What is the difference between gross and net?

Do you have any idea what is actually meant by gross and net?

These are not the first words you will learn on your vacation in Italy, but they are nevertheless important Italian terms that will always accompany you in your everyday life. The differences between gross and net not only affect the salary you receive at the end of the month, but also the purchase price of your sun cream.
But what exactly do the terms mean now and what is gross? The words gross and net go back to Latin and are still used in the Italian language today. A look in the dictionary helps to get a definition and explanation of brutto and netto and thus derive their meaning in German: According to this, brutto can be translated as "raw", "impure" or even "ugly" , thus indicating the unprocessed character of a thing . Gross is therefore an amount without deductions. 

Netto , on the other hand, was borrowed from the Italian word for "pure" or "unmixed". It therefore describes something from which something has been taken away or subtracted; or which is not mixed with other things.

Salary, price or invoice: the differences between gross and net play a role everywhere here

Still "lost" with the terms? Then find out more here, because it is not only worthwhile for entrepreneurs to familiarize themselves with the terms. As a consumer, employee, career changer or retiree, it is also helpful to know what gross is and to know the explanation of gross and net. 

The importance of gross and net in your salary

Many people notice the biggest difference between gross and net when they receive their payslip . This clearly shows that the employer pays a larger amount (gross) than the employee receives as salary (net). Below we explain how this difference comes about, and in the section "Simple solution: net-gross calculator" we show you how you can use a calculator to quickly determine your net salary based on your gross salary.

The VAT issue: hairdresser's invoices and gross and net shopping

While we are primarily interested in the net amount when it comes to salaries, i.e. the money we are paid, the focus with invoices is on the gross amount. In addition to the cost of a service, this also includes value added tax (VAT) and indicates how expensive a visit to the hairdresser or hiring a tradesman actually is.

As consumers, we are also confronted with the distinction between gross and net when making everyday purchases. On the one hand, the net price of a product together with the VAT results in the gross purchase price, which you then actually have to pay at the checkout; on the other hand, the net and gross weight of packaged vegetables can differ. In this case, customers want to know how much is in the packaging (net weight) and are not interested in the weight of the packaging material.
The situation is different when sending parcels. Here, both the contents and the packaging (gross weight) must be weighed in order to determine the price for the delivery and to be able to frank the parcel sufficiently.

Check it out: Determine your net salary quickly and easily with a gross-net calculator

The amount paid by your employer and the net salary you receive can differ significantly. The difference between gross and net pay depends on a number of factors: Find out here how the differences between gross and net arise and how you can easily calculate them with a wage and salary calculator .

How taxes affect salary

Various taxes and insurance contributions are deducted from the gross wage, which may have been negotiated individually with the employer or stipulated in the collective wage agreements of the public sector (TVöD). Taxes include income tax, solidarity surcharge and church tax. 

The amount of tax depends on your income tax class and whether you belong to a church . The working hours (part-time, full-time employment or employment as a working student), but also the hourly wage and thus the amount of gross income play a role in the income tax class.
Most employees have a full-time job, which is why this is often regarded as the standard. You can find out exactly what full-time means in professional life in our article. 

The amount of church tax also depends on income. It also depends on the respective federal state and amounts to eight percent of income tax in Bavaria and nine percent in Berlin, for example.

The various social security contributions

There are also various social security contributions: pension, health, unemployment and long-term care insurance. The amount can vary depending on the insurance company; the statutory health insurance companies (e.g. AOK, Barmer and TK), for example, charge different additional contributions.

The employer and the type of employment are decisive

An exception is the so-called 520-euro job or mini-job (formerly 450-euro job, the limit was raised on October 1, 2022). In this case, the income tax is a flat rate of two percent, but is often paid by the employer and the employee can also be exempted from the pension insurance obligation. 

In addition, there are differences between people who are in a regular employment relationship and those who are civil servants. For civil servants, only income tax and the solidarity surcharge are deducted from the gross salary. However, they must take out private health and long-term care insurance.

Pension and retirement

The difference between people who are civil servants and those who are not also becomes clear in old age. Pension incomeis taxed in full(apart from a small pension allowance). Pensions, on the other hand, are often only taxable to a certain extent. In both cases, health insurance contributions are also payable. 

Simple solution: net-gross calculator

Do you want to calculate your net salary quickly and easily? The easiest way is to use a salary calculator. Using various details such as the amount of your gross salary, the federal state in which you live and the tax bracket to which you belong, you can use these salary calculators to calculate your net amount. Pension calculators and pension calculators also offer employees the opportunity to calculate the net amount they will receive in retirement. 

Gross and net differences outside Germany: Austria and Switzerland

The difference between net and gross salary does not only concern employees in Germany. In other countries too, taxes and social security contributions are deducted from the gross salary, whereby different factors are taken into account. In Austria, for example, the age of the children or the commuter allowance also play a role, while in Switzerland the place of residence has an influence. Salary calculators for Switzerland and Austria can help you to find out about the regulations in our German-speaking neighboring countries.

‍Calculator: Examples of net and gross salary differences in Germany

We have now explained the differences between gross and net. But what does this mean in concrete terms for your salary as an employee? Let's use a few brief examples to illustrate this for the German labor market. We have compiled the data using a gross-net calculator, as of September 2024.

3,000 euros gross salary - what's left net?

An employee in Bavaria who earns 3,000 euros gross per month as a career changer, is unmarried, has statutory health insurance and has no children or religious affiliation, would currently receive a net wage of 2,051.42 euros. If this person belonged to a church in Bavaria, a further 25.36 euros would be deducted.

2,800 euros gross as a family man: This net salary beckons

If instead you receive 2,800 euros gross, are married (tax class 4) and have children, the net amount is 1,957.07 euros without church tax and 1,939.05 euros if you belong to a church (simplified here assuming that the child allowance is 0.5).

520-euro job (formerly 450-euro job)

With a 520-euro mini-job, your gross salary can correspond to your net salary. Although a flat rate of 2% of your income is generally taxable, these taxes are often paid by your employer. Meanwhile, no unemployment insurance contributions have to be paid and employees can be exempted from pension insurance. Those who do this actually receive a higher proportion of their salary, but at the same time the risk of poverty in old age increases as no contributions are paid into the pension insurance scheme.

A wide variety of factors affect the amount of your salary, including your professional experience or whether you have started a new job as a career changer . You can find out exactly what it means to start a job as a career changer in our article. 

Mnemonic: Never confuse gross and net again!

Now you know the most important differences between gross and net. However, you may still find it difficult to tell the two words apart and keep asking yourself: Which was which? Was gross a part of net? Or was it the other way around? No problem: we have a really simple and practical mnemonic for you. So let's take another quick look: 

In principle, gross equals net + bonuses: Your gross salary is therefore the sum of your net salary plus payments for insurance etc. In simple terms, you could say that net is the smaller value and part of gross. And that's quite obvious: net is also the smaller word and only has five letters, whereas gross has six.‍

FAQ

What is gross and net simply explained?

Gross (Italian for "raw") refers to an amount without deductions. A gross salary therefore consists of the salary and the various social security contributions. Net (Italian for "pure"), on the other hand, refers to the amount from which something has been deducted. A net salary is therefore the amount paid to employees after deductions.

Is net with or without tax?

A net amount is without taxes. The net wage is what is paid to the employee after deductions from the gross wage. In the case of an invoice or a purchase, VAT must be paid in addition to the net amount.

What is deducted from the gross salary?

Taxes and social security contributions are deducted from the gross salary. Taxes include income tax, the solidarity surcharge and, if applicable, church tax. In addition, various social security contributions such as pension, health, unemployment and long-term care insurance are deducted from the gross amount.