An annual salary is the gross pay that you earn per year. This does not take into account income tax, social security, medicare, state and local taxes, or other withholdings. Net pay is the total earnings you receive after all of the above items are withheld from your pay. Overall, it’s important to under your hourly wage and what that equates to as an annual salary. This allows you to better understand different employment options or job offers, and allows you to better negotiate with current or potential employers.