Comment by sva_
12 hours ago
I think you should also mention the ~17k Euro social contributions that your employer pays on top, which could otherwise be part of your salary. Then it is actually pretty much 50%
12 hours ago
I think you should also mention the ~17k Euro social contributions that your employer pays on top, which could otherwise be part of your salary. Then it is actually pretty much 50%
Correct: if one takes as basis not the Bruttolohn but the total cost for the company, the sum of taxes and mandatory social contribution can very well reach the half of the income. The method of splitting employer-side and employee-side deductions seems just there to hide this fact.
Most taxes are deducted when money is transferred between two parties. The view that one party pays it all (Brutto-Netto and VAT) seems wrong to me.
I anyway doubt that the wages would be at the same standard if there wouldn't be any deductions (from the beginning). Wages in expensive cities are higher because the cost of living must be matched. Similarly salary negotiations account for deductions. Nobody wants a job that doesn't pay the bills.
There are two terms in German salary:
"visible" and "invisble" Brutto. The one is without "contributions from employer", which is a lie anyway since an employer makes a total comp perspective and he for sure includes his "contribution" into that
US also has federal employer-paid payroll taxes the employee usually doesn't see or think about.
For a $110k salary the federal employer paid payroll taxes would be almost $8,500, or ~7.69%. They would also pay some amount to unemployment insurance, but that rate depends a lot state by state.
I realize that's less than the Euro taxes, just wanted to share so everyone is aware of these often forgotten US taxes when compared.
A US employer also generally provides health insurance and retirement, of which they pay a large piece.
> A US employer also generally provides health insurance and retirement, of which they pay a large piece.
Health insurance yes, retirement… no, not really. They may offer a 401k plan and some might even offer a match, but most companies offer at most a 4% salary match (dollar for dollar, or sometimes 50c per dollar).
So, it’s a vehicle to invest retirement funds with some tax advantages, but it’s not really “providing” it like you would subsidized healthcare.
For a role like that, they'd likely cover a decent chunk of the premium cost. Its not always the full cost though, FWIW. People earning such a wage paying for the rest of their family often still spend hundreds of dollars a month for their premiums, along with also needing to stash a few hundred dollars a month towards healthcare savings whether in an HSA or an FSA.
I do agree though, such a thing should also be considered when thinking about total cost of the compensation. Things definitely start getting a bit fuzzier though. You then also get stuff like HSA matching, 401k matching, etc.
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