Net versus gross - what is the difference and how to calculate it?
For business
6 July 2025
The terms gross and net are not only used in finance. They are also used to describe product prices in shops and for individual goods. However, you are most often confronted with these values when it comes to pay for work. Net versus gross pay - what is the difference and how do you convert them?
Netto i brutto - definicje
The gross versus net amount is primarily used for the price of goods, their weight and the amount of remuneration. It is therefore very important to be aware of the differences between these terms, particularly if you are facing a job interview.
The term gross refers to the amount including any additional financial charges, i.e. taxes. In the case of products, e.g. in a shop, these are indirect taxes, as individuals do not pay them at the tax office, but only through the purchase of goods and services.
The net amount, on the other hand, is defined as the rate net of taxes. In the case of an employment contract, it is this amount that the prospective employee should pay attention to, as it is this amount that will go directly to his/her bank account. The situation is different for purchases, because then the gross price applies to private individuals.
Gross versus net amounts thus differ in the inclusion (or lack thereof) of all contributions, taxes and other benefits that go into a country's resources. They are used, among other things, for employment contracts or the prices of individual products. 
What is net versus gross pay?
Being aware of the differences between the terms gross and net is particularly important when applying for a job. Above all, distinguishing between net and gross income will enable you to properly understand your employment contract - whether it is a civil law contract in the form of a contract of mandate or a contract of employment. It is a good idea to have the definitions of both terms at the back of your mind already during the interview to avoid misunderstandings later on.
The difference between gross and net wages is due to a number of contributions that the employer is obliged to pay to the Treasury for each employee. Gross pay therefore does not determine the real amount you will receive as an employee, as it will be reduced by any contributions. The difference between the gross and net hourly rate is similarly due to the obligation to pay the same contributions.
An employer who employs a person under an employment contract must specify in the contract such matters as, for example, the working hours, the type of work and the date of commencement. The law obliges the employer to specify the amount of the employee's remuneration on the contract, taking into account all components. This means that the amount that appears on the employment contract is the gross salary, while in practice you will receive a net salary.
Net, i.e. how much we get in hand
It is useful to expand your knowledge of what gross versus net wages are by looking at the types of contributions an employer is required to make. Gross wages are protected by law. This means that the employer must withhold the relevant amounts from it to the Treasury. Net salary, i.e. the amount an employee receives on hand under an employment contract, is reduced by contributions to the Social Insurance Institution (ZUS), i.e. pension, accident, disability and sickness insurance. Also deducted from the gross salary are the contribution to health insurance under the National Health Fund and the advance payment of personal income tax. Similarly, the discrepancy between gross and net hourly wages is the same as the discrepancy between gross and net wages.
In the case of a contract of mandate, gross vs. net as the distinction between the amounts is due to the employer's obligation to pay Social Security contributions and health contributions. Only sickness insurance is voluntary in this case. However, there is an exception if the person has been insured under other titles. In that case, only the health contribution is deducted from the amount. An advance payment of income tax is also taken from the salary. An exception to this is students, who are exempt from contributions and taxes until the age of 26 and do not have to calculate the differences between gross and net salary. Instead, the differences between gross and net pension are due to the obligation to pay health insurance contributions, as well as the amount of income tax. 
How do you calculate the difference between net and gross pay?
Calculating the difference between gross and net pay in the case of an employment contract involves subtracting all the previously mentioned contributions from the gross amount. On the internet, you can find special calculators on various websites that calculate how much money you will receive on the basis of your gross salary and any contributions and allowances. Calculating the difference yourself is also possible, but it is quite time-consuming and complicated. The net salary calculator will very quickly calculate the estimated amount of income tax and the sum of all health contributions. The sum of these liabilities is then subtracted from your gross salary, taking into account any tax allowances.
Price and net versus gross weight - differences
It is useful to know what is gross and what is net not only for professional reasons. Also in your everyday shopping in a shop, you may come across the distinction between gross and net price. In this case, unlike in the case of an employment contract, the amount that should be of interest to the shopper is the gross price, through which indirect tax is paid to the Treasury.
The gross price consists of the net amount plus the obligatory VAT (and sometimes customs and excise duties). In Poland, the basic VAT rate is 23% and this is what makes the difference between gross and net on shop tags. On the other hand, the net price for the sale of goods is looked at by traders who make settlements between themselves. For them, this makes it easier to account for VAT.
It is very important that the prices for individual goods in shops are net prices. Otherwise, it is misleading to the customer. This is generally regarded as unfair competition. It is worth knowing that if, while shopping, you suggest the price of a product on the shelf and it turns out to be higher at the checkout, the seller should sell you the goods for the amount that appears on the goods.
The terms gross and net are also used to refer to the weight of products, which is useful, among other things, during any logistics process. What is the difference between net and gross in this case? The gross weight of a good is correspondingly higher than its net weight. In this case, the difference is due to the weight of the packaging of the individual goods. Its weight can be calculated by subtracting the net product weight from the gross weight. The result of this subtraction is determined by a unit called tare.
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