Salary is a consistent payment that is made to the employees by their employer for the number of hours or months of work put by them. The payments are made at certain intervals depending on whether you are a wage earner or a monthly earner. The entire salary that is provided per month or week is calculated for the yearly income. The net salary can be assessed using Net Salary Calculator UK.
To assess net salary, understanding the components of salary is essential:
Basic Salary – This is a particular amount that is payable to the employees for the amount of performance or work kept into the company. After any deductions or raise, the allowance is made and the basic income is generated. This is a fixed sum and is the core salary amount for any employee. This amount doesn’t vary generally unless a raise or a promotion is given.
Gross Salary – This is the salary which includes all the amount included for an employee when working in a company for 1 year. This amount does not include the deductions such as medical insurance, income tax, Provident Fund and so on. This salary does include overtime pay, bonus, vacation payment, payable leaves and so on. Gross salary incorporates, HRA- House rent allowance, basic salary, conveyance allowance, special allowance, etc.
Basic difference between Gross Salary and Basic Salary
As mentioned above, Gross salary incorporates bonuses, overtime pay, vacation pay, etc., however, does not include taxes and other reductions but a basic salary is the fixed amount of income that is given by the company to the employee when hiring which would not include overtime, bonus or other compensation amounts.
CTC -Cost to Company
This is the price which a company spends either directly or indirectly in sustaining or hiring the services of that worker/employee. This is also referred to as Total salary package. It is the expense that an employer spends on an employee per year.
Components of CTC are as below:
- Basic Salary
- HRA – House Rent Allowance
- Vehicle Allowance
- Dearness Allowance
- LTA – Leave Travel Allowance
- Conveyance Allowance
- Medical Allowance
- Incentives or bonuses
- Telephone/Mobile Phone Allowance
- Special Allowance
- Company Leased Accommodation
- Food Coupons
- Subsidized meals
- Income Tax Savings
- Interest Free Loans
- Premiums of Health and Life Insurance provided by the employer
Contribution to savings
- Superannuation Benefits
- EPF – Employer Provident Fund
Calculating Net Salary
To have a precise understanding of calculation of the net salary,which is also the take home income, a ready equation can be used. This income is the income after deductions for PF, tax and other liabilities.
Net Salary = Gross Salary -Public Provident Fund -Income Tax – Professional Tax
Distinction between Gross Salary and Net Salary
Gross Salary is the income generated after adding all the benefits and allowances prior to tax and other deductions whereas Net salaryis computed using a Net Salary Calculator UK is the take home salary which comes after deductions such as pension, income tax, professional tax and so on.
It is evident from above that net salary is lower than gross salary. This Net salary can be conveniently calculated using aNet salary calculator UK.