To summarise: – .
Gross pay represents wages earned before taxes or other deductions are taken, it includes basic pay plus overtime pay, holiday pay and bonuses. Basic pay is the agreed rate discussed between employer and employee it does not include overtime or any other forms of extra compensation. If an employee has worked overtime or been the recipient of a bonus, the amounts will be added to his gross pay.
Net pay is the residual amount of earnings after all deductions have been taken from gross pay, including PAYE, national insurance, attachment of earnings, student loans and pension plan contributions. Net pay is the take home paid received by the employee and paid to him either in cash or transferred to the employee’s bank account.
Gross vs. Net – Definitions: –
|Gross refers to the total amount before anything is deducted. Many important accounting statistics use this method, such as gross earnings and gross profit.||Net refers to the amount remaining after certain adjustments have been made for debts, deductions or expenses.|