The value that appears in the employment contract does not always correspond to the amount that reaches the worker’s bank account every month. The difference between gross remuneration and net remuneration continues to raise doubts, especially among those who are now entering the job market or who see their salary change with new tax rules. The Government once again clarified the issue, explaining why the values are different and where the deducted money goes.
According to the Government, within the scope of Finance à Lupa, the distinction is simple in theory, but has direct impacts on available monthly income. Gross remuneration corresponds to the total paid by the employer before any mandatory deductions, while net remuneration is the amount actually received after these deductions.
The salary you sign in the contract is not what reaches the account
When a worker negotiates a salary, the agreed upon amount is almost always the gross salary. This amount appears in the contract and serves as the basis for calculating taxes and contributions. However, the money that enters the account at the end of the month results from an intermediate process of mandatory retentions.
As explained by the Executive, remuneration includes not only the base salary, but also other components, such as allowances, bonuses, overtime or commissions, whenever applicable.
Gross remuneration: the amount before taxes and contributions
Gross remuneration corresponds to the total amount paid by the employer before any discount. It is on this amount that Social Security contributions and IRS withholding taxes are levied.
According to the Government, this is the value that reflects the worker’s direct cost to the company, although not all of this amount is received by the worker at the end of the month.
One of the main differences between gross and net salary results from the contribution to Social Security. In the case of most salaried workers, the worker’s so-called Single Social Tax is 11%.
As explained by the Executive, this contribution finances social protection in situations such as illness, unemployment, disability, maternity, paternity, old age and death, functioning as one of the pillars of the Social State. At the same time, the employer supports an additional contribution, generally 23.75%, which does not directly affect the worker’s net salary.
IRS: the monthly discount that works like an advance
In addition to Social Security, there is IRS withholding tax. This monthly discount is made by the employer and delivered to the Tax and Customs Authority.
According to the official explanation, these withholdings function as an advance on the tax due, with the final amount only being determined the following year, when the annual IRS declaration is submitted. This is why some taxpayers receive refunds, while others have to pay additional tax.
Net remuneration: the money that the employee actually receives
Net remuneration results from subtracting Social Security contributions and IRS withholding taxes from the gross salary. This is the amount that enters the bank account and that determines, in practice, the worker’s monthly purchasing power.
According to the Government, understanding this difference is essential for more informed financial management and to avoid unrealistic expectations regarding the agreed salary.
It is important to highlight that not all workers are subject to IRS withholding tax. The legislation provides for a minimum value, known as the existence minimum, below which there is no discount.
In 2026, this value was updated to 12,880 euros per year, which corresponds to 14 times the minimum guaranteed monthly salary, currently set at 920 euros. According to the Executive, anyone earning income up to this limit is not subject to IRS withholding.
Another frequently ignored point is that variable salary components, such as bonuses, allowances or overtime, also count towards the calculation of gross remuneration and, in many cases, are also subject to deductions.
According to the same government source, these installments must be considered in the overall analysis of income and associated tax charges.
Why two equal salaries can give different net values
Finally, the Government remembers that two workers with the same gross salary can receive different net amounts. The reason may be marital status, the number of dependents, the type of income or the specific tax framework of each case.
This is why, highlights the Executive, just looking at the gross salary is not enough to understand how much money will actually end up in the account at the end of the month.
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