Take-Home Pay (THP) is a familiar term, but many mistakenly equate THP with basic salary. In fact, the two are very different.
A lack of understanding of this distinction can impact an employee’s personal financial situation. Protect your financial rights by understanding the details of both.
What Is Take-Home Pay?
Take-Home Pay, or net salary, is the amount of salary an employee receives after deductions such as taxes, BPJS (social security), and other withholdings.
These deductions are based on regulations set by the law and company policies. The final amount received by employees varies according to the agreements outlined in the employment contract.
In conclusion, Take-Home Pay is the final amount of money that is actually deposited into the employee’s bank account.
Read More: Understanding The Difference between Nett Pay vs. Gross Pay
The Difference Between Take-Home Pay and Base Salary
One common misunderstanding is assuming that take-home pay is the same as the basic salary. In reality, the two are very different.
The basic salary is the primary component of an employee’s earnings, agreed upon during the employment contract, and does not include allowances or deductions.
On the other hand, take-home pay (THP) is the final amount an employee receives after adding allowances and deducting items like taxes, BPJS contributions, or company loans.
Understanding this difference is crucial, especially for gaining clarity on the actual income received. By doing so, employees can better plan their expenses to align with their individual financial needs.
Components of Take-Home Pay
By understanding the components of Take-Home Pay (THP), employees can calculate their net income more accurately. Below are the key components that make up your Take-Home Pay:
1. Basic Salary
The main component that serves as the basis for calculating allowances and deductions.
2. Allowances
Allowances increase the amount of Take-Home Pay and are usually fixed. Common types of allowances include transportation allowance, meal allowance, and health allowance.
3. Bonuses or Incentives
Additional pay provided based on performance or specific achievements.
4. Deductions
Common deductions applied to an employee’s salary include:
- Income tax (PPh 21)
- BPJS health contributions
- BPJS employment contributions
- Health insurance
- Salary advances
- Fines
Understanding these components helps employees plan their finances more effectively and ensures a clear picture of their actual earnings.
How to Calculate Take-Home Pay (Example)
After understanding the various components of Take-Home Pay (THP), it is equally important to learn how to calculate it. Follow these simple steps to calculate an employee’s Take-Home Pay:
Steps to Calculate THP:
- Add the basic salary and all allowances.
- Subtract total deductions, such as taxes and BPJS contributions.
- The rinal result is the set salary (Take-Home Pay).
Here is the formula for calculating THP based on Law No. 13 of 2003 Article 1 Paragraph (30):
THP = (Basic Salary + Allowances) – (BPJS Deductions + Income Tax (PPh 21) + Other Deduction Components)
By understanding this process, employees and employers can calculate earnings transparently and accurately, ensuring compliance with applicable labor laws.
Take-Home Pay Calculation Example
Suppose Employee Z has the following salary details:
- Basic Salary: Rp5,000,000
- Transportation Allowance: Rp500,000
- Meal Allowance: Rp500,000
- Deductions (PPh 21 and BPJS): Rp1,000,000
Based on these details, we can calculate the Take-Home Pay as follows:
THP = Rp5,000,000 + Rp500,000 + Rp500,000 – Rp1,000,000
THP = Rp5,000,000
Thus, the net salary (Take-Home Pay) that Employee Z will receive is Rp5,000,000.
Support Early Salary Access for Employees with Setlary
From the explanation above, it is hoped that companies and potential employees can better understand the concept of take-home pay (THP).
By recognizing the difference between THP and basic salary, as well as understanding the components that influence it, employees can plan their expenses more wisely and manage their personal finances effectively.
But what if employees need access to their salary before the official payday? This is where Setlary Earned Wage Access (EWA) comes in as a solution.
With Setlary, companies can empower employees to access their earned wages at any time without waiting for the end of the month.
Why Is EWA Important?
- Employees can address urgent financial needs without falling into high-interest debt traps.
- Financial stress is reduced, enabling employees to focus better on their work.
- Offering a more diverse range of benefits makes your company more appealing to high-performing candidates.
Now is the time to support employees with flexible benefits that drive greater productivity!
