How to Calculate Gross Wages for a New Employee in 2023
Working in payroll isn’t for the faint of heart.
Between all of the rules and regulations governing their work and the fact that they are the first line of defense between employees and their paychecks, they’re the unsung heroes of any organization.
How much do they need to know? Anyone who has ever read a pay stub knows that a lot goes into paying employees accurately. For example, according to the Bureau of Labor Statistics (BLS), the average American earned $71,456 in 2022. However, there’s a big difference between this figure and what actually gets deposited into the employee’s account.
This figure is a gross wage, and in this article, we will walk you through how to calculate gross wages for a new employee this year.
What Are Gross Wages?
Gross wages are simply the total amount of money an employee earns for the time they have worked for your company. It is the total amount before anything is deducted, including federal and state taxes. Whenever a salary is quoted for a position, that’s in gross wages.
Your annual gross income also includes any overtime or bonuses on top of your regular hourly or salary pay.
Your gross wages will look different than the total pay you see on your W-2. W-2 records taxable wages which are your wages after pre-tax deductions are taken out. Pre-tax deductions might include retirement plan contributions, flexible spending accounts, or healthcare premiums.
Calculating Gross Wages for Hourly Employees
As an employer, you will need to calculate your employees’ gross wages every pay period. You will do this differently depending on whether the employee earns an hourly wage or is a salaried employee.
To calculate an employee’s hourly gross wages, follow these steps:
- Accurately record the employee’s hourly wage.
- Determine how many hours the employee worked that pay period.
- Make sure any paid time, such as paid sick leave and breaks, is included.
- Multiply the hours worked by the hourly wage.
- Add any overtime pay.
Calculating gross wages for salaried employees will look a bit different. Like an hourly employee, you will also need to calculate gross pay every pay period. To calculate a salaried employee’s gross wages, follow these steps:
- Verify the employee’s salary.
- Calculate how many pay periods there are per year.
- Divide the salary by that number.
- Add any bonuses, commissions, or expense reimbursements.
Proper pay is essential in hiring and keeping quality employees in your organization. Looking to fill the vacancies within your company? Epic Placements has hundreds of pre-vetted candidates waiting to sign that contract. Contact us today to find just who you’re looking for.
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