Guide
Gross pay vs net pay, explained simply
Gross pay is what you earn. Net pay is what you get. The gap between them is taxes and deductions, and it matters more than most people think when deciding what to buy.
Gross pay
Your gross pay is your full pay before anything is taken out. It's the number in your job offer and on your contract, and it's how salaries are usually advertised.
Net pay
Your net pay, or take-home pay, is what reaches your bank account. Depending on where you live, these can come out first:
- Income tax
- Social security or national insurance
- Health insurance
- Pension or retirement contributions
- Housing fund, union dues, loan repayments and other deductions
A quick example
Gross pay: 30,000 a month. Deductions: 4,200. Net pay: 25,800.
Net is 86% of gross. Every price you pay comes out of the 25,800.
Which one should you use?
- Comparing job offers or salaries: gross pay, because that's how they're quoted. Then check what each will be after tax.
- Deciding whether to buy something: net pay. You can only spend what you take home, so a price costs you more hours of work than the gross rate suggests.
- Budgeting: net pay, always.
How much difference does it make?
If you keep 80% of your pay, every purchase takes 25% longer to earn than your gross pay suggests. If you keep 70%, it takes about 43% longer. Something that looks like 10 hours of work at your gross rate is really 12.5 or 14.3 hours.
In the calculator: enter your gross pay, then add your take-home % to switch every result to net pay. The take-home percentage guide shows how to find it.