Comparing gross/net ratios across EU countries doesn't give useful information since different countries define them differently. Something like total payroll cost / salary fund per employee vs net would be more appropriate.
For example, in Estonia, social contribution tax (33% of gross) isn't considered a part of gross salary, so it's left out of these sorts of statistics, only because it's technically paid by the employer. In reality, income and unemployment taxes are also withheld and paid by the employer as part of the same tax report and payment as the social tax. You don't actually take home 80%+ of what the employer spends on your salary, more like <60%.
I'm sure other countries have their own quirks for defining gross vs net.
Interesting, but I wonder whether that's not due to some misunderstanding. In Germany the employer pays half the social security and health care costs, which is not considered part of gross, because, well, it's not the gross income of the employee, but part of the cost of the job to the employer (and of little concern to the employee).
Ultimately that's just an accounting trick that makes it appear like the government takes less than it actually does.
What we really care about is how much the government takes from us ("total cost to employer" - "net payment to employee") and what it provides in return.
In some sense, it doesn't matter at all if the tax is paid on the employer or employee side.
But in reality, it matters a lot when the tax burden is raised or lowered. Either the employer or the employee will be paying more or less. It's not the same at all. And the people making the decisions know this difference, for sure.
But the amount taken from the employee is "total gross salary for employee" - "net payment to employee". Any additional expense borne by the employer due to additional tax is taken from the employer. (Same goes for other overheads such as insurance, cost of equipment, cost of working space.) The distinction is relevant because the employer has other things it could spend the money on, such as giving it all to the shareholders. Or buying more equipment. Or just storing it in the bank for a rainy day. Or maybe even employing more people at the existing salary levels. It's always felt to me that it's counting this particular bit of tax as the employee's money that is the trick.
But, I won't deny that our hypothetical employer could also give people a pay rise. And maybe this would translate into higher salaries generally over time. Not impossible! It's all the same pool of money!
But in this scenario, the amount of money doesn't change. It's just a matter of defining what percentage of the total salary cost of employee is attributed to the employer vs employee.
For example in Estonia, if you hired somebody for 1000 EUR gross salary (the number that you'd put in a job listing), the employee would receive 896 EUR on their bank account and the state would receive 442 EUR as taxes from the company. This means the cost of this employee's salary is 1338 EUR (1000 EUR gross * 33% social and 0.8% unemployment tax) to the company. This is not optional, the company can't decide to pay less or use the money for other purposes. This would show up as 1000 EUR in statistics for average salaries or comparisons like this.
You could shift this tax burden between employer / employee arbitrarily and say for example that starting next month, social tax will be counted as part of gross. However the employee would still receive 896 EUR to their bank account and the state would still get 442 EUR as taxes and the company would still pay a total of 1338 EUR, but the average gross salary just went up by a third, while nothing actually changed.
> But, I won't deny that our hypothetical employer could also give people a pay rise
It is money allocating for having that employee in the company - it could all go to the employee as far as the company is concerned. It is worth considering how much of that total money the company is spending goes as taxes, and not just the bit that counts against income tax scaling.
Right, and why not? The situation would be exactly the same in terms of how much money goes to employee and how much to tax.
But these arguments are always made with the implication that things should change, because otherwise what's the point? And in this situation, suppose things did change, and the tax rates were reduced: now the employee would get the same amount (they weren't paying any tax!) and the employer would get more (they were paying all of it!). And if this applies when the employer pays all of the tax, when it's perhaps obvious this part of the tax burden wasn't the employee's money, it applies when it pays part of it.
(Of course, reading the thread again, this depends on what the definition of "we" is...!)
I totally agree, UK should be included, but this article is based on Eurostat's 2023 dataset which includes all EU member states, three European Free Trade Association (EFTA) countries [Switzerland, Iceland, Norway], and one EU candidate country [Turkey].
Raw data available: https://ec.europa.eu/eurostat/data
It's much harder than it used to be. EU citizens now need a visa to stay and work for longer than a few months, and they mostly need to obtain a Skilled Worker Visa which has occupation and salary requirements.
Since Brexit I've noticed that my London-based employer has had an uptick in hiring Indian and Pakistani nationals, especially in Dev and QA. It's probably not the outcome that most Brexit supporters were gunning for, although I did hear that a large proportion of South Asians did in fact vote to leave for this reason.
Comparing gross/net ratios across EU countries doesn't give useful information since different countries define them differently. Something like total payroll cost / salary fund per employee vs net would be more appropriate.
For example, in Estonia, social contribution tax (33% of gross) isn't considered a part of gross salary, so it's left out of these sorts of statistics, only because it's technically paid by the employer. In reality, income and unemployment taxes are also withheld and paid by the employer as part of the same tax report and payment as the social tax. You don't actually take home 80%+ of what the employer spends on your salary, more like <60%.
I'm sure other countries have their own quirks for defining gross vs net.
Interesting, but I wonder whether that's not due to some misunderstanding. In Germany the employer pays half the social security and health care costs, which is not considered part of gross, because, well, it's not the gross income of the employee, but part of the cost of the job to the employer (and of little concern to the employee).
Ultimately that's just an accounting trick that makes it appear like the government takes less than it actually does.
What we really care about is how much the government takes from us ("total cost to employer" - "net payment to employee") and what it provides in return.
In some sense, it doesn't matter at all if the tax is paid on the employer or employee side.
But in reality, it matters a lot when the tax burden is raised or lowered. Either the employer or the employee will be paying more or less. It's not the same at all. And the people making the decisions know this difference, for sure.
But the amount taken from the employee is "total gross salary for employee" - "net payment to employee". Any additional expense borne by the employer due to additional tax is taken from the employer. (Same goes for other overheads such as insurance, cost of equipment, cost of working space.) The distinction is relevant because the employer has other things it could spend the money on, such as giving it all to the shareholders. Or buying more equipment. Or just storing it in the bank for a rainy day. Or maybe even employing more people at the existing salary levels. It's always felt to me that it's counting this particular bit of tax as the employee's money that is the trick.
But, I won't deny that our hypothetical employer could also give people a pay rise. And maybe this would translate into higher salaries generally over time. Not impossible! It's all the same pool of money!
But in this scenario, the amount of money doesn't change. It's just a matter of defining what percentage of the total salary cost of employee is attributed to the employer vs employee.
For example in Estonia, if you hired somebody for 1000 EUR gross salary (the number that you'd put in a job listing), the employee would receive 896 EUR on their bank account and the state would receive 442 EUR as taxes from the company. This means the cost of this employee's salary is 1338 EUR (1000 EUR gross * 33% social and 0.8% unemployment tax) to the company. This is not optional, the company can't decide to pay less or use the money for other purposes. This would show up as 1000 EUR in statistics for average salaries or comparisons like this.
You could shift this tax burden between employer / employee arbitrarily and say for example that starting next month, social tax will be counted as part of gross. However the employee would still receive 896 EUR to their bank account and the state would still get 442 EUR as taxes and the company would still pay a total of 1338 EUR, but the average gross salary just went up by a third, while nothing actually changed.
> But, I won't deny that our hypothetical employer could also give people a pay rise
It is money allocating for having that employee in the company - it could all go to the employee as far as the company is concerned. It is worth considering how much of that total money the company is spending goes as taxes, and not just the bit that counts against income tax scaling.
So why not have the employer pay the entirety of the tax burden? Make it seem, to the employee, like they are paying 0 tax.
This would dramatically change how tax deductible expenses work.
If I pay €X in tax, I can recover some of that money via tax deductible expenses. If my employers pays that tax, I can’t deduct anything.
Right, and why not? The situation would be exactly the same in terms of how much money goes to employee and how much to tax.
But these arguments are always made with the implication that things should change, because otherwise what's the point? And in this situation, suppose things did change, and the tax rates were reduced: now the employee would get the same amount (they weren't paying any tax!) and the employer would get more (they were paying all of it!). And if this applies when the employer pays all of the tax, when it's perhaps obvious this part of the tax burden wasn't the employee's money, it applies when it pays part of it.
(Of course, reading the thread again, this depends on what the definition of "we" is...!)
Shame they didn't include the UK, it's Europe's biggest competitor in terms of where workers can easily move to.
I totally agree, UK should be included, but this article is based on Eurostat's 2023 dataset which includes all EU member states, three European Free Trade Association (EFTA) countries [Switzerland, Iceland, Norway], and one EU candidate country [Turkey]. Raw data available: https://ec.europa.eu/eurostat/data
> where workers can easily move to.
Is this part still true though?
It's much harder than it used to be. EU citizens now need a visa to stay and work for longer than a few months, and they mostly need to obtain a Skilled Worker Visa which has occupation and salary requirements.
Since Brexit I've noticed that my London-based employer has had an uptick in hiring Indian and Pakistani nationals, especially in Dev and QA. It's probably not the outcome that most Brexit supporters were gunning for, although I did hear that a large proportion of South Asians did in fact vote to leave for this reason.
For most jobs that pay well, the requirements are more like a formality, it's quite easy to satisfy the conditions compared to some other countries.
if you're from outside, it's more or less the same. if you're from europe, it's harder (but not that much harder if you're in tech).