Payroll Terminology
Gross pay vs. net pay: what each amount means.
Gross pay and net pay describe two different stages of a payroll calculation. Understanding the difference makes a pay stub easier to review.
Gross pay comes before deductions
Gross pay represents earnings before taxes and other deductions. For an hourly worker, it may be calculated using hours multiplied by the applicable rate, plus overtime or other earnings. Salaried pay is typically based on the salary and pay frequency.
Gross pay example
If authorized payroll records show $1,500 in earnings for the period before deductions, the gross pay is $1,500.
Net pay example
If $350 in taxes and authorized deductions are subtracted, the resulting net pay would be $1,150.
Net pay is the remaining amount
Net pay is calculated after subtracting applicable taxes, benefits and other authorized deductions from gross earnings. The pay stub should clearly separate current-period amounts from year-to-date totals so readers do not confuse them.
Verify payroll calculations with current guidance
Gross-to-net calculations can vary with filing information, taxable wages, benefits and applicable deductions. Employers should use the current IRS Employer’s Tax Guide and federal withholding tables, plus applicable state guidance. For related definitions, read what a pay stub contains.
Reviewed August 26, 2026. General educational information only. Review our editorial standards and responsible-use policy.
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