Unit 1 · Level 1 · Where your money goes
Gross, net, and what actually lands
Gross pay is the headline: what your employer agreed to pay. Before it reaches you, income tax is withheld and social contributions are taken for things like pensions, health cover and unemployment insurance. What survives is net pay, or take-home. The distance between gross and net varies enormously by country and by income, so never assume a friend's percentage is also yours. Read your own payslip.
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What you get asked
Put a payslip in order, from the top line down to the money in your account
The exact order and the names change from country to country, but the shape never does: one big number at the top, deductions in the middle, a smaller number at the bottom. Only the bottom one can be spent.
Your gross pay is €3,000 a month. €480 goes to income tax and €330 to social contributions. What is your net pay, in euros?
€2,190 lands, which is 73% of the headline figure. A budget built on €3,000 would overshoot by €810 every single month, and that shortfall shows up later as debt.
You are told you earn €48,000 a year. Which number should your monthly budget actually use?
Only net pay reaches your account, and only what reaches your account can be spent or saved. A plan built on gross quietly assumes money that a payroll system already sent somewhere else.
Social contributions differ from income tax because they usually buy you specific ___ such as pension credits or health cover.
Contributions typically buy claims you can later use: pension credits, health cover, unemployment insurance. What they buy varies a lot by country, so check yours before writing it off as pure loss.
Two people have the same €50,000 gross salary in different countries. What can you conclude about their take-home pay?
Tax bands, contribution rates and thresholds are set nationally and change often. A gross figure only becomes comparable once you have seen both payslips. Compare net, or you are comparing nothing at all. 🐜
The rest of this unit
The gap between what comes in and what goes out is the only number a market can ever act on.