How to Read Your Payslip and Estimate Take-Home Pay

1. Find your gross pay

Gross pay is your pay before any deductions: your hourly rate times the hours worked, or your monthly or yearly salary. Bonuses, overtime and allowances are usually listed separately.

2. Find the pre-tax deductions

Contributions to a workplace pension, a 401(k), a health plan or, in China, social insurance and the housing fund are often taken out before tax. Divide them by gross pay to get the percentage to enter.

3. Work out your average tax rate

Divide the income tax on your payslip by the taxable pay. If your country gives you a tax-free amount each year, enter it in the tax-free field and use the rate on the remaining income.

4. Add social security and other deductions

Enter social security, health, pension and unemployment insurance as a percentage of gross pay. Union dues and other fixed monthly amounts go in the fixed deductions field.

5. Compare with your payslip

Set the pay period to match your payslip and compare the take-home pay. If it is a little off, adjust the tax rate. Then change the gross pay or the hours to see what a raise or a new job would mean.

Checklist

Before you rely on the estimate, check these points:

• Gross pay and pay period match your contract.
• Hours per week and paid weeks are right for hourly pay.
• The tax rate is your average rate, not your top bracket.
• Pre-tax deductions are entered as pre-tax, so they lower your taxable pay.
• The number of monthly payments matches your contract (12, 13 or 14).
• For decisions about tax, check the result with your employer, tax office or an adviser.