Gross Salary vs. Net Salary: Definition and Examples
by Hong Yuan
Aug 21, 2024
at 2:54 PM
Whether you earn a monthly salary or hourly wage, you might notice "gross salary" and "net salary" on your payslip. Understanding the difference between gross pay and net pay helps you know how much you actually take home.
What is Gross Pay?
Gross pay is the total amount you earn before deductions like taxes or EPF (Employees Provident Fund) are taken out. For example, if your employer agrees to pay you RM40,000 per year, that RM40,000 is your gross pay.
Your gross pay is usually the highest number you see on your payslip. It reflects your full earnings based on your agreed salary or hourly rate. For instance, if you earn RM15 per hour and work 30 hours in a pay period, your gross pay will be RM450.
What is Net Pay?
Net pay is the final amount you receive after all deductions are made. This is the amount deposited into your bank account or shown on your paycheck.
On your payslip, net pay is often highlighted so you can easily spot it. It's the actual amount you take home after all taxes, EPF, and other deductions.
Difference Between Gross Pay and Net Pay
Gross pay is the total amount before any deductions. Net pay is what’s left after all deductions have been subtracted—this is the amount you actually receive.
Common Deductions from Gross Pay
Your gross income is your total annual earnings before deductions. It’s always higher than your net income because it doesn’t account for deductions like:
Income tax
EPF (Employees Provident Fund)
SOCSO (Social Security Organisation)
EIS (Employment Insurance System)
Zakat (if applicable)
Your employer might also make voluntary deductions for things like health insurance, loans, or union fees.
To find your gross income, look at your latest payslip. The calculation differs for salaried and hourly employees.
Calculating gross income for salaried employees
Your employment contract will state your gross pay. For example, if you receive RM5,000 per month, your annual gross income is RM60,000 (RM5,000 x 12 months).
If you get bonuses, add the full bonus amount before taxes to your gross salary. For example, if your annual salary is RM60,000 and you receive an RM5,000 bonus, your gross income will be RM65,000.
