Articles Blog

The Difference between Gross Pay and Net Pay

Employees who get minimum wages are often surprised to realize that they get paid with an amount smaller than they expected. Checking their pay slips to see how is that so, they see the words “gross pay” and “net pay” on it, as well as their corresponding amounts. These words, by the way, are specifically used in salary talks and you will not find them printed in any money-related sheets except from your pay slip.

The net pay is always a smaller amount compared with the gross. If you wish to get the bigger amount, prepare to get disappointed as the actual wage credited to you is always the smaller one- the net pay. How, exactly, is this amount computed and why does your salary almost always comes smaller than your expected basic salary plus the bonuses?

Well, the net pay is the total amount from the total earnings that you have within a pay period. Basic wages, bonuses, over-times, allowances, holidays and everything related all make up your total gross pay. From this gross, two things are deducted. The first one is the basic deductions as mandated by the government like taxes and national insurance. The other thing is the so-called personal deductions of your other financial obligations that you have secured using your salary wage. This includes pension and loan debits, if you have any of these.

If you want to know the biggest deduction, look at your taxes. This swallows a huge chunk of your budget. If you wish to know how this gets computed, ask your payroll specialist and he would be happy to explain.