Gross wages vs net wages
Understanding the difference between gross and net wages is essential for both employers processing payroll and employees reviewing their pay.
Gross wages
- Total before deductions
- Includes all earnings
- Used for tax calculations
- Shows on payment summary
Net wages
- After deductions
- Take-home pay
- Bank deposit amount
- What employee receives
Calculating gross wages
Gross wages calculation involves summing all pay components for the pay period:
Gross wages formula
Gross wages and payroll tax
For employers, gross wages are relevant to both PAYG withholding (deducted from employees) and payroll tax (paid by employers on total wages above threshold).
Payslip requirements
Under Fair Work regulations, payslips must clearly show gross wages with each component itemised (base pay, overtime, penalties, allowances). Employees must be able to verify how their gross wages were calculated.
Common mistakes with gross wages
Missing penalty rate components
Not including weekend, public holiday, or overtime payments when calculating gross wages leads to underpayment and incorrect tax calculations.
Including super in gross wages
Superannuation is not part of gross wages—it's an additional employer contribution. Don't include it in gross wages calculations or payslips.
Not itemising on payslips
Showing only a single gross wages figure without breaking down components doesn't meet Fair Work payslip requirements.
Key takeaways
Gross wages is the total amount a waged employee earns before deductions, including base pay, overtime, penalty rates, and allowances. It forms the basis for PAYG tax calculations and must be clearly itemised on payslips. Net wages is the take-home amount after deductions.
Accurate gross wages calculations require tracking all hours and applying correct award rates. RosterElf's time and attendance system captures hours worked and automatically calculates gross wages with correct rate classifications for payroll integration.
