What is a grey salary and why is it paid?
Posted: Thu Jan 23, 2025 8:03 am
Gray salary is the payment of part of the salary in cash, without official registration and payment of taxes. If the labor relations between the employee and the employer are not formalized in any way, the salary in an envelope is paid not partially, but in full.
Salary in an envelope
Source: shutterstock.com
From this official salary, the manager pays bolivia mobile phone numbers database contributions and personal income tax. The rest, which is paid in an envelope, bypasses salary deductions. Thus, the employer saves at the expense of the employee.
The main reasons why employers resort to grey wages:
reducing the tax burden.
reduction of costs for social contributions.
increasing competitiveness by reducing costs.
Important: such actions carry serious risks, and both employers and employees themselves may be held liable.
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Risks of workers agreeing to grey wages
The employee receives a grey salary solely at his own risk. Neither the amount, nor the procedure, nor the term of its payment are fixed by law or the employment contract.
At any moment, the employer can stop paying wages, and it will be difficult to get money in this situation. And it is better for the employee to understand this before agreeing to receive wages in this way.
Loss of social guarantees
Gray wages are not taken into account when calculating pensions, sick leave and other social benefits. When an employee goes on vacation, his vacation pay may be much less than the salary in the envelope. For reporting purposes, they will be calculated not based on the actual, but on the official salary.
Also, a person who receives a gray salary may be denied a loan, since no bank will issue him a mortgage or other loan with a small official income.
Salary in an envelope
Source: shutterstock.com
From this official salary, the manager pays bolivia mobile phone numbers database contributions and personal income tax. The rest, which is paid in an envelope, bypasses salary deductions. Thus, the employer saves at the expense of the employee.
The main reasons why employers resort to grey wages:
reducing the tax burden.
reduction of costs for social contributions.
increasing competitiveness by reducing costs.
Important: such actions carry serious risks, and both employers and employees themselves may be held liable.
Read also!
"Marketer's KPI - Key Indicators and Accurate Calculation"
Read more
Risks of workers agreeing to grey wages
The employee receives a grey salary solely at his own risk. Neither the amount, nor the procedure, nor the term of its payment are fixed by law or the employment contract.
At any moment, the employer can stop paying wages, and it will be difficult to get money in this situation. And it is better for the employee to understand this before agreeing to receive wages in this way.
Loss of social guarantees
Gray wages are not taken into account when calculating pensions, sick leave and other social benefits. When an employee goes on vacation, his vacation pay may be much less than the salary in the envelope. For reporting purposes, they will be calculated not based on the actual, but on the official salary.
Also, a person who receives a gray salary may be denied a loan, since no bank will issue him a mortgage or other loan with a small official income.