When we negotiate an employment contract, it is important to make the conditions clear to avoid misunderstandings . One of the most important things is to learn the difference between gross salary and net salary, something that will be reflected in what we charge each month. We will also teach you how to calculate the net salary so that you know what you really receive for your work.
- It may be useful to you: Salary tables according to the labor field where you work.
What is the difference between gross salary and net salary?
We all have more or less clear what a salary is: an economic amount that a worker receives for rendering his services to a company or entity. Below we explain the difference between gross salary and net salary.
1. Gross salary
We can define the gross salary as the amount of money that the company or entity returns to us for our work before subtracting tax withholdings and contributions . Therefore, it is not the figure that we will finally end up receiving.
To the base salary (the exact amount that has been agreed) we must add concepts that are not subject to these tax withholdings, such as travel costs, salary supplements, the seniority bonus or any type of supplement that we have agreed in the contract. The result is the gross salary.
2. Net salary
The next step is to subtract from the gross salary all that amount of payments and tax withholdings that we mentioned before. In general, there are two types of withholdings: payment to Social Security and Income Tax on Individuals , also called IRPF.
Once we have subtracted these amounts, we will obtain the net salary. This figure is especially relevant in the employment contract, since it is the money that we will finally receive in our checking account. In short, the salary that will allow us to lead a normal life.
How to calculate the net salary
Once the difference between gross salary and net salary has been explained, we will help you calculate the net salary. To obtain a definitive figure, you must follow these simple steps that will help you know what you receive each month.
1. Find out your type of contract
The first thing you should know is the type of contract you have (temporary or indefinite). The fact is that depending on the type, Social Security will subtract a percentage or another . The difference is not very significant, but it is still important to calculate what exactly you will charge.
2. Calculate the social security withholding
If you have a temporary contract, they will retain 6.4%, while the retention of a permanent contract is 6.35%. This means that if, for example, you have a gross salary of 1,000 euros, at least 63.5 euros will be for Social Security.
3. Calculate the personal income tax
Next we must calculate the personal income tax, the payroll monster and salary devourer. The percentage must not be less than 2% nor more than 46% , and varies depending on the amount received. Make sure you have this number clearly specified in your payroll and contract.
4. Subtract it from the gross salary
When you have calculated these two withholdings, it is time to add them and then subtract the resulting figure from the gross salary. The total amount is the money that you will receive in the checking account.
What is the personal income tax withholding
The amounts that have been withheld throughout the year may exceed what is allowed or fall short. Depending on this, the Treasury will return money to you or make you pay when you make the Income Tax Return . The amount depends on many factors, such as your gross salary, monthly withholdings or the number of contracts you have had in a year. The page of the Tax Agency has more information.
Agree on gross salary or net salary
We have already seen that there is a substantial difference between gross salary and net salary and that we can calculate what we really earn each month by finding the percentage of the two withholdings. Taking this into account, is it better to negotiate with the employer the gross salary or the net salary
Many of you will think that it is best to negotiate based on the net salary, but the truth is that during a negotiation the withholdings are not taken into account , so the gross salary is the figure that is put on the table. From there, you must take into account the type of contract (for payment to Social Security) and know that a higher salary implies a higher personal income tax payment.
Now that we have these concepts clear, keep them in mind when you go to sign your next contract and make the conditions clear from the beginning. As we have seen, it is not as complicated as it seems.
- You can also read: The 8 worst paid jobs in Spain.