How to distinguish between gross salary and net salary
Gross salary and net salary are common concepts in salary agreements. Most businesses today pay gross salaries to employees. So what is gross salary and what should you keep in mind when receiving gross salary to avoid being disadvantaged? Readers are invited to learn more about gross and specific monthly salary report through the following article by Smart Solutions For Business Company Limited(S4B Vietnam).
1. What is gross salary?
Gross salary is the employee’s total salary, including basic salary, allowances, allowances, responsibilities, commissions, insurance payments, and personal income taxes that the business has not yet paid. This salary is not the salary that the employee actually receives because it must also deduct the amounts payable according to regulations such as insurance and taxes, if any. So the salary you actually receive monthly will be lower than the gross amount agreed with the business in the monthly salary report.
According to Decision 595/QD-BHXH, insurance premiums are prescribed as follows: Social insurance is 8%, health insurance is 1.5%, unemployment insurance is 1%. Thus, when receiving gross salary, employees need to deduct a total of 10.5% to pay insurance in accordance with the law.
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2. Distinguish between gross salary and net salary
If gross salary is total income without deduction of mandatory amounts, then net salary is the actual salary received by the employee, with social insurance, personal income tax, and other expenses deducted. These two concepts often appear in interviews and payroll monthly report. Depending on the company’s policy or the candidate’s wishes, both sides will negotiate the appropriate gross salary or net salary.
Suppose the employee has an agreed gross salary of 15 million from the company, then when receiving the salary, the actual number will be less than 15 million, due to the need to pay social insurance, personal income tax… If the agreement is 15 million net salary, this will be the exact amount the employee receives at the pay period.
Distinguishing gross salary and net salary clearly will help workers estimate their actual income and make wiser decisions before the employer’s invitation. On the business side, unifying salary forms will make salary calculation and human resource management more convenient. However, in some cases, the company can flexibly exchange gross salary or net salary depending on the candidate to achieve recruitment purposes.
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3. Notes to receive accurate gross salary
When negotiating gross salary, employees need to pay attention to the following issues:
- Proactively update regulations on social insurance and personal income tax. The reason is because the insurance premium and tax deduction will change from time to time. If you don’t know the information well, you won’t know whether the amount you’ve been deducted is correct or not.
- Please carefully check the insurance salary because it is related to the money you receive when you retire or when you are sick or pregnant. Please monitor information via the VSSID app and immediately notify company HR if there are any abnormalities.
- In addition, don’t feel discouraged when the salary you actually receive is lower than what was agreed upon. The entire deductible amount still belongs to you.
4. Should employees receive gross salary or net salary?
After knowing what gross salary is, employees will certainly wonder whether they should negotiate gross salary or net salary. In theory, if you choose gross salary or net salary, the actual amount received will not change. Each type will have its own advantages and disadvantages.
In reality, according to many people’s experience, receiving a net salary will cause workers to face more risks. The reason is because when you receive your net salary you will not know how much social insurance is paid (usually companies will pay the lowest level). This causes employee benefits such as unemployment benefits, pensions, maternity benefits, etc. to be calculated at low levels.
Meanwhile, if you accept gross people, the entire insurance premium will be calculated at this level. Thanks to that, the benefit level will also be higher than the net salary. Although when you receive your salary you are disappointed because of the deductions, but in fact it is very beneficial later. So when negotiating salary, prioritize gross salary to ensure all benefits for yourself.
5. Payroll service company helps calculate salaries more professionally and effectively
Manual salary calculation on Excel is no longer a suitable and optimal solution for many Vietnamese businesses in the current period. Because this method is prone to errors, it wastes time and highly qualified human resources of the organization. Instead, many businesses decide to use an easier payroll monthly report.
The payroll service company is considered the optimal solution for businesses with a scale of 100 employees or more and a highly qualified staff. The solution helps HR save up to 50% of time and effort in calculating salaries and bonuses, increasing work efficiency and saving a lot of costs.
Hopefully, through the information provided above by Smart Solutions For Business Company Limited(S4B Vietnam), it will help readers understand what gross salary is and what to note when negotiating gross salary with businesses. In addition, readers should also regularly update information and regulations related to insurance, taxes… to avoid being disadvantaged.
Smart Solutions For Business Company Limited(S4B Vietnam)
- Address: Unit 602A, Tower A, Handi Resco Office Building. 521 Kim Ma Street, Ba Dinh District, Hanoi
- Tel: + 84 24 3974 4181
- Email: service@s4b.com.vn
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