It is a recurring theme. Knowing how to interpret a paycheck is not easy and, therefore, from time to time, doubts – and indignation – return due to the difference between the gross salary and the net salary that the worker receives in the bank account and due to the difference between what the company pays the company for each of its employees and what they receive. Although they share a common context – the employment relationship -, they are two different worlds.
What the employer pays
Why, if a company pays 7,500 euros for a worker, the amount that the employee receives barely exceeds 3,000? This is the example of a tweet that went viral and generated a wave of indignation, but everything has its explanation.
On the one hand, there is the cost of labor, which is what a company pays per employee. The total amount It is not exclusively about salaries. Although these represent the largest percentage of these costs (70%), behind this amount there are other concepts, the most important being the social security contributions that the employer must pay for possible disabilities due to a common illness (the famous common contingencies). . ), retirement (MEI), leave such as paternity or maternity leave or work accidents.
The cost of labor also involves the company covering unemployment benefits, the Wage Guarantee Fund (FOGASA) covering redundancy in the event of bankruptcy, or professional training.
What the employee receives
On the other hand, there is the gross salary (the component called “salary cost” within the company’s labor cost). From this gross, it is necessary to deduct the deductions of the Personal Income Tax (IRPF) advance payment which is then regularized with the Income Tax return (to be paid or refunded) and the Social Security contribution which must be assumed by the employee.
Here, as in the case of the company, the worker contributes a percentage of the gross salary for current contingencies, unemployment and professional training, which explains why the amount of the net salary is lower.
A few months ago, CEOE President Antonio Garamendi made a statement in which he proposed that workers start receiving the entire monthly wage bill and that they would later pay their social security contributions: “This is the way in which you would really see what the real cost of wages is in Spain.” […] “That can be almost double what someone can actually afford,” he said at the 4th CEOE Business Meeting.
Practical example
From Factorial, they simulate a case to explain the difference between what the company pays (labor cost) and what the worker receives (net salary):
A permanent IT specialist (rates vary depending on the type of contract) is paid 1,400 euros gross per month but what the company pays per month for this worker amounts to 1,867.6 because it is necessary to add to the salary cost 23.60% of common unforeseen events (23.60% of 1,400 euros is 330.4 euros), 5.5% of the general unemployment rate for a permanent contract (77 euros), 3.5% of professional pension, which varies according to the professional activity (49 euros), 0.20% of FOGASA (2.8 euros) and 0.60% for professional training (8.4 euros)
What the worker receives in his account will depend on his social security contribution and the withholding of personal income tax.
Therefore, the two amounts cannot coincide and find their explanation mainly in the social contribution that the company and the employee must pay.
