Differences in Employee Gross and Net Salary – Career plays a very important role in making a responsible individual. For some people, a career or job is just to pass the time. For some it may be a decent source of income, and for some, it is life.
Someone who works in an agency or company aims to be useful to others around him. By developing the knowledge gained and seeking more experience in the world of work, as well as to get paid/income which is commonly referred to as salary.
Companies should have standard procedures for payroll and policies in terms of providing incentives for employees. In preparing the payroll system, it should be able to give influence to achieve several goals.
But, surprisingly, the salary received by the employee is confusing, because the salary stated is different, less than the agreed amount. Where’s the rest? are the most common questions asked by employees. However, not many know the difference between the salary received net, and the salary received gross.
In this article, we explain what is gross salary and net salary and what the difference is between of both.
What is Salary?
A salary is a regular payment made by an employer to its employees in return for the work done by the workers.
Salaries are paid to employees at fixed intervals, but generally monthly, and are often expressed as an annual amount.
In Indonesia, the salary measurement is usually done in a period per month. And salary is also usually determined by comparing with what employees earn in the company (position/level of position, location of the company and region also affect salary).
Definition of Basic Salary
A fixed amount paid to employees in return for the work done by them. Basic income is obtained according to the level or type of work, the amount of which is determined by mutual agreement.
In Article 94 of Law Number 13 of 2003, it is further explained that the amount of the basic wage component is at least 75% of the total basic wage and fixed allowances.
Base salary is a fixed part of an employee’s compensation structure and is the core of an employee’s salary, prior to any reduction or increase due to overtime or bonuses, other benefits.
Definition of Employee Gross Salary
Gross salary is a term used to describe all the money an employee has earned while working for the company. Gross salary itself is the total amount of money from components of basic wages or fixed allowances, non-fixed benefits, overtime wages, bonuses, other income, before any deductions, whether income tax, pension contributions, Jamsostek/BPJS contributions and other deductions has been agreed upon by the company and the workers issued/paid by the company to the workers.
Definition of Employee Net Salary
Net salary, or more commonly referred to as salary earned, is the income actually received by an employee after deducting taxes, savings, and other deductions.
Net Salary is equal to (=) Gross Salary (deducted) Income Tax (deducted) Participation in Jamsostek/BPJS Employment and Health BPJS as well as pension insurance and (deducted) Professional Tax.
Net salary is usually lower than gross salary. This can be the same in cases where the income tax is 0 and when the salary earned by the employee is less than the government tax limit.
What is the Difference Between Gross Salary and Net Salary?
The difference between gross salary and net salary as explained below:
- The annual compensation decided initially without withholding is known as gross pay, and the amount remaining after deducting taxes and benefits is known as net pay.
- Gross Salary is always higher than Net Salary.
- It is best to see between gross pay and net pay, net pay always depends on gross pay.
- Net Salary is derived from the Gross Income Guide after all adjustments and allocations.
- Gross Salary includes all the benefits that benefit the employee, which the employer pays annually while the Net Salary is a fixed amount enjoyed by the employee each month.
How to Calculate Gross Salary & Calculate Net Salary ?
For more details, you can contact Indoservice.
Understanding how to handle payroll for employees can easily turn into a nightmare quest. Different types of wages, deductions, and labor laws all need to be properly considered and dealt with.
To stay abreast of legal requirements and payroll rules, you just need to start tackling the important things one at a time. Understanding the difference between gross and net salary may be the first to conquer.
If you need outsourced Payroll services. You can contact Indoservice now!
Indoservice offers accounting, tax and payroll outsourcing services centered on businesses in Indonesia. At Indoservice, we have a dedicated team of professionals who will work with the needs of a good accounting, tax and payroll system for your business. You can count on us to provide the quality service that best suits your needs.