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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 ta
by 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 agoIt'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 agoMost of all of that comes out of the salary on your payslip in the US.
- machinebun 6y agoThere 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.
- RHSeeger 6y agoNone of that comes out of the salary on your payslip. Rather, you also have your own contribution to those things, separate from the one your employer pays.
- benhurmarcel 6y agoTo give some numbers to play with, here's an official simulator for France: https://mon-entreprise.fr/simulateurs/salaire-brut-net https://mon-entreprise.fr/simulateurs/salaire-brut-net Sorry it's in French, but very simple. Choose by month or year, and you have in order: total cost (what the company pays), before tax salary (what's on the contract), "net" salary (ignore that), after tax salary (what they employee actually gets). You can see that the employee gets about half of the total employer cost.
- thedufer 6y agoThe US has this as well, albeit to a lesser degree. The employer-side FICA is around 7%, and is paid directly by the employer, rather than deducted from your paycheck.
- shankr 6y agoThis works very similar in different parts of the world. You will hear lot of times CTC (Cost to company) being used when discussing salaries.
- jbn 6y agoThis is a very good explanation of a major source of confusion. Indeed "employer's taxes" really does NOT belong to the employer, it is very much a part of the employee's salary. Some left-wing parties in France are starting to call this out and call it "the socialized portion of the employee's salary", which is a good way to put it. A major issue is that this often does not even appear on pay slip, it is an invisible tax that employees do not see (the best kind of tax is you are the one levying it...). This robs people blind, they don't even realize what the things those taxes finance (social security, healthcare, retirement) really cost... if they knew, they would overthrow the government over this..