Gross vs Net pay

[CalmFizz]

Why when talking about salaries do we use the gross figure? The headline figure of £60/70/80k can sound like a huge salary, but when tax,NI, pension and student Loan repayments get removed at source, the take home monthly payment can be half that sum.

We all have tax and NI but the pension and student loan repayments can be vastly different.

Is it about projecting an image of the seniority of a role that we give the gross salary instead of the what we actually get landing in the bank account every month or just some historic quirk?

I guess because that's the figure the jobs are advertised at

Pension is still part of pay, it is saving for your future.
Not everyone has student loans.
Tax depends on various other factors.

Gross is the best way to compare, and then if needed talk about 'take home pay'.

Everyone’s net pay is different due to things like student loans, pension contributions, non standard tax codes etc, so you can’t compare net pay as an indicator of salary.

If companies offered a net salary then they’d be paying things like student loans or underpaid tax instead of the employee.

Neither. Employers quote a gross salary because that is what they pay you.
You are responsible for your income tax and employee NICs on that amount, although the employer must now deduct at source.
If employers quoted net salary they would run the risk of you having other earnings or a tax change taking place that would mean they had to pay more tax.

As you say, pension and student loan repayments can vary. Because they are individual the individual has to work out what their take home will be.
There are lots of online tools for doing this.

Also that most people have similar deductions (even on £80k, student loan repayments are 'only' £400 pm) so it's a well above average salary whichever way you look at it.

If someone is struggling on salaries that are two or three times the national average, then it's very likely to be more about how they spend their money rather than blaming deductions that just about everyone has.

Do you mean in job adverts? Or just when people are chatting? DP would appear to earn lots, but by the time we've paid childcare and mortgage we're actually a lot poorer than my Dbro who earns 21k, such is life. Income is only one factor in how much money you have, outgoings are more relevant IMO as to how "rich" you feel.

Because pension contributions are voluntary and part of pay. Because not everyone pays student loans. Because income tax and NI are set by the government not the employer. Because people will pay different rates of income tax based on their circumstances. Because lots of benefits - flexible benefits programmes, bonuses, employer pension contributions, but also maternity pay and sickness pay, are calculated from gross salary not net.

Yabu

Status would still come into it if you had net figures. So not sure of your point.

Plus, as already stated, gross salary won’t translate into the same net salary as someone with different deductions.

Unless OP, you want to be able to say you actually got ££ more in the bank than someone else with a higher gross salary.

Because for one person who doesn't have a certain deductions the net salary is x and for a different person who does have deductions the net salary is y.

For a lot of people it's probably because it sounds better!

I do wonder how many people add up their actual annual income rather than looking at the net pay, particularly when looking at their budget. People tend to look at a household income of, say £60k, and lambast the OP for not being able to live on it.

However, if there is one earner on a £60k salary the household net income will be less than two people on £30k because of personal allowances and pension differences.

For instance, if a couple both worked where I do and earned £30k each, they would take home £3,770 per month between them. Two personal allowances and 2% less pension. If the "high flying DH" sole earner of mumsnet fame earned £60k he would take home £3,450 - higher pension contributions and half the personal allowance of the couple - a difference of £320 per month.

But two people on £30k are likely to have higher costs than one person on £60k with a SAHP. Childcare, travel to work x2, work clothes and lunches x2.

Sorry, I meant more so for chatting purposes rather than job adverts. You often see threads on here where people will have a salary of £xx and I know I can be guilty of thinking ‘loads of money!’ (Insert Harry Enfield impression here) but the take home can be half that sum.

Person A on £70k salary, take home £3k a month.
Person B on £22k salary, take home £1.5k a month.

For someone on £70k to take home £3k, they must have a student loan, much higher than average pension contributions and other deductions like a company car, so they are saving for the future and covering their car expenses.

With a more average 6% pension contributions and still with a student loan, they will receive quite a bit more.

We have a progressive tax system in this country, which skews higher tax contributions towards higher earners, which is widely considered to be the fairest system.

I don’t talk about salary when chatting, if I did I would just mention the basic gross salary, mine varies massively due to commission and bonus payments (not a banker).

The Gross figure,( whilst not being exact the variables are known) is a closer cost to the company than the Net figure. A net figure of say £30k could mean a gross figure of anything depending on the individuals circumstances.

Person A on £70k salary, take home £3k a month.
Person B on £22k salary, take home £1.5k a month.

Because if person A is on 70k and chooses to make extra pension payments that's a choice. It's a really sensible choice for most people, but it's still a choice. If some catastrophe struck and they needed more take home pay, they could reduce their pension contributions.

Like PP said if you choose to put a lot on your pension that's your choice just like of you choose yo buy a house with a large mortgage.

Thus reminds me of when a bunch of colleagues got a huge... Think 1000s tax rebate.... They'd overpaid.... Different colleagues got very vocal... Very pissed offf..... But they hadn't overpaid their tax to begin with... They just coukdbt understand WHY they weren't getting this as everyone else was....

For someone on £70k to be on 3k with a student loan they’d be doing a 25% pension which is so far from the average it would be a meaningless comparison.

I take your point though that compared to a lower salary the gain doesn’t seem as much proportionally as the gross salary difference would suggest.