Understanding the difference between gross and net salary
12 June 2025 · 3 min reading time
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See job offersThe moment of payday, an instant often eagerly awaited… but also sometimes with a touch of confusion. Many wonder why the difference between the gross and net salary is so important, and especially, where this gap comes from. These concepts of gross and net salary are at the heart of every employee's concerns, as they concretely determine the amount you receive in your bank account.
If you find yourself in this situation, rest assured: you’re not alone! This article aims to clarify everything. We’ll break down together the mechanisms that transform your gross salary into net salary, explaining each component in a simple and practical way. You’ll finally understand why the difference between gross and net exists, and how to read your payslip with full confidence.
Gross Salary: What Does It Correspond To?
To truly understand the difference between gross and net salary, it’s essential to start with the basics: the gross salary. This is the total amount of remuneration your employer commits to paying you before any deduction. Imagine it as the “full pool” of your compensation before it’s distributed through different “channels.”
This gross salary is typically what appears on your employment contract, in job advertisements, and it forms the basis for calculating many benefits. It’s not limited solely to your basic salary. Gross salary also includes:
- Your monthly or hourly basic salary.
- Various bonuses you might receive (seniority bonus, performance bonus, 13th-month salary, exceptional bonuses...).
- Benefits in kind (provision of a company car, housing, meal vouchers, etc., for which a value is estimated).
- Overtime hours and their increased rates.
- Certain specific allowances.
What’s crucial to remember is that gross salary never corresponds to what you’ll receive in your bank account. Why? Because this amount hasn’t yet undergone the mandatory deductions intended to finance social protection and income tax. It’s precisely from this amount that all the charges creating the famous difference between gross and net salary will be deducted.
Social Contributions: The Shift from Gross to (Almost) Net
This is where the difference between gross and net salary truly begins to make sense. Social contributions represent the mandatory deductions directly taken from your gross salary. Far from being simple “taxes,” these contributions are the cornerstone of our social protection system. They serve to finance essential mechanisms that protect us all daily: health insurance, retirement, unemployment insurance, family benefits, and so on. It’s a collective investment in guarantees that will be useful throughout your life.
The main employee social contributions (deducted from gross):
- Social Security Contributions: This is a broad category covering several risks. It includes contributions for health, maternity, disability, and death insurance. These fund a large part of your healthcare expenses and guarantee your rights in case of hardship.
- Retirement Contributions: To prepare for your future, these contributions feed into retirement schemes, whether basic (like the general social security scheme) or supplementary (like Agirc-Arrco for private sector employees). They entitle you to a pension once you reach retirement age.
- Unemployment Insurance Contribution: This contribution is essential to protect you in case of involuntary job loss. It’s paid to France Travail (formerly Pôle emploi) and grants you rights to unemployment benefits if needed.
- CSG (Contribution Sociale Généralisée) and CRDS (Contribution au Remboursement de la Dette Sociale): These two contributions are levied on a large part of your earned income. They also participate in financing social security and reducing its debt.
- Provident Fund and Mutual Health Insurance Contributions: Depending on your company and the collective bargaining agreement it adheres to, contributions may be deducted for supplementary guarantees. This could include mandatory collective health insurance or a provident scheme that covers you in case of work incapacity, disability, or death.
The calculation of these contributions involves applying a specific percentage to your gross salary (or a portion of it, according to ceilings defined by social security). The total of these deductions represents a significant part of the difference between gross and net salary you’ll see on your payslip.
Income Tax at Source: The Final Step Towards Net
After social contributions, there’s one last step that refines the difference between gross and net salary: income tax. Since January 1, 2019, this tax has been directly withheld from your net salary before tax by your employer. This is known as “prélèvement à la source” (pay-as-you-earn). This system was implemented to simplify tax payments and adapt them in real-time to your financial situation.
Unlike social contributions, which finance specific benefits (health, retirement, unemployment), income tax is a general tax. It contributes to the state budget and funds essential public services that benefit everyone: education, justice, infrastructure, defense, etc. It’s therefore a direct contribution to the functioning of our society.
The amount of tax withheld each month depends on your withholding rate. This rate is calculated and transmitted to your employer directly by the tax authorities. It can be:
- Personalized: This is the most common rate, calculated based on your income from the previous year and your family situation (single, married, with children, etc.). It’s adjusted automatically based on your declarations.
- Neutral: If you don’t want your employer to know your personalized rate (for example, if you have high income from other sources), you can opt for a neutral rate, determined by a scale that doesn’t take into account your family situation. In this case, any additional amount will have to be paid or reimbursed during your annual tax declaration.
Once your gross salary has been reduced by social contributions and the income tax withheld at source, you finally get the net salary that will be transferred to your bank account.
Net Salary: What Is It?
After dissecting the various deductions, it’s time to talk about net salary. It’s, in final count, the amount you eagerly await each month: the one that is actually deposited into your bank account. The net salary is the result of your gross salary minus all the charges we have reviewed.
To summarize it simply, the formula is as follows:
Salaire net=Salaire brut−cotisations sociales salariales−prélèvement à la source de l’impôt sur le revenu
Your payslip is your best ally for understanding this difference between gross and net salary in detail. Each line of your payslip is essential. You’ll find clearly indicated the amount of your gross salary, the detail of each social contribution (health, retirement, unemployment, CSG/CRDS, etc.), the amount withheld for income tax, and finally, the famous net salary to be paid. Take the time to consult it; it’s a document rich in information about your remuneration.
What's the Difference Between Net and Gross? The Percentage to Remember
The difference between gross and net salary is primarily explained by the deduction of two categories of levies: employee social contributions and income tax withheld at source.
In France, for a non-executive private sector employee, employee social contributions represent on average between 22% and 25% of the gross salary. This percentage can vary slightly depending on your status (executive or non-executive), sector of activity, or specific company agreements (like a mutual health insurance or provident scheme).
To these contributions is added the income tax withheld at source, whose rate is personalized by the tax authorities and depends on your situation.
Gross and Net Salary Simulation
To better visualize this difference between gross and net salary, let ’s take a concrete example. Imagine a single person with no children, working in France, with a gross salary of €2,500 per month.
Keep in mind that the percentages of contributions can slightly vary depending on the sectors of activity, collective agreements, and legislative changes. The figures below are given for illustrative purposes only.
- Gross Salary: €2,500
Let’s assume that employee social contributions represent approximately 23% of the gross salary for a non-executive, and that an income tax rate of 5% is applied after these contributions (these percentages are indicative averages).
- Calculation of employee social contributions: 2 500€×23%=575€
- Net salary before tax: 2 500€−575€=1 925€
- Calculation of income tax withholding: 1 925€×5%=96,25€
- Net salary after tax: 1 925€−96,25€=1 828,75€
In this simplified example, a gross salary of €2,500 transforms into a **net salary of approximately
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