Gross wages

Meaning & Definition

Gross Wage is defined as the full amount paid to an employee before any deductions (for example, taxation, provident fund, etc.) have been taken from their pay. The gross wage includes all forms of remuneration (for example, basic wage, allowances, bonus, overtime). In the context of HR and payroll, gross wages are required for the purposes of calculating statutory deductions and net pay.

Important Aspects of Gross Wages

• The foundation on which the payroll is calculated.
• Accurate payroll processing and salary forecast.
• Used for the determination of statutory contributions (such as EPF and ESIC).
• Creates a measure of transparency into what employees earn.
• Helps with compliance with labour laws related to wages.

Compliance Requirements

• The Code on Wages 2019 outlines the definition of wages, including provisions for paying employees, minimum wage regulations, and equal pay for equal work.  
• The Employee’s Provident Fund & Miscellaneous Provisions Act (1952) has prescribed the wage elements included in the employee contributions. 
• There will also be statutory requirements for calculating wages.