What is Gross 1?
Gross 1 salary is the amount most often negotiated by the employee with their employer. It is the amount stated in your employment contract and serves as the basis for all further calculations.
What Does Gross 1 Consist Of?
This amount directly belongs to the employee, but it does not sit entirely in the account, but mandatory contributions and taxes are settled from it. It includes:
- Contributions "from salary" (Pension insurance)These contributions are paid into pension funds so that you have a secured pension in the future. Since they are deducted from the Gross 1 amount, we call them contributions "from salary".
- Income tax and local taxesThe state charges income tax (after the personal tax-free deduction is deducted), while the local administration can charge an additional local income tax (depending on state laws and place of residence).
- Net salaryAfter all the above-mentioned contributions and taxes are deducted from the Gross 1 amount, the rest is your Net salary. This is the amount you receive in your bank account.
Why is Gross 1 Negotiated?
Negotiating salary in gross amount is the standard due to various tax reliefs that workers may have (e.g., dependent family members, disability). Two workers with the same Gross 1 salary can have completely different Net salaries if they have different tax reliefs. That's why negotiating a gross amount is the only fair way to define the value of a workplace for the employer — regardless of the worker's private tax situation.