Understanding the difference between gross and net pay is essential for any employee. These two concepts not only affect personal income but also form an important basis in labor agreements. Let's learn the details to make the right choice for your financial plan.
What is gross salary?
Gross pay , also known as gross pay, is an employee's total earnings before mandatory deductions such as insurance and taxes are taken out. This includes:
- Base Salary : Wages are paid based on job title and responsibilities.
- Allowances, subsidies : Additional payments such as lunch, travel or overtime allowances.
- Commission and bonus : Income from work performance.
- Compulsory insurance contributions : Including social insurance (SI), health insurance (HI), unemployment insurance (UI).
- Personal income tax (PIT) : Amount paid to the state based on the employee's income.
For example, if your gross salary is 10 million VND, after deducting insurance and tax, you will receive a lower net amount.
What is net salary?
Net pay , or gross pay, is the actual amount an employee receives after all insurance and taxes have been deducted from gross pay. This is the final amount you can use.
For example: With a gross salary of 10 million VND, after deducting insurance (9.5%) and tax, the actual amount received ( net salary ) can be about 8.9 million VND.
How to calculate gross and net salary
To convert between these two types of salaries, you can apply the following formulas:
- Gross salary = Net salary + (Insurance + Personal income tax)
- Net salary = Gross salary – (Insurance + Personal income tax)
Specific deductions:
- Compulsory insurance:
- Social insurance (SI): 8%.
- Health insurance (HI): 1.5%.
- Unemployment insurance (UI): 1%.
- Personal income tax (PIT):
Calculated according to the progressive tax schedule, applied when income is over 11 million VND/month (after deductions).
For example:
If you receive a gross salary of 15 million VND:
- Total insurance deductible: 15 million x 10.5% = 1,575 million VND.
- Taxable income: 15 million – 1.575 million – 11 million (family deduction) = 2.425 million VND.
- Personal income tax: 2,425 million x 5% = 121,250 VND.
- Net salary: 15 million - (1,575 million + 121,250) = 13,303 million VND.
Distinguish between gross salary and net salary
|
Criteria |
Gross Salary |
Net Salary |
|
Concept |
Total income before insurance and taxes. |
Net amount received after deducting insurance and taxes. |
|
Advantage |
Transparency of income. |
The actual amount received is clear, no need to calculate yourself. |
|
Disadvantages |
The actual amount received will be less after deductions. |
Total income and contributions are not clearly shown. |
Should I receive gross or net salary?
Advantages of gross salary:
- Understand your total income.
- Easier to negotiate higher salaries with employers.
Advantages of net salary:
- No need to worry about calculating insurance or taxes.
- Get a fixed monthly amount.
Tip: If you have good financial management skills, choose gross salary for transparency and control. In case you want to keep it simple and save time, net salary will be the right choice.
Some frequently asked questions
- Does net salary include allowances?
This depends on the agreement between you and your employer. Some companies include the allowance in your net salary, while others separate it out.
- What fees do I need to pay when receiving my net salary?
When receiving net salary , the employer will be responsible for paying mandatory insurance (social insurance, health insurance, unemployment insurance) and personal income tax on your behalf.
Compulsory insurance:
- Social insurance: 8% of salary.
- Health insurance: 1.5% of salary.
- Unemployment insurance: 1% of salary.
Personal income tax (PIT): Calculated according to a progressive tax schedule based on income level.
Understanding the difference between gross and net salary helps you control your personal finances and ensure your rights at work. Consider carefully before making a decision and always ask for transparency from employers about income.
Brand Manager – Specializing in Providing Comprehensive Marketing Services for Brands
Understanding gross salary not only helps employees calculate their income but also supports managers, especially Brand Managers , in planning and allocating marketing budgets. As the link between the business and the market, Brand Managers need to ensure that all resources, including human resources and costs, are used effectively to achieve brand goals.
The importance of Brand Manager in managing gross salary budget
Brand Managers are not only responsible for communication campaigns but also manage salaries and benefits for marketing staff. Understanding the concept of gross salary , allocating bonuses, allowances and benefits helps them maintain employee satisfaction and performance. At the same time, they also balance this cost within the overall budget to optimize the financial performance of the business.
In this way, the Brand Manager acts as a talented strategist, not only ensuring the brand develops but also supporting the team to operate smoothly, aligned with the company's common vision.
