GROSS VS NET SALARIES
Traditionally, private employers and employees have discussed salaries in net pay terms. At Greycoats Lumley, we believe this should only be used as a guide to help employees get an idea of their approximate ‘take home’ pay.
Gross pay is the total amount before deductions.
Net pay is the amount actually received by the employee, after deductions.
All professions refer to gross pay when recruiting and we believe employers and employees in private environments should be no different.
Greycoat Lumleys encourages all employers and employees to confirm all salaries as gross pay. A gross annual salary benefits both the employer and the employee.
Benefits to Employers
The costs are fixed - agreeing a net salary may mean fluctuating costs. In particular, an employer may end up repaying any backdated tax owed by the employee, plus any student loan repayments where applicable
Understanding the true cost of the employment - the only addition will be the employer’s National Insurance. On a net salary you don’t know the full cost as it depends on the individuals’ tax code
Complying with employer’s responsibilities
No confusion as to whether your staff member is ‘self-employed’ and whether they are paying their own taxes. Please note ‘domestic staff’ do not normally fulfil the HMRC’s definition of self-employment and the responsibility is with the employer to declare tax and NI. Visit the link to HMRC to find out more.
Benefits to Employees
An employee will benefit from the personal tax-free allowance increases which the government has pledged to deliver over the next few years. Those on a net salary have actually lost out over the last few years
You ensure that all your salary is declared in full – when some employers are aware of the additional costs, they could be tempted to not declare your salary or declare only part of it
No confusion over being seen by the employer as ‘self-employed’, thus being paid a salary from which you would then be expected to pay your own tax
You receive any tax refunds due and not your employer
It could be easier to apply for a mortgage
Stafftax offers a comprehensive, user-friendly Payroll Service and we recommend any employers contact them with any specific tax related issues.
Send Your CV to email@example.com or browse our jobs here.