Eurostat, the statistical office of the European Union

F3: Labour market and lifelong learning

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Information on net earnings (net pay taken home, in absolute figures) and related tax-benefit rates (in %) complements gross earnings data with respect to disposable earnings. The transition from gross to net earnings requires the deduction of income taxes and employee's social security contributions from the gross amounts and the addition of family allowances, if appropriate.

The amount of these components and therefore the ratio of net to gross earnings depend on the individual situation. A number of different family situations are considered, all referring to an average worker. Differences exist with respect to the number of workers/earners (only in the case of couples), number of dependent children, and level of gross earnings, expressed as a percentage of the gross earnings of an average worker (AW).

All the data are based on a widely acknowledged model developed by the OECD, where figures are obtained from national sources (for further details on data providers, see the national contact list in Annex).

The collection contains, for selected situations, data for the following variables and indicators :
a) gross and net earnings, including the transition components "income taxes", "employee's social security contributions" and "family allowances", if appropriate;
b) tax rate, defined as the income tax on gross wage earnings plus the employee's social security contributions less universal cash benefits, expressed as a percentage of gross wage earnings;
c) tax wedge on labour costs, defined as income tax on gross wage earnings plus the employee's and the employer's social security contributions, expressed as a percentage of the total labour costs of the earner. The total labour costs of the earner are defined as his/her gross earnings plus the employer's social security contributions plus payroll taxes (where applicable). The tax wedge on labour costs structural indicator is available only for single persons without children earning 67% of the AW.
d) unemployment trap, measuring the percentage of gross earnings which is taxed away through higher tax and social security contributions and the withdrawal of unemployment, and other, benefits when an unemployed person returns to employment. This structural indicator is available only for single persons without children earning 67% of the AW when in work.
e) low wage trap, measuring the percentage of gross earnings which is taxed away through the combined effects of income taxes, social security contributions and any withdrawal of benefits when gross earnings increase from 33% to 67% of AW. This structural indicator is available for single persons without children and one-earner couples with two children.

Data is only available at country level with no further breakdowns by region

http://ec.europa.eu/eurostat/en/web/products-manuals-and-guidelines/-/CA-22-99-442-1F

Final tax (Effective Tax Rate) results:

The results from 2008 onwards, (2017 onwards for Cyprus and 2013 onwards for Croatia) are based on sections B to N of the NACE classification rev 2.

Final tax burden indicators:

As specified in the files, the average wages are based on either NACE/ISIC rev.3.1 (sectors C-K) or NACE rev.2/ISIC rev.4 (sectors B-N) with exceptions for Turkey prior to 2007 (ISIC rev.3.1, sector D) and for Austria for the 2000-2003 period (another classification than ISIC or NACE was used).

Information is provided on net earnings, the (average) tax rate, the tax wedge on labour costs, the unemployment trap and the low wage trap. All variables and indicators are based on gross earnings, income tax, social security contributions, family allowances and other benefits.

Gross earnings cover remuneration in cash, paid during the reference year by the employer, before tax deductions and social security contributions payable by wage earners and retained by the employer. All bonuses, whether regularly paid or not, are included (13th or 14th month, holiday bonuses, profit-sharing, allowances for leave not taken, occasional commissions etc.). Severance payments and payments in kind are excluded. Details of this definition can be found in Commission Regulation (EC) No 1916/2000 of 8 September 2000 implementing Council Regulation (EC) No 530/1999 concerning structural statistics on earnings and labour costs as regards the definition and transmission of information on structure of earnings.

Net earnings are calculated from gross earnings by deducting the employee's social security contributions and income taxes, and adding family allowances in the case of households with children. Income tax and social security contributions parameters refer to the beginning of the fiscal year, i.e. changes occurring later during the year are ignored. Family allowances are cash transfers paid in respect of dependent children aged between 6 and 11 years (except for parts d and e below, the ages are 4 and 6). If the amounts vary within this age range, the most generous are used. The case of twins is disregarded.

The data refer to an average worker at national level for different illustrative cases, defined on the basis of the number of earners (only in the case of couples), number of dependent children, and level of gross earnings, expressed as percentage of the average earnings of an average worker (AW).

See also the country specific overview provided in the file in the Annex.

Data are available for the following variables and indicators for selected situations:

a) gross and net earnings, including the transition components income taxes, employee's social security contributions and family allowances, where appropriate. The following situations are considered:

• single person with no children and 50%, 67%, 80%, 100%, 125% and 167% of the AW respectively;
• single person with two children and 67% of the AW;
• one earner couple with two children and 100% of the AW
• two earners couple with two children and the following levels of the AW: main earner 100% and second earner 33% / main earner 100% and second earner 67% / both earners 100%
• two earners couple with no children and: 100% of the AW for the main earner and 33% for the second earner / both earners 100%.

To be noted that an extra table (earn_nt_netft) focuses on the situation of a single earner (full time worker) with no children and 100% of the AW, while providing annual / 3 year averages data on the net earnings in PPS and the corresponding growth rates in real terms. 

b) (average) tax rate, defined as the income tax on gross wage earnings plus the employee's social security contributions less universal cash benefits, expressed as a percentage of gross wage earnings. The situations considered are the same with the ones in (a). Illustrative calculations Singles and couples contain illustrative calculations (see Annex at the bottom of the page).

c) the tax wedge on labour costs, defined as income tax on gross wage earnings plus the employee's and the employer's social security contributions, expressed as a percentage of the total labour costs of the earner. The total labour costs of the earner are defined as gross earnings plus the employer's social security contributions plus payroll taxes (where applicable). The tax wedge on labour costs structural indicator is available only for single persons without children earning 67% of the AW. Illustrative calcul indic tax wedge (see Annex at the bottom of the page) contains illustrative calculations.

d) the unemployment trap measures the percentage of gross earnings which is taxed away by higher tax and social security contributions and the withdrawal of unemployment, and other, benefits when an unemployed person returns to employment. It is defined as the difference between gross earnings and the increase of the net income when moving from unemployment to employment, expressed as a percentage of the gross earnings. This structural indicator is available only for single persons without children earning 67% of the AW when in work. Illustrative calcul indic unemploy trap (see Annex at the bottom of the page) contains illustrative calculations.

e) the low wage trap measures the percentage of gross earnings which is taxed away through the combined effects of income taxes, social security contributions, and any withdrawal of benefits when gross earnings increase from 33% to 67% of AW. It is defined as the difference of the increase of gross earnings and net income both due to increased work effort, expressed as a percentage of the increase of gross earnings. This indicator is available for single persons without children and one-earner couples with two children aged 4 and 6 years. Low wage trap_briefing note (see Annex at the bottom of the page) contains illustrative calculations.

The statistical unit is the family. All situations are illustrative and not necessarily representative in any country.

All families in the aforementioned countries.

Data are available for the EU and Euro area aggregates, EU Member States, Turkey, Iceland, Norway, Switzerland, Japan and the USA.

Pulished data are available from 2001 onwards. For a few countries, the time series start from reference year 1995.

Not applicable.

Gross and net earnings and the transition components are expressed in Euro, national currency (if different) and Purchasing Power Standards (PPS), all other indicators are in %.

To remove the effect of differences in price levels between the countries, special conversion rates called Purchasing Power Parities (PPPs) are applied. The PPPs used are on the basis of household final consumption expenditure in each country, expressed in national currencies (euro-fixed series for euro area countries) to an artificial common unit called the Purchasing Power Standard (PPS). In the case when PPPs for the most recent reference year are not yet available, the ones from the previous last available year are used. These are then updated once the PPPs of that particular year become available.

The reference period is the calendar year.

The data are collected on the basis of gentlemen's agreements between the countries, OECD and Eurostat

Not applicable.

Regulation (EC) No 223/2009 on European statistics (recital 24 and Article 20(4)) of 11 March 2009 (OJ L 87, p. 164), stipulates the need to establish common principles and guidelines ensuring the confidentiality of data used for the production of European statistics and the access to those confidential data with due account for technical developments and the requirements of users in a democratic society.

Not applicable.

No release calendar.

Not applicable.

In line with the Community legal framework and the European Statistics Code of Practice Eurostat disseminates European statistics on Eurostat's website (see item 10 - 'Accessibility and clarity') respecting professional independence and in an objective, professional and transparent manner in which all users are treated equitably. The detailed arrangements are governed by the Eurostat protocol on impartial access to Eurostat data for users.

Annual

None

See Annex

Please consult free data on-line or refer to contact details.

Not applicable.

Identification of commentary on the occasion of statistical releases:

There is no official comment accompanying data release.

Hardcopy > Other: None
Internet address: http://ec.europa.eu/eurostat
CD ROM: None
Electronic > Other: None

The OECD annual publication "Taxing Wages" sets out the methodologies and the sources used for the net earnings, tax rates and tax wedge indicators. The methodology used for the unemployment and low wage trap indicators are available at http://www.oecd.org/els/soc/Methodology.pdf.

Not applicable

Not available.

Not available.

Not available.

Not available.

Not available.

Not available.

Not available.

Not available.

Net Earnings data - 3 months after the end of the reference year

Low Wage and Unemployment trap data – 9 months after the end of the reference year

Not applicable

Not available.

Not available.

Net Earnings data except those for the non-OECD EU Member States are also available at: www.oecd.org/ctp/tax-policy/taxing-wages.htm

Unemployment Trap and Low Wage Trap data for all countries are also available at: http://www.oecd.org/social/benefits-and-wages.htm

Not available.

Not available.

Not applicable.

The data for the latest year are sometimes subject to revisions the year after, but the extent of the revisions is usually small.

The data are not collected but estimated on the basis of a widely acknowledged model developed by the OECD. OECD collects these data from national sources on a gentlemen's agreement.

Not applicable.

Net Earnings data available at: www.oecd.org/ctp/tax-policy/taxing-wages.htm

Unemployment Trap and Low Wage Trap data available at: http://www.oecd.org/social/benefits-and-wages.htm

Validation is undertaken between OECD and national sources.

EU aggregates are weighted averages of the national data.

Each individual country weight reflects the number of employees in the labour market of that particular country.

Not applicable

Country specific notes

Data prior to 2005 for Estonia, Cyprus, Latvia, Lithuania and Malta, prior to 2008 for Bulgaria and Romania, and prior to 2013 for Croatia are not calculated by the OECD - causing a possible break in national vs. OECD concepts.

Housing benefits are included for data on Tax rate on low wage earners - 'Unemployment trap ' and ' Low wage trap'.For full details on Housing Benefit methodology, please see http://www.oecd.org/els/soc/Methodology.pdf

A full classification of the Average Wage figures used is available from the following link: http://dx.doi.org/10.1787/888933197483 This table is replicated in OECD (2015), Taxing Wages 2015, OECD Publishing