The salary or salary is the part that the company pays a worker at the end of the month for the work performed. There are two types of salary, the gross and the net. In fact, when we talk about net pay, we mean the liquid part that the worker receives at the end of the month. However, this amount is the result of gross salary after deducting other payments. For this reason, in reality, the part that the company pays out is greater than that of the net salary.
Many people ask companies or individuals "What is your salary?", Or "How much do you charge?", When in fact the question is inaccurate. Some will tell you the gross salary or the net salary and others will ask, "Do you mean the gross salary or the net salary?" The part that as a worker you will end up receiving and with it you will face your expenses each month is that of the net salary. For this reason, we are going to take a closer look at how it is obtained, the expenses that are deducted, and perhaps help you to negotiate a possible salary increase.
Differences between net salary and gross salary
The gross salary is the total amount that the worker receives from the company in concept of the services performed. No withholding has yet been applied to this salary. In addition, the gross salary includes all the payments that the company pays apart from the base salary, that is, if there are overtime, commissions, salary supplements, extra pay, etc. Non-salary perceptions are also added to the gross salary, such as whether there are allowances, transportation bonuses, compensation, benefits, etc.
Finally the gross salary is they discount (retain) social security contributions and personal income tax, and the result is the net salary. There is no single type of withholding, and it varies depending on each contract, type of work (if it is temporary or permanent), amount of salary received, as well as the personal situation of each person (if they are married or have children) . It is in those cases when the correct withholding is not applied that when making the income statement it may or may not be in our favor.
Personal income tax on income and payroll
As we have previously explained, certain withholdings are applied to the Gross Salary and thus we arrive at the Net Salary. One of them is personal income tax, the "personal income tax." The personal income tax in the payroll is an advance on what we will have to pay to the Treasury when making the declaration. In case of having paid little, it will be "to pay", and in case we have paid more in our payroll, it will be "to be returned".
When paying the Treasury, tables are applied with percentages of what we will have to pay. The statement includes all income received, not just work. This percentage that we will have to pay as Personal income tax works by sections, that is to say, the percentage is not on the total received, but according to the final amount a different percentage according to the income you earn. To better understand how the net salary is obtained, we are going to see the different sections in percentage that exist.
The different sections of personal income tax
- From € 0 to € 12.450: The 19%. If the annual earnings do not exceed € 12.450, the personal income tax to be paid will be 19% of the total amount earned. That is, if € 10.500 have been won, € 1.995 will be paid.
- From € 12.450 to € 20.200: 24th%. In this case, the first € 12.450 will be paid at 19%, which would be € 2.365,50 and the rest at 24%. If the person had earned € 18.450, they must pay 24% of the excess of the € 12.450, in this case € 6.000. In total, it would be € 2.365 (from the first section) and € 50 from the second section, in total € 1.440.
- From € 20.200 to € 35.200: The 30th%. As in the previous case, the entire first tranche would go to 19%, then to 24%, and the surplus of € 20.200 to 30%.
- From € 35.200 to € 60.000: 37%. Successively the previous format is repeated, for this case and the following ones.
- From € 60.000 to € 300.000: 45%. Until very recently, everything in excess of € 60.000 was paid at 45%. However, with the new budgets for 2021 made by the current Government in Spain, a new section is expected to be approved.
- € 300.000 or more: 47%. This new section would be the new one that would enter for next year 2021 in which from € 300.000 the tax would be increased by 2 percentage points.
Payment to Social Security
The percentage paid to Social Security, on the other hand, does not take into account the level of income or the context of the person. It is paid by both the company and the worker. The company is the one who makes the largest payment (usually 30% to 40% of the gross salary paid to the worker). The worker on his payroll what he will find is a retention that usually ranges between 6% and 7%. The concepts for which you are going to quote and consequently you are going to be retained are the following.
- Unemployment: 1%.
- Common contingencies: 4%.
- Vocational training: 0%.
- Additional contribution for overtime: 2%.
- Rest of overtime: 4%.
The extra payments in the Net Salary
The extra payments on the contrary to the monthly salary, are exempt from paying Social Security. For this reason, they are not exempt from paying personal income tax, since it is part of the income earned throughout the year. So the personal income tax is deducted from them, leaving the net salary as a result. Remember that in the payment of personal income tax, all income received during the year is taken into account, not only those received as wages. These bonuses are part of the salary of the worker and have been postponed. In addition, these payments are usually well received by everyone since they coincide with times when higher expenses are usually faced. there are usually 2, the December one for Christmas and the June one for the summer holidays.
Something to keep in mind is that the extra payments are not an obligation of the company, and each one follows its own criteria. Some companies have more extra payments, such as 3 per year, and others, on the other hand, only 1 or even some cases without payments. Everything will also depend on the conditions in which you are hired.