Pay & Salary

Guide: How To Calculate Gross Monthly Income (With Examples)

May 27, 2021

Gross monthly income is one of the most comprehensive measures of the living conditions of working Singapore residents. It allows government officials, businesses and individuals to measure income growth, making it a good metric for monitoring the economic wellbeing of employees and companies. Knowing how to calculate your gross monthly income is important when making decisions about investments and expenses that could affect your standard of living and expansion plans. In this article, we cover gross monthly income, its uses, how to calculate it and provide relevant examples.

What is gross monthly income?

Gross monthly income is the income earned from employment or a business venture in a particular month. However, the definition can differ based on your source of income. For employees, gross monthly income is the total amount received in a month before deducting personal income tax and employee Central Provident Fund (CPF) contributions. It includes basic wages, overtime pay, tips, allowances, commissions and one-twelfth of your annual bonuses.

If you are self-employed, gross monthly income is the average monthly profits from your business, profession or trade before deducting income tax. It's your total receipts after deducting monthly business expenses. You can find information about your gross monthly income on your paycheck.

Read more: Everything You Should Know About Working From Home

What to include in gross monthly income

When calculating your gross monthly income, you have to include your salary and every other source of income for each month. For instance, you must include any income earned outside of your regular office hours such as small side businesses like online tutoring and freelance writing. Other income sources to include are:

  • Overtime pay
  • Bonuses
  • Commissions
  • Income from businesses or other jobs
  • Investments

Why gross monthly income is important

Its important to know your gross monthly income because banks and other lending agencies often require proof of income when you apply for credit. Your gross monthly income is an important metric because it allows credit holders and lenders to determine your ability to pay them back. For example, the amount you can borrow for a mortgage must not exceed a certain percentage of your gross monthly income. It can also help you plan when making big investment decisions such as buying a new home or car.

Your gross monthly income can also help you prepare monthly budgets and file your tax. You will also need it to apply for credit cards and other financial products and services. The information is vital for effective financial planning.

For large corporations, gross monthly income statistics can make accounting and financial reporting functions easier. It can also demonstrate your company's long-term profitability and financial health.

Read more: How to Negotiate Your Salary During COVID-19

How to calculate gross monthly income

While your gross monthly income is usually on your payslip, you may need to calculate it yourself if you earn money from other sources. Thankfully, you can easily calculate your gross monthly income with a simple formula. Below, we outline how to calculate your gross monthly income:

For annual salary

For annual salary earners, you can determine your gross monthly income by dividing your annual earnings by 12, the number of months in a year. For example, if you make $60,000 per year, your gross monthly income is determined by the calculation below:

$60,000 ÷ 12 = $5,000.

Here's a general formula to help employees on annual salaries calculate their gross monthly income:

Gross monthly income = Annual salary ÷ 12

For hourly pay

If you earn by the hour, your first step should be to calculate your weekly income and therefore your annual salary before you can determine your gross monthly income. To do this, multiply your hourly wage by the number of hours you work per week. Then multiply this answer by 52, the number of weeks in a year. What you get is your annual salary. Finally, divide your annual salary by 12 to work out your gross monthly income.

For example, Daniel earns an hourly wage of $20 and works 25 hours per week. The first step in calculating his gross monthly income is to figure out his weekly income:

$40 x 25 = $1,000

The next step is to calculate his annual salary:

$1,000 x 52 = $52,000

Now we can divide his annual salary by the number of months in a year to work out his gross monthly income:

$52,000 ÷ 12 = $4,333.33

Here's a formula composed of three simple steps to help hourly wage earners calculate their gross monthly income:

Step 1

Hourly rate x hours per week = Weekly pay

Step 2

Weekly pay x 52 = Annual salary

Step 3

Annual salary ÷ 12 = Gross income per month

For businesses

To calculate the gross monthly income of a business entity, the most important metric is the company's revenue. You can determine this figure by deducting the cost of goods sold from the gross revenue. Your company's gross revenue for a particular month is the total amount of all income and earnings that came into a business.

Follow this formula to calculate the gross monthly income of your business:

Gross monthly income = Gross monthly revenue - Cost of goods sold

Gross monthly income examples

Here are a few examples to help you calculate your gross monthly income:

Gross monthly income calculation for a person with multiple part-time jobs

John Chu jostles between three different jobs along with his main job to make ends meet. His first gig pays $10 per hour for 12 hours per week. He also does a second job that pays $12 for eight hours per week. John also earns another $300 per month from a tutoring business. His primary job pays $15 per hour for 25 hours per week. What is his gross monthly income?

To calculate John's gross monthly income, first calculate his weekly earnings:

$10 x 12 = $120

$12 x 8 = $96

$15 x 25 = $375

Total weekly earnings:

$120 + $96 + $375 = $591

Next, we need to work out his annual income:

$591 x 52 = $30,732

John's annual earnings from these three jobs are $30,732.

John also makes $300 per month from his primary job. From this job he makes an annual income of:

$300 x 12 = $3,600 per year

Next, we need to calculate John's gross yearly income through the sum of all his annual streams of income:

$30,732 + $3,600 = $34,332

To get John's gross monthly income, divide his gross yearly income by the number of months in a year:

$34,332 ÷ 12 = $2,861

John's gross monthly income is $2,861.

Salaried individual gross monthly income calculations

Janet is a full-time manager at a utility company. She earns an annual salary of $56,000 in this position. Besides her salary, Janet also works two hours every business day at her father's noodles shop, earning $12 per hour. She wants to apply for a new credit card that will allow her to shop freely during her trips abroad. In order to apply, she needs to show her gross monthly income.

To determine her gross monthly income, Janet must find out how much she earns annually and divide that figure by 12.

First, she calculates her weekly income from her father's noodles shops.

Janet works for 10 hours per week at her father's shop. Therefore, her weekly income is the following:

10 x $12 = $120

Next, she needs to calculate her annual income from her father's noodle shop:

$120 x 52 = $6,240

To calculate Janet's gross annual income, she needs to add together her annual earnings from her full-time job and her father's noodle shop:

$56,000 + $6,240 = $62,240

Finally, she can calculate her gross annual income:

$62,240 ÷12 = $5,186.7

Janet's gross monthly income is approximately $5,187.

Gross monthly income calculations for a business

Jimmy Lam's fish processing company recently acquired a used fishing boat which increased its revenues by $400,000 in the first month of operation. To purchase the new boat and make it operational, the company incurred the following expenses:

$55,000 on the new boat

$12,000 on repairs

$10,000 on custom duties and coastguard permits

$15,000 on recruitment of a boat crew and purchase of fishing gear

Before investing in the new boat, the company only made $250,000 in monthly revenues. The company wants to see the impact of the investment on their gross monthly income in order to estimate potential earnings and profits in the coming months. An improved gross monthly income will guide the company's future investments.

To get the business's gross monthly income, first we need to calculate the expenses for the project.

Fishing boat expenses:

$55,000 + $12,000 + $10,000 + $15,000 = $92,000

To work out the company's gross monthly income, deduct the project expenses from the total revenue for the month.

Gross monthly revenue:

$250,000 + $400,000 - $92,000 = $558,000

The gross monthly income for Jimmy Lam's fish processing company after buying the fishing boat is $558,000. This represents a $308,000 increase in monthly revenue for the business.

This result projects that the company's investment in the fishing boat will increase its profitability in the long-term.

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