If you are an employee, you usually hear about your gross and net salary, but do you clearly know what the relationship is between the two?

To the amount that you receive as gross salary, discounts and deductions must be applied for the obligations that you have as a worker with Social Security and with the Tax Agency. These discounts and withholdings is your employer (your payer) who must pay them. Discounting these concepts from your gross salary, you get your net salary.

In general, and when determining salaries, the gross salary is generally used. This is the case of the determination of the Minimum Interprofessional Salary, or the salaries established in collective agreements.

Both the employer and the worker must pay, respectively, the part of the contribution that corresponds to each one, and it is not possible for one to transfer his/her obligation to the other.

When should the employer make the Social Security and Tax Agency discounts?

The employer must make these discounts at the time your remuneration is effective. Thus, the employer cannot unduly accumulate discounts on subsequent employee remuneration. This is prohibited by law, since it can cause serious damage to the worker, who sees his income (earned wages) reduced.

To calculate the net salary from the gross salary, amounts must be deducted and withheld for Social Security and Tax Agency. It is advisable to agree on a gross salary, and not a net one.

To calculate the net salary from the gross salary, amounts must be deducted and withheld for Social Security and Tax Agency. It is advisable to agree on a gross salary, and not a net one.

How to calculate your annual net salary, starting from your agreed gross salary, or from the one set by the applicable collective agreement?

1) Firstly, calculate the contribution that corresponds to the worker in the Social Security contribution. For this, the type of contribution is defined as the percentage that, applied to the contribution base, results in the fee or amount to be paid. The type of contribution, to determine the respective contributions of the employer and the worker required to contribute, are established annually in the corresponding General State Budget Law. In addition, maximum and minimum contribution bases are defined annually that may not be exceeded in any case. In another post we will explain in detail how to obtain the type of contribution and the maximum and minimum of the contribution base.

2) Secondly, obtain the corresponding income tax withholding percentage. This is, since the employer must make deductions on account of personal income tax on the remuneration of their workers and pay them into the Public Treasury, the percentage of personal income tax that applies in each case must be obtained. In another post we will explain in detail how to obtain the type of withholding.

3) Knowing the two previous contributions of the employer (to Social Security, and personal income tax), both are subtracted from the agreed annual gross salary.

And do you know how to calculate your gross salary from your annual net salary?

In the first place, it is important to highlight that it is advisable not to agree to net wages, since, in that case, the resulting real wage will fluctuate in some cases to the benefit of the worker, and in others to the company, depending on the particular situation of the worker. That is, by increasing the net salary of the worker with what corresponds to contribute to Social Security, and the withholding that corresponds to pay on personal income tax account, it can have consequences on the contribution, by generating a contribution base that will vary from time to time and with every assumption.

For the same reason, obtaining the gross salary from the net is not easy. From a series of approximations, it is possible to obtain the fictitious gross salary that the worker supposedly charges to, thereby re-approximate the net salary that would correspond in that case.

If you need to solve your Labor Law problems (dismissal, workplace harassment situations, etc.), do not hesitate to contact the Pérez Parras Economists & Lawyers law firm. We are experts in this area of Law.

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