Why your actual earned income is much greater than your gross salary

It is a common misconception that the employee's salary is equal to their gross salary. This unfortunately leads to a lot of confusion when comparing compensation across different countries.

Whereas, in effect, the employee's total compensation is typically much greater than their gross salary and is equal to what it costs the employer to hire said employee.

The employer's costs roughly include the following:

1. Net salary – The money paid to the employee after tax deductions
2. Taxes – Employers often pay extra taxes for hiring workers (health insurance, social insurance, payroll tax).
3. Benefits – Costs for disability insurance, unemployment insurance, pension contributions and other perks.
4. Bonuses & Allowances – Extra money given for performance, travel, or meals.

In some countries in Europe, the employer's cost is over 130% the gross salary received by the employee. In other words, the employee's actual compensation may be 130% the gross salary defined in his contract.

And it is only by including the latter figure, that one can make a comprehensive comparison of compensation packages between different countries.

In this event we will take a more detailed look into this, and compare total compensations among countries in the EU and North America.

Disclaimer: we do not offer investment advice. All the shared material is solely for educational purposes.

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