6 ms·

PSA: When comparing US and EU salaries (or anywhere, really), use total cost to employer (excluding fixed office costs), or total benefit to employee (incl. tax

by senko 6y ago

PSA: When comparing US and EU salaries (or anywhere, really), use total cost to employer (excluding fixed office costs), or total benefit to employee (incl. taxes paid in their name and health/retirement costs). US salaries are mostly discussed before taxes, while often for EU countries it's after taxes and/or after mandatory health insurance and retirement savings.

raverbashing 6y ago
> US salaries are mostly discussed before taxes, while often for EU countries it's after taxes and/or after mandatory health insurance and retirement savings. Citation? I think pretty much all salaries discussed in Europe was before tax (Stock option on the other hand are usually not counted)
- saiya-jin 6y ago
  This is country specific but in many European countries there are employer's and employee's social deductions. Usually salaries discussed are already without employer's part, but with employee's ones. Taxes should be taken away only once AFAIK. So salaries discussed/negotiated will still have in them 1) tax; 2) employee social deductions; 3) health insurance. This is deducted, and result goes to employee's account. In many places, its cca 50% or less that gets into account depending on many things (state, family situation, type of employment etc.)
  - vidarh 6y ago
    Employer payroll taxes exists in a number (all?) of US states too.
- bonzini 6y ago
  Before tax but after retirement savings (or most of them, e.g. in Italy it's about 4:1 with the employer paying the larger part). Depending on the country after healthcare costs too, since often healthcare is simply financed from taxes (if not, anyway it will be lower and also come with hardly any deductibles).
marvin 6y ago
Does the US have significant employer tax? A data point from Norway: Employer tax of 14% of pre-tax salary is paid by employer. Employer also has to pay 2-13% (dependent on individual negotiation) of pre-tax salary for retirement savings. These are both part of the cost to the employer, and are rarely considered part of "total compensation". So employers have to pay an extra 16-27% of each person's salary in addition to what the employee gets. An 8% tax for compulsory retirement savings is then taken from the employee's pre-tax salary, along with other individual taxes, that will usually sum up to around 33%. This is not part of the cost to the employer. The number before these taxes are subtracted is usually quoted as the person's salary. Although for a US comparison, few employers in Norway have significant expenses for health insurance. And the cost of US health insurance, a considerable percentage, is rarely considered part of your "total compensation".
- eptcyka 6y ago
  I've never understood why there's a split between what taxes get paid by your employer and what taxes get paid by the employee - in the end, the employer pays all of them anyway. I'd like to know exactly how much money an employer would have to pay for a given amount of money landing in my bank account in a given time period.
  - pnutjam 6y ago
    As long as there is a hidden "benefits tax" that varies wildly from company to company, it doesn't matter. It's crazy to try to compare offers in the US.
  - brianwawok 6y ago
    You can figure it out with a basic Algebra calculation. Not that hard. But I doubt any employee is comparing your offer on that. They are going on the top line number.
  - benhurmarcel 6y ago
    The reason is politics. It's easier to raise taxes that are invisible to voters.
_-___________-_ 6y ago
Having worked in many EU countries, I've never once had salary quoted or discussed after tax.
- javajosh 6y ago
  Less experienced, but I've never seen EU salaries quoted after tax, either.
  - senko 6y ago
    As one data point, people never discus before-tax salaries in my home country (Croatia), it's always after-taxes and all other mandatory deductions. I believe the same holds true for at least several other EU countries from the region.
    - egman_ekki 6y ago
      by "people never discuss" you mean the negotiation between the employee and employer is based on after tax salary, or do you mean casual conversations with friends? I haven't seen discussing after tax salary at all during interviewing process in the 4 countries I applied for jobs and got offers (Slovakia, Czechia, Switzerland, Denmark).
      - senko 6y ago
        Both. Officially, on the employment contract, the salary is shown before-tax, but after mandatory pension and healthcare deductions. However, in the negotiations, in casual conversation, and when you're hearing someone talking about their salary in the media, it's always discussed after taxes. Most people have no idea how much tax (or health insurance) they're actually paying.
        Hamuko 6y ago
        In Finland, I usually hear people talk about salaries before taxes and less often after taxes. For example my union has a yearly salary survey and publish results in before taxes salaries. But since it's so confusing, you usually see "brutto" ("gross", before taxes) and "netto" ("net", after taxes) being discussed when talking about salaries.
AhtiK 6y ago
Which EU countries have net salary in their employment contracts? Employment contracts in Germany have gross salary (Bruttogehalt), all the social security, healthcare and taxes will be deducted from that amount. Estonian employment contracts are a bit of a mix: the amount listed is gross (brutopalk), but the employer pays an additional 33+% on top of that gross salary for social security etc.
- dkyc 6y ago
  That's not completely true, part of the German social security is paid directly by the employer and not deducted from the Bruttogehalt. It's about 15-20% in total.
- odiroot 6y ago
  I used to have when I worked in Poland. Was really surprised, after moving to Germany, people don't seem to care about their net salaries.
  - brewdad 6y ago
    Probably because if you maximize the pre-tax salary, except for a few edge cases, the net salary will be maximized too. The difference between the two is largely out of one's control.
ulfw 6y ago
What you're saying is impossible. Prospective employers don't know what your exact after-tax income is as it depends on a lot of factors (dependents, marital status, etc)
- senko 6y ago
  As an employer in an EU country (Croatia), I know exactly how much each of my employees' after tax income is, including everything you've said (and adding stuff like some debt payments if there are any, etc). It's all withheld by employer - employee never sees a penny out of it. Although they always get full documentation of exactly what's wihhheld, in my experience almost nobody ever reads it. Note that there are some adjustments employees can make a return for at the end of the year, which takes into accounts stuff like dividend income, tax deduction on mortgages and similar.
  - andrewingram 6y ago
    Note the comment you're replying to said "prospective employers". Until you're entered into the payroll system, your employer likely won't know what all the applicable deductions are, so can't give you a net income figure as part of an offer, just a pre-deductions figure.
    - senko 6y ago
      Good catch, thanks for pointing it out. The way this works here in practice is the employer assumes "standard" level of taxes based on your location. So for example, you'd negotiate €2k net salary, and you'd get a some € extra if you have a dependant, mortgage, etc.
  - ericmay 6y ago
    Yea but you don’t know that before you hire them (or at least that’s the case in America). Here you might live in a different township or city, taxes will be different depending on school district, etc. AFTER you hire them, sure, you will probably know what their tax rate is. I think originally the discussion was about before you hire someone.
Cthulhu_ 6y ago
My wages / wage offers are always listed as wage before tax. On top of that, the employer will pay an X amount for pension contributions and health insurance, but that doesn't show up on my wage slip because it's not coming out of my income.
- alistairSH 6y ago
  What country? In the US, my wage slip shows the portion of my salary that was withheld to pay federal/state income taxes on my behalf, plus my personal pre-tax retirement account contribution, plus health insurance fees. It does NOT show the taxes paid by my employer in my name (workman's comp, employer share of FICA, employer share of health insurance, etc).
  - pnutjam 6y ago
    I've had paystubs that enumerate what the employer is paying for different benefits, like health insurance or short term disability (US midwest). There is no standard in the US. When I worked at a university, they made a big deal about how they contributed 10% of your income into a retirement plan. Unfortunately it had a cliff vesting cycle that I never got close to meeting. (another scam that employers use to pay you less)
samvher 6y ago
For many of the sibling comments discussing before/after tax: part of the confusion arises here because many European countries essentially have two steps of taxation. I work for an American organization as a Dutch person and have had to figure some of this out for my own contract situation. For the Netherlands, your contract will state a wage "before taxes". But the employer will play "employer's taxes" over this wage, making you effectively ~20% more expensive. What gets transferred to your bank account is wage "after taxes", but this is after income taxes. For example, say that your salary in the Netherlands is E50,000. Your employer pays E60,000 for that, but E10,000 goes straight to the government (doesn't show on your payslip, used to fund primarily social security systems). After that, you pay income taxes, let's say 30%, so you get E35,000. Of course, effectively you're paying close to 50% taxes and your employer considers you as costing E60,000, but the two-step process hides part of it and makes it somehow more palatable for the employee/tax-payer. This is a really large part of why European wages are lower than American ones.
- RHSeeger 6y ago
  It's the same in the US, with different percentages. From: https://bench.co/blog/accounting/calculate-payroll-tax/ https://bench.co/blog/accounting/calculate-payroll-tax/ - FICA tax is 7.65% (6.2% social security, 1.45% medicare) - FUTA tax is 0.6 to 6.0% (varies, iiuc) - And then employers (generally) also pay an amount towards health care. But that's not a tax, per se; more of a mandatory "benefit"
  - ViViDboarder 6y ago
    Most of all of that comes out of the salary on your payslip in the US.
    - machinebun 6y ago
      There is a 7% employer contribution that does not show up on your payslip (as well as the 7% that does). Also the employer contribution to your health insurance does not show up but your part of it does.
    - 6y ago
nivenkos 6y ago
EU salaries are also given before taxes. Have you worked in the EU?
- benhurmarcel 6y ago
  Before the employee's taxes, but after the employer's taxes. That adds a good 15-30% depending on the country.
- jbn 6y ago
  "given before taxes" as in "given before income tax", but by that time a whole lot of other taxes have been substracted...
908B64B197 6y ago
For software engineers, keep in mind healthcare is typically taken care of via private (high quality) insurance and that pre-tax retirement contributions (401k) are matched as well. So these aren't really issues.
IshKebab 6y ago
> while often for EU countries it's after taxes and/or after mandatory health insurance and retirement savings. It's not in the UK. I'm not sure which countries you are thinking of.

by senko 6y ago

raverbashing 6y ago

> US salaries are mostly discussed before taxes, while often for EU countries it's after taxes and/or after mandatory health insurance and retirement savings. Citation? I think pretty much all salaries discussed in Europe was before tax (Stock option on the other hand are usually not counted)

saiya-jin 6y ago
This is country specific but in many European countries there are employer's and employee's social deductions. Usually salaries discussed are already without employer's part, but with employee's ones. Taxes should be taken away only once AFAIK. So salaries discussed/negotiated will still have in them 1) tax; 2) employee social deductions; 3) health insurance. This is deducted, and result goes to employee's account. In many places, its cca 50% or less that gets into account depending on many things (state, family situation, type of employment etc.)
- vidarh 6y ago
  Employer payroll taxes exists in a number (all?) of US states too.
bonzini 6y ago
Before tax but after retirement savings (or most of them, e.g. in Italy it's about 4:1 with the employer paying the larger part). Depending on the country after healthcare costs too, since often healthcare is simply financed from taxes (if not, anyway it will be lower and also come with hardly any deductibles).

marvin 6y ago

Does the US have significant employer tax? A data point from Norway: Employer tax of 14% of pre-tax salary is paid by employer. Employer also has to pay 2-13% (dependent on individual negotiation) of pre-tax salary for retirement savings. These are both part of the cost to the employer, and are rarely considered part of "total compensation". So employers have to pay an extra 16-27% of each person's salary in addition to what the employee gets. An 8% tax for compulsory retirement savings is then taken from the employee's pre-tax salary, along with other individual taxes, that will usually sum up to around 33%. This is not part of the cost to the employer. The number before these taxes are subtracted is usually quoted as the person's salary. Although for a US comparison, few employers in Norway have significant expenses for health insurance. And the cost of US health insurance, a considerable percentage, is rarely considered part of your "total compensation".

eptcyka 6y ago
I've never understood why there's a split between what taxes get paid by your employer and what taxes get paid by the employee - in the end, the employer pays all of them anyway. I'd like to know exactly how much money an employer would have to pay for a given amount of money landing in my bank account in a given time period.
- pnutjam 6y ago
  As long as there is a hidden "benefits tax" that varies wildly from company to company, it doesn't matter. It's crazy to try to compare offers in the US.
- brianwawok 6y ago
  You can figure it out with a basic Algebra calculation. Not that hard. But I doubt any employee is comparing your offer on that. They are going on the top line number.
- benhurmarcel 6y ago
  The reason is politics. It's easier to raise taxes that are invisible to voters.

_-___________-_ 6y ago

Having worked in many EU countries, I've never once had salary quoted or discussed after tax.

javajosh 6y ago
Less experienced, but I've never seen EU salaries quoted after tax, either.
- senko 6y ago
  As one data point, people never discus before-tax salaries in my home country (Croatia), it's always after-taxes and all other mandatory deductions. I believe the same holds true for at least several other EU countries from the region.
  - egman_ekki 6y ago
    by "people never discuss" you mean the negotiation between the employee and employer is based on after tax salary, or do you mean casual conversations with friends? I haven't seen discussing after tax salary at all during interviewing process in the 4 countries I applied for jobs and got offers (Slovakia, Czechia, Switzerland, Denmark).
    - senko 6y ago
      Both. Officially, on the employment contract, the salary is shown before-tax, but after mandatory pension and healthcare deductions. However, in the negotiations, in casual conversation, and when you're hearing someone talking about their salary in the media, it's always discussed after taxes. Most people have no idea how much tax (or health insurance) they're actually paying.
      - Hamuko 6y ago
        In Finland, I usually hear people talk about salaries before taxes and less often after taxes. For example my union has a yearly salary survey and publish results in before taxes salaries. But since it's so confusing, you usually see "brutto" ("gross", before taxes) and "netto" ("net", after taxes) being discussed when talking about salaries.

AhtiK 6y ago

Which EU countries have net salary in their employment contracts? Employment contracts in Germany have gross salary (Bruttogehalt), all the social security, healthcare and taxes will be deducted from that amount. Estonian employment contracts are a bit of a mix: the amount listed is gross (brutopalk), but the employer pays an additional 33+% on top of that gross salary for social security etc.

dkyc 6y ago
That's not completely true, part of the German social security is paid directly by the employer and not deducted from the Bruttogehalt. It's about 15-20% in total.
odiroot 6y ago
I used to have when I worked in Poland. Was really surprised, after moving to Germany, people don't seem to care about their net salaries.
- brewdad 6y ago
  Probably because if you maximize the pre-tax salary, except for a few edge cases, the net salary will be maximized too. The difference between the two is largely out of one's control.

ulfw 6y ago

What you're saying is impossible. Prospective employers don't know what your exact after-tax income is as it depends on a lot of factors (dependents, marital status, etc)

senko 6y ago
As an employer in an EU country (Croatia), I know exactly how much each of my employees' after tax income is, including everything you've said (and adding stuff like some debt payments if there are any, etc). It's all withheld by employer - employee never sees a penny out of it. Although they always get full documentation of exactly what's wihhheld, in my experience almost nobody ever reads it. Note that there are some adjustments employees can make a return for at the end of the year, which takes into accounts stuff like dividend income, tax deduction on mortgages and similar.
- andrewingram 6y ago
  Note the comment you're replying to said "prospective employers". Until you're entered into the payroll system, your employer likely won't know what all the applicable deductions are, so can't give you a net income figure as part of an offer, just a pre-deductions figure.
  - senko 6y ago
    Good catch, thanks for pointing it out. The way this works here in practice is the employer assumes "standard" level of taxes based on your location. So for example, you'd negotiate €2k net salary, and you'd get a some € extra if you have a dependant, mortgage, etc.
- ericmay 6y ago
  Yea but you don’t know that before you hire them (or at least that’s the case in America). Here you might live in a different township or city, taxes will be different depending on school district, etc. AFTER you hire them, sure, you will probably know what their tax rate is. I think originally the discussion was about before you hire someone.

Cthulhu_ 6y ago

My wages / wage offers are always listed as wage before tax. On top of that, the employer will pay an X amount for pension contributions and health insurance, but that doesn't show up on my wage slip because it's not coming out of my income.

alistairSH 6y ago
What country? In the US, my wage slip shows the portion of my salary that was withheld to pay federal/state income taxes on my behalf, plus my personal pre-tax retirement account contribution, plus health insurance fees. It does NOT show the taxes paid by my employer in my name (workman's comp, employer share of FICA, employer share of health insurance, etc).
- pnutjam 6y ago
  I've had paystubs that enumerate what the employer is paying for different benefits, like health insurance or short term disability (US midwest). There is no standard in the US. When I worked at a university, they made a big deal about how they contributed 10% of your income into a retirement plan. Unfortunately it had a cliff vesting cycle that I never got close to meeting. (another scam that employers use to pay you less)

samvher 6y ago

For many of the sibling comments discussing before/after tax: part of the confusion arises here because many European countries essentially have two steps of taxation. I work for an American organization as a Dutch person and have had to figure some of this out for my own contract situation. For the Netherlands, your contract will state a wage "before taxes". But the employer will play "employer's taxes" over this wage, making you effectively ~20% more expensive. What gets transferred to your bank account is wage "after taxes", but this is after income taxes. For example, say that your salary in the Netherlands is E50,000. Your employer pays E60,000 for that, but E10,000 goes straight to the government (doesn't show on your payslip, used to fund primarily social security systems). After that, you pay income taxes, let's say 30%, so you get E35,000. Of course, effectively you're paying close to 50% taxes and your employer considers you as costing E60,000, but the two-step process hides part of it and makes it somehow more palatable for the employee/tax-payer. This is a really large part of why European wages are lower than American ones.

RHSeeger 6y ago
It's the same in the US, with different percentages. From: https://bench.co/blog/accounting/calculate-payroll-tax/ https://bench.co/blog/accounting/calculate-payroll-tax/ - FICA tax is 7.65% (6.2% social security, 1.45% medicare) - FUTA tax is 0.6 to 6.0% (varies, iiuc) - And then employers (generally) also pay an amount towards health care. But that's not a tax, per se; more of a mandatory "benefit"
- ViViDboarder 6y ago
  Most of all of that comes out of the salary on your payslip in the US.
  - machinebun 6y ago
    There is a 7% employer contribution that does not show up on your payslip (as well as the 7% that does). Also the employer contribution to your health insurance does not show up but your part of it does.
  - 6y ago

nivenkos 6y ago

EU salaries are also given before taxes. Have you worked in the EU?

benhurmarcel 6y ago
Before the employee's taxes, but after the employer's taxes. That adds a good 15-30% depending on the country.
jbn 6y ago
"given before taxes" as in "given before income tax", but by that time a whole lot of other taxes have been substracted...

908B64B197 6y ago

For software engineers, keep in mind healthcare is typically taken care of via private (high quality) insurance and that pre-tax retirement contributions (401k) are matched as well. So these aren't really issues.

IshKebab 6y ago

> while often for EU countries it's after taxes and/or after mandatory health insurance and retirement savings. It's not in the UK. I'm not sure which countries you are thinking of.