What Is Gross to Net? The Payroll Breakdown Every Team Should Understand

Whether you run payroll for a small team or thousands of employees worldwide, there’s one calculation that sits at the heart of it all – gross to net.

It’s the difference between what you owe your employees and what actually lands in their bank account.

And if you get it wrong? You risk compliance penalties, payroll disputes, and a big hit to employee trust.

What Does Gross to Net Mean?

At its core:
Gross pay = total earnings before deductions.
Net pay = final take-home pay after deductions.

Gross pay typically includes:

Base salary or hourly wages
Overtime payments
Bonuses and performance incentives
Commissions
Cash allowances (e.g., transport, housing, meal stipends)

From there, you subtract statutory and voluntary deductions to get net pay.

Typical Deductions in the Gross to Net Process

The deductions vary widely across countries, but they often fall into these categories:

Income tax
- PAYE in Ghana, Nigeria, Kenya, South Africa, and the Philippines
- Tax bands, allowances, and exemptions can change annually
Social security contributions
- National Insurance (UK), Social Security (US), SSS (Philippines)
Health insurance premiums
- Compulsory in countries like Kenya and the Philippines
Retirement or pension contributions
- Tiered systems in Ghana, provident funds in South Africa
Other statutory levies
- Housing funds, education levies, union dues
Voluntary deductions
- Loan repayments, savings plans, charitable contributions

Why Gross to Net Is More Complex for Global Teams

If you only hire in one country, gross to net is relatively straightforward, mostly. But for companies managing distributed teams across multiple countries, the complexity skyrockets.

You need to navigate:

Different tax codes for each jurisdiction
Multiple currencies and fluctuating exchange rates
Changing thresholds and deductions throughout the year
Country-specific compliance requirements

For example:

In Ghana, the tax-free threshold applies before progressive tax bands kick in.
In Kenya, PAYE is layered with NSSF and NHIF contributions.
In the Philippines, employees may have mandatory SSS, PhilHealth, and Pag-IBIG deductions.

The Risks of Getting It Wrong

Mistakes in gross to net calculations can result in:

Regulatory penalties and fines
Late payment fees for statutory contributions
Employee dissatisfaction or disputes over pay
Time lost in reprocessing payroll

Why Automation Is the Future of Gross to Net

Manual calculations, especially with spreadsheets, can’t keep pace with:

Frequent law and rate changes
Multi-country expansion
The need for real-time accuracy

Automated payroll tax engines solve this by:

Pulling real-time tax updates for each country
Applying jurisdiction-specific rules instantly
Scaling across 100+ countries without extra setup
Offering transparent calculations employees can verify

Summary

Gross to net might seem like a basic payroll concept, but in the context of global hiring, it’s one of the most mission-critical processes to get right.

Automating it doesn’t just save time, it ensures compliance, builds employee trust, and frees your team to focus on growth.

Cadana’s Global Payroll Tax Engine automates gross to net calculations globally, giving you compliance confidence and operational efficiency from day one.

👉 Book a free demo to see it in action.