In order to know exactly how much compensation you will be getting in your new job, or figure out how much you can save by outsourcing instead of paying someone a regular salary, you need to know how to calculate salaries.

If A Monthly Figure is Given

If you are told that your monthly salary is $500 a month, all you have to do is multiply this amount by 12, and then divide the total by 240. The number 240 is based on 5 days work week, 4 weeks in a month. It’s not accurate in the sense that some months have more working days, but the end figure will give you an idea how much you earn for one day.

Another reason it’s not accurate is because some working are declared to be holidays. You get paid extra if you work on these days or do overtime. Keep in mind also that there will be deductions for insurance, health benefits and taxes.

If you want a more accurate figure, then instead of dividing the initial figure by 12, divide it by the number of work days in each month. Should you be absent at any time during that point, simply deduct the number of days’ salary from $500.

If you are working or paying someone a salary, computing for salary is easier because you can base your calculation on the pay slip. You will also know the exact deductions made every pay day.

Net Salary Versus Gross Salary

If you have followed the instructions above, gross pay is before deductions or $500, and net salary is the actual money you get. It is possible to question deductions or ask for proof that the deductions for benefits are being remitted. Most companies will willingly show you the documents and give you a copy. Failing to remit deductions to the proper agencies is tantamount to a death sentence for a business.

How About Bonuses or Merit Pay?

As a general rule, merit pay is a confidential matter between employer and employee. It is possible to get an annual bonus this year, but none the following year, or vice versa. The amount of the bonus or merit pay is also decided upon by the employer and they are taxed by the government under regular income tax. If the bonus is based on profit sharing, it could be taxed under luxury tax which is a higher percent than income tax. It would really depend on how the figure was arrived at and under what income range it falls under.