Why a $500 Pension Contribution Costs You $390
Pre-tax deductions come off before tax is calculated — so part of the money was never yours to keep.
⚠️ No calculator knows your tax code
Bands, thresholds, allowances and social contribution rules differ by country and change every year. Anything claiming to produce your exact net pay from your gross is either country-specific or guessing.
Every rate here is one you supply, and the only reliable source is your own payslip: divide each deduction by the figure it was taken from, and you have the rate that actually applies to you.
What this tool contributes is the order.
Your details
Pension, salary sacrifice, and in some systems health premiums. These come off BEFORE tax is worked out. Must cover the SAME period as your gross pay — if this comes out larger than gross, the pay figures read — rather than guess, because you cannot contribute more than you earned.
From your payslip: tax paid divided by taxable pay. Not the headline band — the rate you actually paid.
Union dues, some savings schemes, court orders. These come off money already taxed.
Result
Gross, minus pre-tax deductions, minus tax on what remains, minus social contributions, minus post-tax deductions. A NEGATIVE figure is not a payslip you could receive — it means the deductions you entered come to more than the pay for that period, and the amount shown is the shortfall. Reads — instead if the pre-tax figure exceeds gross, which cannot happen at all.
- What your pre-tax deduction really costs youLess than the amount itself, because part of it would have gone in tax anyway. The most useful figure here.
- $390.00
- Effective discount on that contributionHow much of every dollar contributed is money you would not have kept anyway.
- 22
- Taxable payGross minus pre-tax deductions. This is what tax is calculated on, not your gross.
- $4,500.00
- Tax
- $990.00
- Social contributions
- $382.50
- Total taken off
- $1,972.50
- Share of gross you do not take homeIncludes your own pension contribution, which is not lost — it is still yours, just not in your account today.
- 39.5
- Cost of putting $100 more in pre-taxThe question worth asking before deciding you cannot afford to increase a contribution.
- $78.00
Open the Take-Home Pay Calculator on its own page to bookmark or share it.
The order is where the confusion lives
Deductions don't all come off the same number:
- Start with gross pay
- Subtract pre-tax deductions — pension, salary sacrifice, in some systems health premiums
- That gives taxable pay — what tax is actually worked on
- Subtract tax on that figure
- Subtract social contributions — on gross or post-pension, depending on your system
- Subtract post-tax deductions — union dues, court orders
On the defaults: $5,000 gross, $500 pre-tax, 22% tax, 7.65% social, $100 post-tax → $3,027.50 take-home.
Which is why $500 costs $390
Contributing pre-tax drops your taxable pay by $500, so your tax bill falls by $500 × 22% = $110.
Your take-home drops by $390. Five hundred dollars lands in your pension.
That's a 22% discount on saving — and it's the single most useful thing here, because people routinely decide they can't afford to increase a pension contribution by comparing it against their take-home rather than against its real cost.
The tool asks the question directly: putting another $100 in pre-tax costs you $78.
The base question changes it again
Whether social contributions are charged on gross or on post-pension pay varies by country and scheme — and it isn't a detail:
| Social charged on | $500 really costs | Discount |
|---|---|---|
| Gross | $390.00 | 22% |
| Post-pension | $351.75 | 29.7% |
Same contribution, same rates. If your pension also reduces social contributions, the discount is materially larger.
The tool asks rather than assuming, because assuming would make it wrong for roughly half its readers. Your payslip settles it — check which figure the contribution is a clean percentage of.
The same wedge, seen from the other end
Run the tool with $500 more gross and you get the mirror image of the pension question:
| Face value | What it's really worth | |
|---|---|---|
| A $500 raise | $500 | +$351.75 take-home (70.3%) |
| $100 into a pension | $100 | −$78.00 take-home (78%) |
Both are the same deduction wedge, approached from opposite directions. Money coming in arrives reduced; money going out pre-tax leaves reduced.
Which is worth knowing before a salary negotiation. A raise that sounds substantial in gross terms lands as roughly seven-tenths of itself — so the difference between two offers is always smaller in your account than it is on paper.
And it cuts the other way too: a benefit taken pre-tax is worth more than the same amount in salary, because the salary version gets taxed first.
You can check nothing is hiding
Set every rate to zero and take-home comes back as exactly $5,000 — gross, straight through — with a pre-tax contribution costing its full $100.
Everything the tool subtracts is a rate you gave it. Nothing else is in there.
Your pension isn't a deduction like the others
It reduces take-home, but unlike tax it isn't money you've lost. It's still yours — just not in your account today.
Worth holding on to when the effective deduction rate reads 39.5%, since that figure counts your own saving alongside genuine deductions. Set the pre-tax figure to zero and it drops to 31.7% — that's what's actually leaving your control.
Employer contributions, where they exist, appear in neither figure and are usually the best-value part of the whole arrangement.
⚠️ It won't match your payslip exactly
Progressive bands and annual allowances don't divide neatly into pay periods, and student loan repayments, benefit deductions, tax credits and court orders all sit outside this.
If the figure lands close to your real net pay, the model fits and it's useful for what-if questions.
If it's far off, find out why rather than adjusting a rate until it matches. The discrepancy is telling you something.
General information, not financial or tax advice. For anything that matters, ask a qualified adviser or your tax authority.
Free tool
Take-Home Pay CalculatorThe order deductions come off decides what you keep - and a $500 pre-tax contribution only costs $390 of take-home.
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