the calculation is the overtime pay. The overtime rate varies according to the local law of the state. It is common practice that overtime rates are higher than the hourly rate. Again, this is subject to the local labor laws of the state. You have to understand that the overtime pay is only a segment of the gross income. It means that this amount has also to be deducted for whatever application deductions in your company’s payroll system.
Before planning out your monthly income, it is best to anticipate the possible deductions which will be subtracted from your gross pay. In this way your budget is in the right track otherwise you are frustrated for receiving less than what you expect.
Tags: meaning of gross pay
