How to calculate the net and gross salary?

calculate net and gross salary

Knowing how to calculate the net and gross salary will allow you to have clear accounts!

You've done the math. You are sure that you are working the full hours, not less, that you are fulfilling all your tasks, and even then you do not know why your payment is less than what is stipulated. Or, perhaps when signing a contract, you have noticed two different figures and do not know what they mean.

The net and gross salary are two totally different things, and learning to calculate them is an advantage in that you will always know how much you are earning at all times, allowing you to organize your finances and budgets for the month with more confidence.

What is gross salary?

Gross salary is the term that is given to the total amount of money that is paid to you (either for every hour, monthly or annually). This reflects the amount before deductions are applied, among which are taxes, insurance and other additional fees that the company or business for which you work may establish.

If you work more than one job, you will have a gross salary for each one. When requesting the extension of a loan, lenders will usually want to know what your gross salary is to know if they should grant it or not.

How to calculate the gross salary?

You will usually know what your gross salary is when signing a contract with a company or wherever you go to work, since this is always reflected in the contract. But in any case, here we explain how to calculate it. We try to cover all cases, but if your payment is made monthly, you already know what your gross salary is.

If your salary is expressed by hours of work, you must first know how much you are paid annually. To do this, multiply the amount of money paid each hour by the total hours you work weekly, and then multiply the result by 52.

From here you can also know your gross salary if your salary is expressed in an annual sum. Once you have your annual salary, you must divide the amount by 12 and the result is your gross monthly salary .

What is net pay?

This amount is the one that you will usually receive in your account or reflected in your income once your salary payment has been made. Simply put, take-home pay is the money paid to you after all deductions have been applied. In addition to the aforementioned, they may also include - and not be limited to -:

  • Pension deduction.
  • Charitable donations.
  • Health insurance
  • Medical care.
  • State and local taxes.

Keep in mind that the net salary will always be lower than the gross salary , as it is the result of the deductions applied to your salary. When it comes to budgeting and knowing how much money you have, you must calculate your net salary , as it is the money you enjoy when a payment is made.

How to calculate the net salary?

Calculating the net salary is easier than you think. In fact, there is a very simple formula that allows you to calculate it in seconds.

  • Net pay = gross pay - deductions.

As you can see, you will first need how much your exact gross salary is in order to calculate your net salary . If you haven't done it already, follow the steps from the previous point.

If you have any questions, you can always check with your company's human resources department to find out what is stipulated in your contract and what deductions are made from your monthly salary. Some deductions, such as insurance and retirement plans, are optional, and you can withdraw them from your contract whenever you want.

Now that you know how to calculate the salary, you can better plan your budget to save money based on your salary.

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