What is Gross 1?
Gross 1 salary is the amount that a worker most often negotiates with their employer. This 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 belongs directly to the worker, but it is not paid in full into the account; instead, 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 subtracted), while 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 remainder 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 different 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 is why negotiating the gross amount is the only fair way to define the value of a job for the employer — regardless of the worker's private tax situation.