3.1 Overview

In this chapter, you will explore gross earnings—understanding gross earnings is essential to payroll processing. Before determining what deductions must be made and calculating net pay, it is important to calculate gross pay accurately. Payroll professionals need to consider earnings such as wages, salary, piecework, commission, overtime pay, bonuses, incentive pay, vacation pay, and director’s fees.

You will start by learning about pay cycles. Pay cycles are the frequency that employees are paid—this may vary across and even within organizations, within the bounds of what is permitted by employment standards legislation. You will identify common pay cycles used in payroll processing.

You will then learn about the difference between regular and non-regular earnings, after which you will learn to identify different types of regular and non-regular earnings. By the end of this chapter, you will be able to calculate different types of gross earnings and calculate an employee’s total gross pay.

Finally, you will differentiate between earnings, allowances, expense reimbursements, and benefits. Allowances and expense reimbursements are payments (or repayments) made to an employee that are not usually included on the employee’s paycheck. Non-cash benefits (like a company car) might not appear on an employee’s paycheck, but may be taxable. Cash benefits will usually appear on the paycheck and are taxable. If benefits, allowances, or expense reimbursements are taxable, they will usually be included in gross earnings.

Specific Learning Outcomes

Image Credit

Canadian cash in hand by Meena Gupta, NorQuest College, CC BY-SA 4.0