Before checking inthe key factors of net salary calculator UK, here is what net salary means:
Net Salary or net pay is the amount of money payable to the employee after deducting the necessary taxes and other withholdings from his or her gross salary. It is the amount remainingfor the insurance for that individual and paid on the day of payment. Net salary is also termed as take home pay.
Therefore, the net salary is calculated as:
[Gross salary – Payroll taxes – other with holdings and deductions = Net Salary]
Elements of Net Salary Calculator UK:
Now, let’s have a look at the different elements of calculating net salary:
- Gross pay- It is the actual amount of wages and overtime payments earned by an employee or the total compensation of salary.
Gross salary may also consist of other types of compensation, such as bonuses and commissions, etc.
- Payroll taxes- This is the amount of money that is deducted from the gross salary of the employee.
This is the government-validated sum of payroll taxes which is to be drawn from the employee earnings. The amount is generally forwarded by the employer to the government.
There are certain typical types of payroll taxes which are:
- The Social Security Tax and
- The Medicare Tax
- Cost to company (CTC)- It is the amount of money that the company incurs while recruiting an employee. CTC comprises of certain elements and is cumulative to Provident Fund (PF), House Rent Allowance (HRA), Medical Insurance (MI) and so on which are included in his or her basic salary.
- Other withholdings and deductions- Just like the payroll taxes, these deductions are also made from the gross salary of the employee.
There is a long list of possible deductions that an employer or a company can make from its employees’ earnings. Such deductions are basically to pay for benefits, garnishments and for the loan repayment.
Here are some of the instances of the above-mentioned deductions:
- Spousal support garnishment
- Child support garnishment
- Unpaid taxes garnishment
- Unpaid loans garnishment
- Portion of the medical insurance paid by the employee
- Portion of the life insurance paid by the employee
- Portion of dental insurance paid by the employee
- Money payable by the employee to company of advances
- Money to be paid by the employee to his or her company for goods purchased on behalf of that individual
- 10.Withdrawal for stock purchase plan
- 11.Withdrawal for certain pension plans
- 12.Deduction based on trade union dues
- 13.Deductions based on the charitable causes
These are some primary points which are considered by the net salary calculator UK while calculating the payable salary.
Easy example of calculating net salary from gross salary:
So, if the gross salary of an employee is £1000 (say), then deductions of £52 for social security, £100 for mediclaim, £30 Medicare insurance, and £10 in trade union dues, that person’s totalnet pay will be £808.
On A Closing Note
The derivation of gross salary and all the other with holdings are added to the remittance advice. This accompanies a net payment to the employee so that the individual can easily figure out as to on what basis his or her net salary is calculated.