Business Advice
October 21, 2024

Gross salary: What it is and what are its components

Written by
Galih Gumelar
Last Modified on
October 21, 2024

Understanding gross salary is crucial for any business, especially when it comes to managing payroll efficiently and ensuring employees are fairly compensated. Whether you are a financial professional, a business owner or someone entrusted with payroll, knowing the intricacies of gross salary calculations can help you avoid costly mistakes and streamline the payroll process.

In this article, we will explain what gross salary is, what components it's made up of and how it's calculated, with clear examples to help you run your payroll more effectively.

What is a gross salary?

Gross salary is the total amount of earnings an employee receives in cash, before any deductions such as income tax (PPh) and the National Health and Employee Security Programs (BPJS) contributions. This figure represents the employee’s full earnings, excluding benefits in kind and employer's national insurance and pension contributions.

As gross salary includes all forms of cash compensation, it is usually the highest figure on an employee’s payslip. However, it is important to know that this is not the amount an employee takes home. After deductions such as taxes and insurance contributions, employees receive the so-called net salary or take-home pay (THP).

Moreover, the gross salary is often also referred to as "gross pay" or simply "gross income"

Gross salary vs. net salary

If you’ve ever confused the difference between gross and net salary, you’re not alone. Although the two are closely related, they represent different things when calculating salary.

Gross salary, as we’ve already mentioned, is total earnings before any deductions. It includes everything an employee earns within a certain period of time, which is usually calculated monthly in Indonesia.

Net salary, on the other hand, is what is left after all necessary deductions. To obtain the net salary, the gross salary is reduced by taxes, social security contributions and other deductions that apply for that month.

For example: An employee named Ani earns a gross salary of Rp7,000,000. After deducting Rp1,000,000 in taxes and other deductions, Ani receives a net salary of Rp6,000,000.

Important components of the gross salary

The gross salary is made up of several components, and if you know these, you can calculate it accurately:

1. Base salary

This is the basis for every salary calculation. The base salary is the fixed salary paid by the company and is often determined by the employee's position and the agreement between employer and employee. It is the main component in the calculation of gross salary, which remains constant unless it is adjusted, such as in the annual salary review.

2. Allowances

Allowances are additional earnings over and above the basic salary, designed to improve employee well-being and attract talent. They can be fixed (recurring monthly) or variable (dependent on certain conditions).

Common allowances include:

  • Travel allowance
  • Family allowance (spouse and children)
  • Meal allowance

3. Other Income

In addition to the basic salary and allowances, employees may also earn additional income in connection with their work, such as

  • Overtime bonuses
  • Performance bonuses
  • Project or sales commissions
  • Stock dividends

How do you calculate the gross salary?

Calculating the gross salary is very simple: just add up all the components mentioned above. Here is the formula:

Gross salary = basic salary + allowances + other income

The values vary for each employee based on their basic salary and the additional earnings to which they are entitled.

Example: Calculation of gross salary

Let’s look at Ani’s earnings to see how gross salary is calculated in practice.

  • Base salary: Rp7,000,000
  • Travel allowance: Rp500,000
  • Communication allowance: Rp500,000
  • Performance bonus: Rp1,000,000
  • Overtime allowance: Rp300,000

According to this formula, Ani’s gross salary for this month is

Gross salary = Rp7,000,000 + Rp500,000 + Rp500,000 + Rp1,000,000 + Rp300,000

Gross salary = Rp9,300,000

It is important to note that this amount is before any deductions. The net salary that Ani brings home is calculated by deducting all deductions from this gross amount.

Optimize your payroll with Aspire's all-in-one solution

Payroll processing can be complex, especially if you manage multiple employees. Errors in payroll calculations or late payments can lead to unhappy employees and potential legal issues. This is where Aspire’s all-in-one solution comes into play.

With Aspire's bulk payments, you can schedule and execute bulk payments automatically, ensuring that all salaries are processed correctly and on time. No more manual processing — just seamless transfers directly to your employees’ accounts.

In addition to payroll, you can also efficiently process supplier payments and other bulk transactions with Aspire's bulk payment features.

Aspire not only simplifies payroll, but also employee reimbursement. With Aspire, your employees can submit claims with just a few clicks, and you can manage, approve and process them from a single dashboard, saving you time and effort.

Want to see how Aspire can help you optimize your business processes and financial management? Get in touch with us today!

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Frequently Asked Questions

How can Aspire support the unique financial needs and challenges of mid-sized businesses?

Aspire offers a comprehensive suite of expense management solutions tailored for mid-market companies. This includes sophisticated corporate cards, advanced budget controls, and streamlined claims and approval policies, all designed to enhance financial efficiency.

How quickly can a mid-market company integrate Aspire's solutions into existing systems and workflows?

Integration with Aspire's expense management solutions is swift and seamless. Mid-market companies can swiftly implement corporate cards with tailored features, set up nuanced budgets, and establish streamlined claims and approval processes, ensuring minimal disruption to existing workflows.

How does Aspire compare to competitors for international money transfers?

Aspire excels in international expense management with FX fees up to 2x cheaper than traditional banks.

Global payments are offered by various providers through business accounts. Read our article to know more about types of business accounts and how to choose the best one for your business. There are many banks and fintech companies offering business accounts to businesses in Singapore. We have covered them all in our blog, you can click the links to view accounts offered by various banks such as DBS, OCBC, Maybank etc.

However, if you are a start-up or a growing business, chances are you may not meet the eligibility criteria for most of these banks or find their charges to be expensive for your liking. You can consider opting for Aspire multi-currency account for global payments which offers you all the benefits, with eligibility criteria which are less stringent. Read our article on bank charges in Singapore for a quick and easy comparison.

What level of customization does Aspire offer to meet the specific financial requirements of mid-market clients?

Aspire understands the diverse financial needs of mid-market clients and provides a high level of customization to tailor solutions accordingly. This includes the ability to customize corporate cards with specific spending limits, rewards, and benefits that align with the unique requirements of each client.

Additionally, Aspire's budgeting features are adaptable to accommodate the distinct financial structures of mid-market enterprises. The platform also allows for fine-tuning approval policies, ensuring they align with the specific workflows and compliance standards of individual mid-market businesses. This commitment to customization empowers mid-market clients to optimize their expense management in a way that best suits their financial goals and operational preferences.

Is there a minimum balance required for Aspire Business Accounts?

No minimum balance is required to keep your SGD, USD, EUR, GBP and IDR Accounts activated.

Can Aspire's corporate cards be customized to cater to the specific needs of consulting teams on the go?

Yes, Aspire's corporate cards are highly customizable. Consulting teams can benefit from tailored spending limits, travel-centric perks, and real-time transaction tracking, ensuring that the cards meet the unique requirements of professionals on the move.

How does Aspire support budget management for consulting projects and travel expenses?

Aspire's platform offers sophisticated budget controls that consulting companies can adapt to project-specific needs. This includes setting project budgets, tracking expenditures, and receiving real-time insights to ensure that expenses align with project goals.

What are Aspire Corporate Card FX rates?

At Aspire, we want you to pay the lowest rates in the market.
- Zero card activation fees
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- Best FX rates, up to 2x cheaper than banks

How does Aspire help consulting companies enforce expense policies and approvals for travel expenses?

Aspire streamlines the claims and approval process, allowing consulting companies to establish and enforce expense policies seamlessly. Customizable approval workflows ensure compliance with company policies and industry regulations.

Is Aspire's platform scalable for consulting companies of varying sizes?

Yes, Aspire's platform is scalable and caters to consulting companies of all sizes. Whether you're a boutique consultancy or a larger firm, the platform's features can be adapted to meet your specific travel and expense management needs.

How can I open a business account in Singapore?

For a business account in Singapore, Aspire is an excellent choice. With a focus on startup and SME needs, Aspire offers a seamless and transparent banking experience.

Benefit from their user-friendly online platform, no minimum balance or account opening fees, and dedicated support for businesses of all sizes.

Aspire is designed to streamline your financial management, making it an ideal partner for entrepreneurs in Singapore.

How long does it take to open an Aspire business account?

Registration with Aspire takes less than 10 minutes which you can do via our website or mobile app.

Once registered, we will get back to you within 5 business days on whether your account has been activated or if we need further documents from you.

Our account verification process varies according to the nature of your business. In exceptional cases, it can take up to 7 days to process your documents.

How can Aspire's corporate cards benefit my startup?

Aspire's corporate cards offer a range of benefits for your startup. Earn 1% unlimited cashback on qualified spends, simplify expense management, enjoy streamlined transactions, and gain real-time insights into spending. With customizable limits, integration with accounting software, and enhanced security features, Aspire's corporate cards are designed to empower your startup's financial efficiency and provide added convenience for your team.

Is Aspire suitable for both early-stage and established startups?

Absolutely, Aspire caters to the needs of both early-stage and established startups. Whether you're just beginning your entrepreneurial journey or have an established business, Aspire offers tailored financial solutions to help streamline your operations.

From managing expenses and optimizing workflows to providing valuable financial insights, Aspire's platform is designed to adapt and scale with your business as it grows. The flexibility and scalability of Aspire make it a suitable choice for startups at various stages of development.

Is there a minimum balance required for Aspire Business Accounts?

No minimum balance is required to keep your SGD, USD and IDR* Accounts activated.

However, we recommend keeping your subscription plan amount available on your balance to ensure you're up to date with your payment every month.*

To create a recipient or make any transaction on your IDR Account, you'll need to have a minimum balance of IDR 10,000 on your account.

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Galih Gumelar
is a seasoned writer specialising in macroeconomics, business, finance and politics. With a writing history at CNN Indonesia, The Jakarta Post, and various other reputed organisations, Galih leverages his broad range of experiences to create insightful resources for those wanting to start a business.
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