Gross Wages
Definition
Gross wages are the total amount earned by employees before any taxes or deductions are taken out. Gross wages are the payroll expense, not the amount employees receive.
Example
An employee earns $5,000 in gross wages. After $1,000 of tax withholdings, the employee receives $4,000 in net pay. The wage expense is $5,000.
Why It Matters
Recording only net pay as the expense understates the true cost of payroll. Gross wages are the real labor cost.