Salary calculation is a seemingly complex process consisting of several standardized steps. Although the exact rates differ, the sequence of operations is almost identical.
Everything starts with your agreed Gross salary. This is the amount from the employment contract, which can be increased by allowances such as overtime work, work on holidays, or meal and holiday allowances.
The first step is deducting contributions borne by the worker. These are contributions for pension (PIO), health, and unemployment.
Income = Gross - Contributions (worker's share)
Not all of your income is taxed. The state guarantees a monthly tax-free minimum. In Serbia, this is a fixed base that is regularly adjusted every year.
Tax base = Income - Tax-free amount
The tax rate (currently 10% in the Republic of Serbia) is applied to the calculated Tax base. The Tax Administration prescribes exact procedures for the collection of this tax.
Your final salary is calculated by the last operation:
Net salary = Income - Income tax
For employees, this process is legally performed by the employer during each payment. The employer pays contributions and taxes in your name and pays the remaining Net amount to your account.