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For each individual when participating in labor, surely all of us will be interested in our own salary regime. So, today Pham Consult will introduce and advise you on two popular salary forms, The Net salary and The Gross salary to protect your best interests!
1. What is The Gross salary, The Net salary?
Currently, the law has not specified the concept of the Gross salary and The Net salary, but in common understanding, you can understand:
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The Gross salary:
- The Gross salary is the total monthly income that employees receive, including basic salary and allowances, allowances, commissions, etc., which includes insurance contributions and personal income tax. (personal income)
- However, every month the employee receives the Gross salary. The employee must deduct to pay social insurance and PIT (if any), so the actual amount received will be less than the Gross salary.
- Under the provisions of Decision 595/QD-BHXH in 2017, the rate of deduction of social insurance contributions from the employee’s salary is determined as follows:
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Rate of the deduction for compulsory insurance contributions |
|||
|
The pension and survivorship fund (social insurance) |
Unemployment fund (UI) | Health fund (HI) |
Total. |
| 8% | 1% | 1.5% |
10.5% |
2. The Net salary:
- The Net salary is the actual salary that the employee is paid monthly by the company after deducting all expenses such as insurance and personal income tax.
- Accordingly, you can understand the relationship between The Net salary and The Gross salary as follows:
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The Net salary = The Gross salary – (Social insurance + Health insurance + Unemployment insurance + PIT) |
2. What are the advantages and disadvantages of these two types of salary?
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|
The Net Salary |
The Gross Salary |
|
Advantages |
Employees can actively calculate their salary. | Employees receive the correct amount according to their agreement. Employers will calculate and pay insurance and taxes for employees. |
|
Disadvantages |
Employees have to calculate the amount of insurance and income tax by themselves and update the regulations on payment of the above amounts to avoid being miscalculated by the employer. |
This salary is to pay insurance for employees, so the premium may be low, leading to low insurance benefits.
|
3. Should employees receive The Gross salary or The Net salary?
- It can be seen from the above comparison that whether receiving The Net salary or The Gross salary, the actual salary received by employees is still the same. However, each payment method will have its own advantages and disadvantages.
- In case workers receive The Net salary, they may face more risks. For example, in some cases, businesses can reduce costs by paying for health insurance through the Net salary (lower contribution rate) making the insurance benefits of employees will be lower. Than actual interests.
- Most experts recommend choosing The Gross salary because most of the insurance contributions, taxes, and other benefits (maternity, occupational accident, …) that employees are entitled to are based on. The Gross Salary.
Therefore, for each specific case and individual, you should choose an appropriate salary form to actively protect some of your rights when enjoying social insurance regimes.
PHAM CONSULT is a unit specializing in providing tax consulting services, financial consulting, accounting services, preparing and paying salaries. Customers can contact us via hotline: (84-28) 3930 2487 or Facebook communication channel: http://bit.ly/phamconsult if you need support.
