The payroll is the document that proves what you earn and what is deducted from you each month. Many workers sign it without fully understanding what each line means. This guide explains everything clearly and without jargon.
The three parts of a payroll
Every payroll has three separate blocks:
- Earnings — what you earn (your gross salary + extras)
- Deductions — what is deducted from you (IRPF + Social Security)
- Net pay — what you receive in your account
The formula is simple:
Net salary = Total earnings − Total deductions
Earnings: what you earn
Earnings are all the amounts you are entitled to receive this month:
Base salary This is the fixed amount established by your contract or collective agreement. It is the minimum guaranteed by labor law or the agreement for your job category.
Salary supplements Amounts added to the base salary for specific circumstances:
- Transport or distance allowance
- Night shift or shift allowance
- Hazard pay, toxicity pay or hardship pay
- Incentives or commissions for meeting targets
- Overtime
Extra payments Most contracts include two extra payments: one in June or July (summer) and one in December (Christmas). They can appear on the payroll in two ways:
- Prorated: a proportional part is distributed across each monthly payroll
- In the corresponding month: they appear as a separate item in the June and December payrolls
Deductions: what is taken from you
There are two main deduction blocks on a payroll:
1. Social Security contributions (employee portion)
These are mandatory contributions that go to the Social Security system and give you rights to benefits such as unemployment, retirement or sick leave. Currently, the employee contributes 6.35% of the contribution base:
| Contribution | Rate |
|---|---|
| Common contingencies | 4.70% |
| Unemployment (indefinite contract) | 1.55% |
| Professional training | 0.10% |
| MEI (Intergenerational Equity Mechanism) | 0.10% |
The contribution base and gross salary usually coincide, but not always: some supplements do not contribute or contribute at different rates.
2. IRPF withholding
This is the advance payment of Personal Income Tax that your employer pays to Hacienda on your behalf each month. The percentage varies depending on:
- Your estimated annual salary
- Your family situation (children, disability, marital status)
- Your autonomous community
It is not a fixed cost: when you file your income tax return, the amount withheld is compared with what you actually owe. If too much was withheld → you receive a refund. If too little → you must pay the difference.
Net pay: what arrives in your account
This is the money you actually receive. It is the difference between what you earned and what has been deducted.
Simplified example:
- Base salary: €2,000
- Transport allowance: €100
- Total earnings: €2,100
- Social Security (6.35%): −€133.35
- IRPF (estimated 12%): −€252
- Net pay: €1,714.65
What is the difference between contribution base and taxable base?
They are different concepts used to calculate different things:
- Contribution base: used to calculate Social Security contributions. It is set by the collective agreement and usually includes base salary + certain supplements.
- Taxable base for IRPF: used to calculate withholding. It is the gross salary minus Social Security contributions.
Employer contribution: the real cost of an employee
What appears on your payroll is not what the employee costs the company. The company also contributes to Social Security on its own account, at a significantly higher rate (around 30% of the contribution base):
- Common contingencies: 23.60%
- Unemployment (indefinite contract): 5.50%
- FOGASA: 0.20%
- Professional training: 0.60%
If your gross salary is €2,000 and the company contributes about 30%, the real cost for the company is roughly €2,600/month.
Common payroll items that cause confusion
“Non-salaried perception”: amounts that are not technically salary (meal allowances, travel expenses). They do not contribute to Social Security up to certain limits and are tax-exempt in IRPF if they are exempt.
“Back pay”: amounts owed from previous months (a retroactive pay raise, for example). They are taxed in the year they are paid, not in the year they were earned.
“IRPF regularization”: mid-year adjustment of the withholding percentage if your situation changes (job change, birth of a child, etc.).
Calculate your net salary
Understanding payroll is good, but calculating it precisely takes time. Use our IRPF and payroll calculator to know exactly how much you will receive net based on your gross salary, autonomous community and family situation.