Gross vs net pay: what comes out of your salary

A job offer quotes one number; your bank account receives another. The gap between the two is not one tax but a stack of separate deductions, each with its own rules, rates and ceilings. Once you can name each layer, a payslip stops being a puzzle and you can check it, plan around it and compare offers in different places fairly.

Gross pay and net pay

Gross pay is the full amount you earn for a period before anything is taken off: your salary or your hourly rate times hours worked, plus overtime, bonuses, commission and taxable allowances. It is the figure in a contract or job advert.

Net pay, or take-home pay, is what remains after your employer has deducted everything it is required or authorised to deduct. In most countries employers act as collectors: they work out the tax and contributions due on each paycheck, pass them to the government and pay you the rest.

The relationship is simple to write down and fiddly to compute:

net pay = gross pay − income tax − social contributions − other deductions

Every term on the right depends on your circumstances, which is why two people on the same salary can take home different amounts.

The three kinds of deduction

• Income tax. A tax on earnings, almost always progressive: an allowance or deduction is tax-free, then rising rates apply to successive slices of income. Some countries split it between national and regional governments (US states, Canadian provinces, Scotland’s own bands).
• Social contributions. Payments that fund pensions, health care and unemployment benefits: Social Security and Medicare in the US, National Insurance in the UK, CPP and EI in Canada, and Germany’s four social insurances. They usually start from the first euro or dollar and often stop at a ceiling.
• Other deductions. Some reduce your taxable pay (US 401(k) deferrals, UK salary sacrifice), some come after tax (a Roth 401(k), union dues, student loan repayments in the UK) and some are optional benefits.

Employers often pay their own social contributions on top of your gross pay. Those never show on your payslip as a deduction, but they are a real cost of employing you, and they matter when comparing an employee job with a contract rate.

Five countries side by side

The table runs each country’s payroll engine on a typical salary in local currency, for a single person with no children, no pension contribution and the default region. Each figure is calculated by the same code as the take-home pay calculator, for the current tax year.

The salaries are not converted at an exchange rate, so the columns are not a ranking of where pay goes furthest. What the table does show is the shape of each system: Germany takes more in social contributions than in income tax at this level, Australia takes almost nothing for social insurance from the employee, and the US federal deductions are a modest share until state tax is added.

United States: federal, FICA and state

On $60,000 in Texas, which has no state income tax, the 2026 deductions are federal income tax of $5,020.00, Social Security of $3,720.00 and Medicare of $870.00. Take-home pay is $50,390.00 a year, or $1,938.08 on each of 26 biweekly paychecks.

Federal tax applies only after the standard deduction, and then in brackets. Social Security is a flat 6.2% up to an annual wage ceiling and Medicare 1.45% with no ceiling, matched by the employer. Move the same salary to California and two more lines appear: state income tax of $1,639.53 and State Disability Insurance of $780.00, so net pay falls to $47,970.47. State choice is the biggest variable on a US paycheck, which is why the US paycheck calculator covers every state and our US paycheck guide walks through each line.

United Kingdom: PAYE and National Insurance

A £40,000 salary in England for 2026/27 pays £5,486.00 of Income Tax and £2,194.40 of employee National Insurance, leaving £32,319.60, or £2,693.30 a month. The Personal Allowance is tax-free, the basic rate applies above it, and National Insurance is charged on earnings between two thresholds at a main rate, with a lower rate above the upper limit.

UK employers deduct both through PAYE, guided by your tax code. Student loan repayments, if you have them, are a further deduction based on income above a plan threshold. Scotland sets its own income tax bands, which the UK take-home pay calculator applies when you choose it.

Canada: two income taxes plus CPP and EI

In Ontario, $70,000 in 2026 attracts federal income tax of $7,278.19, Ontario income tax of $3,255.73 and the Ontario Health Premium of $600.00. Contributions to the Canada Pension Plan come to $3,956.75 and Employment Insurance premiums to $1,123.07. Net pay is $53,786.26.

Each province sets its own brackets and credits, and Quebec runs its own pension plan and parental insurance in place of parts of CPP and EI. CPP also has a second, higher earnings tier (CPP2) that only starts above the first ceiling, so it is zero in this example. The Canada take-home pay calculator covers every province.

Australia: tax, Medicare levy and super on top

An Australian resident on $90,000 for 2026–27 pays $17,520.00 of income tax and a Medicare levy of $1,800.00, taking home $70,680.00, or $2,718.46 a fortnight. The tax-free threshold means the first slice of income is untaxed for residents who claim it.

Australia has no employee social security contribution of the US or German kind. Retirement saving instead comes through the employer’s super guarantee, paid on top of salary: $10,800.00 on this salary. Job offers are sometimes quoted “including super”, which lowers the gross pay the tax is worked out on, so it is worth checking which basis an offer uses in the Australian pay calculator.

Germany: Lohnsteuer and four social insurances

In tax class I, a gross salary of €55,000 in 2026 has €8,060.00 of wage tax (Lohnsteuer) withheld. The social insurances take more: pension insurance €5,115.00, health insurance €4,812.48, long-term care insurance €1,320.00 and unemployment insurance €714.96. Net pay is €34,977.56, about €2,914.80 a month.

The employer pays a broadly matching share of each insurance on top, €11,632.44 here. Church tax applies to registered church members, and the solidarity surcharge only affects higher incomes, which is why it is zero in this example. Your tax class, which depends on marital status, has a large effect on the monthly figure; the Germany net salary calculator handles all six.

Pre-tax deductions: why saving costs less than it looks

Deductions taken before tax reduce the income that tax is worked out on, so each unit you save costs less than a unit of take-home pay. Two examples from the engines:

The saving is your marginal rate on the amount contributed, so it is larger for higher earners. The rules about what counts as pre-tax differ: some US states, Pennsylvania for one, tax 401(k) deferrals even though the IRS does not.

Why your payslip might not match a calculator

Calculators, including ours, estimate the tax due on a year of regular pay. Real payslips can differ for good reasons:

• Withholding is an approximation. US employers withhold using your Form W-4, not your final liability, and the difference is settled when you file. German Lohnsteuer can differ from the annual assessment. UK PAYE uses cumulative tax codes that can be temporarily wrong.
• Irregular pay. Bonuses, overtime and a change of job mid-year can push one paycheck into a higher withholding band even if the annual tax is unchanged.
• Benefits and deductions. Health insurance premiums, pension schemes, benefits in kind and student loans all change the net figure.
• Local taxes. US city and county taxes and German church tax depend on where you live and what you have registered.

If the gap is large, compare each line of your payslip with the matching line of the country calculator. The one that differs usually points to the setting to change, whether that is a tax code, a W-4 entry or a pension percentage. To compare jobs paid by the hour, convert first with the salary to hourly calculator, and for saving out of your net pay the savings goal calculator shows what a monthly amount builds to.

This guide explains how things work in general terms. It isn’t financial, tax or legal advice. Spotted something out of date? Email errors@moneyotter.com and we’ll check it against the source.