What is an annual wage?

Annual wage definition and meaning

An annual wage is the amount of money an employee earns in a year. Specifically, it refers to a fixed salary, or total expected payment, for the work an employee completes. It is usually a before-tax estimate, or a gross wage before deductions have been applied.

What does gross annual salary mean?

Gross annual salary is the total amount an employee earns in a year before any deductions, such as taxes or benefit contributions, are withheld. It represents an employee’s full yearly pay, the number you’d see in an offer letter or employment contract, before subtracting payroll taxes or other withholdings.

Net wage is another related term — it’s the amount an employee actually takes home after all deductions (like payroll taxes, insurance premiums, and retirement contributions) have been withheld.

How to calculate annual wages

Calculating annual wages depends on how an employee is paid:

• For salaried employees: The annual wage is typically the fixed salary amount agreed upon when they’re hired.

Example: If an employee’s salary is $60,000 per year, that’s their annual wage.

• For hourly employees: Multiply the employee’s hourly rate by the number of hours they work each week, then multiply that total by 52 (the number of weeks in a year).

Example: An employee who earns $20 per hour and works 40 hours per week has an annual wage of $20 × 40 × 52 = $41,600.

Keep in mind that this represents gross annual wages, so it’s wages before taxes or other deductions are taken out.

What does total annual compensation mean?

Total annual compensation goes beyond base pay. It includes the employee’s annual wage plus the value of benefits, bonuses, commissions, paid time off, and any other perks or extras an employer provides.