What is gross salary?
Gross salary definition
Gross salary is an individual’s total earnings during a specific pay period before any deductions are made.
These deductions can include income tax, pension contributions, medical aid contributions, and other payroll deductions.
Key takeaways
- Gross salary is an employee’s total earnings before tax and other deductions are applied.
- Gross salary can include basic pay, overtime, bonuses, allowances, and other earnings.
- Net salary is the amount an employee receives after deductions have been taken from their gross salary.
- For salaried employees, gross salary can be calculated by adding net pay and deductions together.
- Gross salary is different from Cost to Company (CTC), which can also include employer contributions and employment costs.
Jump to:
- Gross salary definition
- Quick definition
- What does gross salary include?
- How to calculate gross salary for salaried employees
- How to calculate gross pay for hourly paid employees
- What is the difference between gross salary and net salary?
- What is the difference between gross salary and Cost to Company (CTC)?
- What deductions are not included in gross salary?
- Related terms
Quick definition
Gross salary = total earnings before deductions.
This is the amount an employee earns before tax and other deductions are taken from their pay.
What does gross salary include?
Gross salary can include:
- Basic salary or wages
- Overtime payments
- Bonuses
- Allowances
- Other earnings paid before deductions are applied
The exact components can vary depending on an employee’s contract and remuneration package.
How to calculate gross salary for salaried employees
For salaried employees, gross salary can be calculated using the following formula:
Gross salary = net pay + taxes and deductions
For example, if an employee’s net pay is R25,000 per month and their taxes and deductions total R7,000, their gross salary is R32,000.
How to calculate gross pay for hourly paid employees
For hourly paid employees, gross pay is calculated differently:
Gross pay = agreed hourly rate × number of hours worked during the pay period
This calculation reflects earnings before any deductions are made.
What is the difference between gross salary and net salary?
Gross salary is an employee’s earnings before deductions.
Net salary, often called take-home pay, is the amount an employee receives after deductions such as tax, pension contributions, medical aid contributions, and other payroll deductions have been made.
What is the difference between gross salary and Cost to Company (CTC)?
In South Africa, employers may advertise jobs using a Cost to Company (CTC) figure.
CTC is the total amount an employer spends on an employee and can include:
- Gross salary
- Employer UIF contributions
- Skills Development Levy (SDL) contributions
- Employer pension contributions
- Employer medical aid contributions
Gross salary is therefore a component of CTC rather than the same figure.
What deductions are not included in gross salary?
When gross salary is calculated, deductions have not yet been applied.
Examples may include:
- PAYE (Pay As You Earn) tax
- UIF contributions
- Pension or provident fund contributions
- Medical aid contributions
These deductions reduce gross salary to arrive at net salary.
Related terms
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