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  • StubBuilder
  • Apr 30, 2021

A Brief Explanation on Gross Pay

When it comes to a pay stub, one of the most confusing yet important terms are gross pay. Calculating pay stub can get burdensome if you are not mindful about gross pay.

Thankfully, leveraging a free pay stub generator with calculator generating accurate pay stubs has become convenient as well as effective.

What is Gross Pay?

Gross pay is a fundamental concept in the US tax system. Gross-pay is an individual’s total earnings throughout a given period before taxes and any deductions. The term is often contrasted with net pay, the money which you take home after deductions, or “take-home-pay”.

The deductions can be some mandated taxes, Medicare contributions, health insurance, or retirement funds. Gross pay is a significant number for you because it is the starting point for your taxes- you have taxed on your grosspay minus any deductions that you qualify for.

Here is the main difference between gross pay VS net pay:

Gross pay: it is the amount that an individual receives before any deductions or taxes. For example, when you tell an employee that you’ll be paid $50,000 a year, it means you will pay them $50,000 in gross wages.

Net pay: your net amount is the total amount you take home after all deductions have been taken out. This money is the money that an individual gets on payday.

Employees and employers should use a pay stub builder for automatically calculating the pay. A pay stub is an important document and hence must be 100% accurate and professional.

Gross pay for business: what’s different?

Gross pay is entirely different when you’re asking as a business owner. It is significantly different for two reasons:

I’is calculated differently
It is taxed differently

For business owners, gross pay is the annual revenue minus the cost of goods they sold. Meaning, it is generally equipped with total revenue minus expenses.

In terms of business financial statements, gross payout is typically only used if something further is processed with the income, extraneous to the business goods and services. That is why gross payout is not the same for business owners like individuals.

Gross payout for individuals

Finding your personal gross salary is not difficult as it seems. For most individuals, you can take your W2 form at the end of the year, or your pay stub salary and the amount will be listed on the form or stub.

Along with the other parameters like wages, tips, compensation, your gross amount is added. By using an online stub generator, you can get your stub with all essential details.

What does grosspay mean for taxes?

As said, for individuals, grosspay is the starting point for your taxes. Typically, if you have a higher gross income, you have to pay more in taxes.

But wait! This is where the real trouble comes. While paying your taxes, there are several deductions that you can leverage to reduce your taxable amount.

Before directly paying taxes, make sure you check deductions. And always, you can use free pay stub calculator for perfect stub.


Understand your net pay and gross pay clearly before paying your taxes. Also, make sure to check the deduction amount to minimize your tax liability and say goodbye to all stress of the tax year.

Related Article: 4 Ways to Show Proof of Income When you’re Self Employed