Each contract that is concluded between an employee and an employer must include information about the remuneration. It is expressed by the gross amount, which can be often misleading, because it differs significantly from how much you actually receive after a month’s work. Why is the net amount completely different from the gross amount?
Gross salary and taxes
The amount that is entered into the contract, regardless of whether it is a contract of mandate, a job or a work, is usually a gross remuneration. This means that the entire amount will not go to the employee’s hand, because it will be covered by the costs related to taxes that have to be borne. However, it should be realized that it is the type of contract that determines the amount of premiums, that is also if the gross amount is reduced. In Poland, the largest taxes are payable on the employment contract and the smallest on the contract for work.
IMPORTANT! The net amount is the determination of the remuneration that will actually be received by the employee – exactly the amount of money the employer will pay him.
What affects the gross amount?
The largest tax liability is the contributions to the Social Insurance Institution (ZUS):
- pension – the whole 19.52%, the employee covers 9.76%,
- pension – the whole 8%, the employee covers 1.5%,
- sickness – the whole covers the employee 2.45%.
The contributions calculated from the payment allow to be able to count on the Polish pension in the future, authorize to receive a pension in the event of inability to perform the profession to the full extent, as well as affect paid sick leave.
Another important tax is the health insurance which funds the National Health Fund (NFZ) and is 9%. It is thanks to him that you can use most of the treatments and services in outpatient clinics or hospitals for free. A person who has paid health insurance through a contract of employment has access to free medical care regardless of the illness – it includes both temporary and long-term treatment.
The tax deductible cost is also taken into account to calculate the net amount. This depends on the place of residence of the employee and may amount to 111.25 PLN for local residents or 139.06 PLN if the person has to commute to his job.
The last tax affecting the amount of net remuneration is the one that goes to the Tax Office. Income tax is usually 18%, and its full calculation takes into account the amount of fees for health insurance or receiving remuneration from other sources.
How to calculate the amount of net remuneration?
In the case of a contract of employment at the beginning you have to deduct all fees resulting from the activity of ZUS from the gross amount. So it will be 9.76%, 1.5% and 2.45%. Subsequently, 9% of health insurance is deducted from the result. This number minus the deductible cost is the basis for calculating income tax, so 18% is deducted from it. The final result presents the net amount.
The gross amount of remuneration is PLN 5,000.
- Social Insurance
5000 – 488 (9.76%) – 75 (1.5) – 122 (2.45%) = 4315
- National Health Fund
4315 – 388 (9%) = 3927
- Tax deductible costs
3927 – 111 = 3816
- Income tax
3816 – 686 = 3130
The net amount is PLN 3130.