The first time I saw my full payslip, I had to read it twice. In the interview I'd been told "you'll earn €1,400 a month," and the bank transfer showed €1,140. That's when you realize the salary you're offered and the salary you actually get paid are two different numbers.
Gross vs. net: the difference nobody explains
Your gross salary is what's written in your contract — what you "cost" before deductions. Your net salary is what actually lands in your account. The difference between the two is social security contributions and income tax withholding, which your employer deducts directly and pays on your behalf.
Nobody explains this in school, or in most job interviews. And it's information you need before you sign a contract, not after, because it completely changes how much you can actually save each month.
What exactly gets deducted
Two things are mainly taken out of your payslip:
- Social security contributions: a percentage of your salary that funds pensions, unemployment benefits, training, and so on. It's mandatory, split between employer and employee.
- Income tax withholding: an advance payment toward the income tax you'll owe that year. The percentage depends on your salary, your family situation and your region.
The more you earn, the higher your withholding rate, because the system is progressive. That's why the gap between gross and net isn't the same at €18,000 a year as it is at €40,000 — it grows faster than intuition suggests.
Why this changes your savings plan
If you're planning how much you can save each month based on your gross annual salary divided by 12 (or 14, if you get extra payments), you'll overestimate your saving capacity. And that means any financial plan — from moving out to starting to invest — starts from a number that isn't real.
The first thing I did when I started working was calculate my real net pay with a payslip calculator, months before I actually needed it, just to get clarity. It helped me set a realistic monthly saving target instead of one based on the gross figure that sounded good in the job offer.
A tip if you're just starting out
When negotiating a salary or comparing job offers, don't compare gross figures. Compare net figures, and keep in mind that net pay can vary by region, since income tax withholding isn't the same everywhere, and depends on your personal situation too.
And when you build your first monthly budget, always build it around net pay, not gross. Gross is the number that sounds good in the contract. Net is the number you'll actually live on.