Collect Payroll Data
Create a new workbook in Microsoft Excel, using your pay stub or payroll remittance advice form as a guide. Populate the sheet’s columns as follows:
Your federal tax rates may vary based on your exemptions. To calculate your tax rates, divide the assessed taxes against the taxable gross income from your pay stub.
Calculate Net Salary
The easiest way to calculate net salary is to break it into smaller formulas rather than one long and complicated formula. In this tutorial, we entered the information in the table from above and entered some payroll data in Row 2.
Use the following formulas to calculate your net salary and other financial metrics:
Net Salary: Hours worked x Hourly Rate + Positive Adjustments - (Negative Adjustments, Pre-tax Adjustments, and Pre-tax Retirement Contributions) - All taxes (Local, State, Federal, and Medicare) - Post-tax deductions. Gross Salary: Hours worked x Hourly Rate + Positive Adjustments. Pre-Tax Salary: Hours worked x Hourly Rate + Positive Adjustments - Negative Adjustments, Pre-tax Adjustments, and Pre-tax Retirement Contributions.
This example uses data from the above chart and enters payroll information into Row 2. Below Row 2, (Cell B4 in this example) enter Gross Salary and press Enter. In Cell C4, enter =B2C2+D2 and press Enter. In Cell B5, enter Pre-Tax Salary and press Enter. In Cell C5, enter =B2C2+D2-(E2+F2+L2) and press Enter. In Cell B6, enter State Income Taxes and press Enter. In Cell C6, enter =C5H2 and press Enter. In Cell B7, enter Local Income Taxes and press Enter. In Cell C7, enter =C5I2 and press Enter. In Cell B8, enter Federal Income Taxes and press Enter. In Cell C8, enter =C5J2 and press Enter. In Cell B9, enter Medicare\SS Taxes and press Enter. In Cell C9, enter =C5K2 and press Enter. In Cell B10, enter Net Salary and press Enter. In Cell C10, enter =C5-C6-C7-C8-C9-G2-M2 and press Enter.
By breaking the formula into smaller steps, you can easily see how your taxes and deductions are compiled to generate your net salary. Then referencing each result in the final formula (in cell C10), you can quickly compute the final results.
Considerations
Using a formula to calculate net salary makes sense if you’re trying to approximate your take-home pay. However, some situations may adversely affect your calculations:
If you’re paid every other week, some deductions may not apply to the third payroll in the same month. In a calendar year, there are 26 pay periods but 24 fortnights. Some deductions (for example, health insurance) may be calculated to pull only 24 times per year. Watch your pay stub to identify which deductions are pre-tax or post-tax. Some deductions are based on a percentage of gross payroll, for example, garnishments.
