Gross Salary
Meaning & Definition
Gross Salary
Gross salary is the amount of money paid to an employee before taxes and deductions are discounted. It is the gross monthly or annual sum earned by the employee.
Gross salary is determined by the employer when the job is offered. This gross salary might come from different sources such as wage, commissions, tips, bonuses and any other economic incentive received as part of the wage and it is the baseline for any calculation made regarding the employee’s income.
The gross salary doesn’t take into account deductions or taxes that are taken out after the payment is issued, because it is the pre-negotiated amount of money stipulated at the job contract. Later on, the gross salary will be reduced by these deductions, to comply with federal or state laws or also, to pay for any other financial commitments taken by the employee that are directly taken off its gross income.
The gross salary figure helps the employee compare its level of compensation with the market average to see if his salary is competitive and rewarding, in relation to similar industry peers. On the other hand, gross salary serves as a measure to determine the employee’s payment capacity, to engage in any debt commitment.
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What is meant by a gross salary?
The gross salary or the CTC, is the compound salary that is entitled to the employee before all kinds of deductions are made to it.
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How to Calculate Gross Salary?
Gross Salary will come down to the addition of the basic salary along with all the special allowances the employer or the manager offers to the employee. This, of course, does not take into account any kind of tax deductions or any other cuts.
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What are CTC and Gross Salary?
CTC and Gross salary are interchangeable terms. They both have the same meaning and both can be calculated as the sum of an employee's basic salary and all the special financial allowances that they receive from the employer.
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What is the difference between Gross Salary and Net Salary?
The difference between Gross salary and the net salary is that while the gross salary is the sum of all the special allowances along with the basic salary, the net salary will also consider all the tax deductions and pay cuts that also come with the same.
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What are the components of Gross Salary?
Base Salary: The basic monthly salary that is not subject to any deductions, does not take into account any kind of allowance or benefit.
Prerequisites: Like the bonuses or the fringe benefits an employee is entitled to by the org that they work for.
Special allowances: Like Mobile allowance, Wi-Fi and network allowance, house rental allowance, and more.
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