Difference between gross salary and net salary
When we go to a job offer and they inform us of the salary to be received, the figure is always gross, then they usually add another piece of information, whether it is 12 or 14 payments. Therefore, it is important to know what they are referring to and thus have a clear and accurate idea of the monthly salary to be received.
But let’s start with the basics, let’s define what “gross and net” means:
The gross salary is the salary that the worker receives for his or her work in the company, that is, it is the basic salary plus salary complements such as seniority, night work, overtime, overtime, toxicity, improvements… and that you will see written down in the payroll as “total accrued”.
However, this will not be the final amount you will receive, as you will have to deduct Social Security contributions and Personal Income Tax (IRPF) from this gross salary.
The net salary is, therefore, the salary you receive after deducting income tax withholdings and social security contributions.
Important: Salaries of less than 14,000 euros are exempt from IRPF.
And if I am self-employed or an SME, how does it affect me?
If you are self-employed, you should take this into account when invoicing. When you invoice a product or service, the cost that you will put on the invoice is the gross cost (in it you will take into account the cost of production and the necessary profit margin). While the net price (final sale price) is the one that will specify the taxes.
The formula to use is:
Net price (selling price) = Gross price – IRPF + VAT.
On the other hand, if you are a company, you will talk about gross and net profit. That is to say, you will have to subtract from the gross profit the general costs of realisation, taxes, interest and depreciation.
The formula to use is:
Net profit = gross profit – taxes – overheads – interest – depreciation.
How to calculate your net monthly salary in Spain
Steps to calculate the net salary.
Taking into account the previous point, and by way of a brief summary, in order to calculate what your net salary would be you should follow these steps:
Social Security contributions. These are 6.35% of your gross salary. However, from 49,000 euros upwards, these contributions will be 3,101.42 euros.
PERSONAL INCOME TAX. The IRPF withholdings will take into account certain family circumstances such as whether you have minor children or dependent family members over 65 years of age, as well as whether they have or you have a degree of disability and other variable issues (flexible remuneration, bonuses, etc.). The important thing to remember is that salaries up to €14,000 are exempt from personal income tax.
However, the Tax Agency (AEAT) has a programme that calculates withholdings.
Is the minimum wage gross or net?
Given that we often talk about the minimum interprofessional wage (SMI), we would like to clarify that this wage is gross and that, therefore, once Social Security deductions and personal income tax deductions have been applied, the resulting net amount will be the amount that will be received in the pay cheque.
In short, if we want to refer to the real amount that the worker will receive, we should always talk about the net salary to be received, whether this is annual or monthly.