What is the difference between gross salary and net salary?
23 de February, 2024
Have you ever hesitated when asked what your salary expectations were at a job interview? Was it because you were unsure about the difference between gross and net salary?
In fact, the difference between the two is not always obvious to everyone. But it’s essential to be aware of the aspects that influence both amounts, not only when accepting a job, but also as a matter of financial literacy. After all, we’re talking about your monthly salary and your budget.
What is gross salary?
The gross salary is the total amount paid by the company to the employee before taxes, deductions or withholdings are applied. Typically, it is the highest figure on your payslip.
The gross salary can be made up of components such as the employee’s basic pay, any commissions or bonuses, vacation and Christmas bonuses, other allowances (e.g. sick pay), vacation pay, among others.
Various deductions can be made from the gross salary, the most common of which are Social Security deductions and IRS withholding tax. In the case of IRS, the amount deducted depends on various factors such as the amount of the gross salary itself, the worker’s marital status, the number of dependents, among others.
What is net salary?
The net salary is the final amount after the respective taxes and deductions have been applied. This is the amount actually received by the worker. By checking the details of your payslip, you can better understand the difference between your gross and net salary.
The sum of the net salary also includes any extra-wage benefits received by the employee which are exempt from deductions/contributions. This is the case, for example, with the meal allowance, which is exempt from IRS and TSU up to a maximum of €9.60/day in meal cards or up to a maximum of €6.00/day in cash. This makes it possible to maximize the liquidity of employees in meal and food expenses.
Read also: Meal allowance: Everything you need to know