You're filling out an application or a form, and suddenly your mind goes blank. Has gross and net pay ever gone haywire? Worry not, you aren't the only one who's ever had that happen to them. We collected an information package for you about gross salary, net salary and what is most commonly deducted from your gross salary. Useful information for those considering light entrepreneurship, and anyone else!
Taxes and fees are deducted from gross wages
Gross salary is a nice-feeling clear amount, but unfortunately you'll never see it in your account as a whole. When the salary is discussed in the employment contract or even in the job advertisement, it is reported as gross wages. Taxes and other mandatory charges have not yet been deducted from the amount. You will not receive the entire gross salary into your account, but the remaining amount after deductions. How many deductions your salary leaves depends on a lot of things. We'll tell you more about it below.
Net salary appears in your account
The net salary is all yours! Net salary is therefore the amount you receive after deductions to your account. Deductions refer to statutory contributions that the employer or billing service provider is forced to pay. You don't have to worry about deductions, whether you're in a traditional employment relationship or a light entrepreneur working through an invoicing service. You can use your net salary the way you best see fit. After your own expenses, of course.
Hint! When you sign a contract as a light entrepreneur, think carefully about your pricing. How much do you want to be paid after the mandatory payments? Ask us for advice!
What is deducted from gross wages?
Taxes, i.e. withholdings based on your tax rate, are deducted from your gross salary. In addition, earnings-related pension, unemployment insurance, health insurance and accident insurance contributions will be deducted. Your money will not be wasted, as the system has been created for your benefit. You don't have to do anything. If you are in an employment relationship, the employer ensures that the payments are taken care of and your taxes reach the tax authorities.
At Truster, we've taken the system to a new level. If you're considering light entrepreneurship, what kind of security would you need to make your work life better? Explore the options and choose the right plan from Truster.
How much is left of your salary?
When you agree on a new job through a light entrepreneur's invoicing service, or enter into a new traditional employment relationship, you cannot agree on a net salary because each of us has an individual tax rate. Your tax rate will have a significant impact on how much money you have to spend. You can draw indicative conclusions about the tax rate based on how much you earn per year, where you live, and how old you are, but each person is still assigned their own tax rate.
Do you think the net salary is right?
Does it feel like the net salary is lower than it should be? Or are you wondering if you've paid enough tax? Keep your tax rates up to date so there won't be any nasty surprises towards the end of the year.
It may be difficult to predict full-year earnings in advance, but the taxman still wants some sort of estimate. If you earn more than you thought, you might want to raise the tax rate a little – and vice versa. You can change your tax rate online at any time. And it's worth it! You don't keep paying too much tax or even worse, you don't have to pay taxes afterwards in the form of back taxes.