‘Gross’ describes the employee’s salary before any deductions have been made. ‘Net’ refers the amount of payment that remains after the deductions have been made.
With that, gross-to-net refers to the process of calculating an employee’s net pay by deducting the relevant taxes and withholdings on their gross salary.
The gross-to-net process can differ depending on country and jurisdiction.
How is gross-to-net calculated?
The calculation process behind gross-to-net can often be complex and requires expertise in such matters, often coming through payroll experts or relevant software.
Common deductions include:
- Federal and state income tax withholdings from gross pay
- Social security contributions
- Medicare contributions
- Employee benefit contributions
- Retirement plan contributions
In addition to deductions like these, gross-to-net also takes into account payment adjustments like bonuses and overtime.
Managing gross-to-net for a global workforce
Gross-to-net is a complicated process for any company. But for an organization with a global workforce worldwide, the task can feel even more complex, with varying tax and social security systems scrambling attempts for clarity.
Diving into different regulatory waters without understanding the rules and requirements can lead to companies drowning in fees and penalties while processing their global payroll. A global payroll provider can act as a breathing apparatus when entering these new waters, offering:
- Automated processes free of human error
- Country level expertise in regulations
- Local compliance experts in every country the organization operates in