What is the formula to calculate payroll?

Written by Editorial Team | Last Updated: August 2026

Calculating gross payroll and net employee pay involves a multi-step mathematical process. Gross pay is calculated by multiplying hours worked by the hourly wage rate or by dividing annual salary by the number of pay periods. Net pay is then determined by subtracting total payroll deductions from gross pay using the formula NetPay=GrossPay−(FederalTaxes+StateTaxes+FICAContributions+VoluntaryDeductions), ensuring accurate compensation disbursement and tax compliance.

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