Glossary
What is gross salary and net salary?
The difference between gross salary and net salary, which deductions sit between them, and how both relate to what an employee costs the business.
Updated
In short
Gross salary is the sum of earnings before deductions; net salary is what the employee receives after income tax, social security, pension and other deductions. SimpleERP shows both on every payslip and in the payroll register.
Gross salary is the total of an employee's earnings for the period, such as salary and allowances, before anything is deducted. Net salary, or take-home pay, is gross salary minus the employee's deductions: income tax withheld, social security, pension and any advance recovery. Employer contributions sit outside both and are added to gross to give the employer's total cost.
Gross vs net salary: a worked example
Ana M, welder at Harbour Steel Furniture, a fictional business paying in US dollars, in October 2026. Income tax and social security are shown as fixed amounts for illustration.
| Line | Amount |
|---|---|
| Salary | $1,760 |
| Allowance | $190 |
| Gross salary | $1,950 |
| Income tax withheld | −$150 |
| Social security (employee) | −$117 |
| Pension, 5% of gross | −$97.50 |
| Net salary | $1,585.50 |
FAQ
Questions, answered
Is gross salary the same as the cost of an employee?
No. Gross salary is the employee's earnings before deductions. The employer's total cost adds its own contributions, such as employer social security and pension, on top of gross. For Ana M, gross is $1,950 and the monthly cost to the business is $2,125.50.
Which deductions take gross salary down to net?
Usually income tax withheld, the employee's social security or national insurance, and pension contributions, depending on the country. Recoveries of salary advances and unpaid days also reduce what reaches the bank.
Is income tax worked out on gross or net salary?
Income tax usually starts from gross taxable pay, with allowances, reliefs and pension contributions treated as the local rules allow. It is not worked out on net pay. This is not tax advice; ask your accountant.
Where are gross and net totals for the month in SimpleERP?
On the payroll run review screen, which totals gross, deductions, employer contributions and net, and in the payroll register report, which lists every employee with each component and can be exported to CSV.
Related
Keep reading
Payroll register
One row per employee and one column per pay component for a month, with totals that match the salary journal.
Read moreStatutory deductions
Deductions from pay required by law, such as income tax, social security and pension, held as liabilities until paid.
Read morePayslip
The statement of paid days, each earning, each deduction and the net pay an employee receives for a period.
Read more
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