Understanding Your Paycheck: Allowances, Deductions, and Net Salary
A monthly payroll statement contains several elements: Basic Salary, Allowances (like housing, transport, or cost of living), and Deductions (such as pension contributions or health insurance).
How Pension Deductions Work (e.g. GOSI in Saudi Arabia):
For Saudi nationals working in the private sector, the General Organization for Social Insurance (GOSI) mandates a pension and social support contribution totaling 9.75% (consisting of 9% for retirement pensions and 0.75% for Saned unemployment insurance). This is deducted from a specific earnings base:
GOSI Basis = Basic Salary + Housing Allowance
Example Payroll Calculation:
If your Basic Salary is $10,000, Housing Allowance is $2,500, and Transportation Allowance is $1,000:
- Gross Salary: $10,000 + $2,500 + $1,000 = $13,500.
- GOSI Basis: $10,000 + $2,500 = $12,500.
- GOSI Deduction (9.75%): $12,500 × 0.0975 = $1,218.75.
- Net Take-Home Pay: $13,500 - $1,218.75 = $12,281.25.