Salaries: our ranking of tax and social efficiency in Europe
Bulgaria winning France losing, Luxembourg falling in the ranking.
With capped social contributions and a low wage tax rate (10%), Bulgaria is the European champion of wage efficiency (net salary received / employer cost).
On the panel of countries compared in this article (France, Romania, Luxembourg, Bulgaria, Switzerland), Bulgaria seems at first sight closely followed by Luxembourg.
However, Luxembourg is only competitive on wage efficiency (measured as the amount of the net salary received by the employee compared to the cost of this same salary for the employer) on “low” salaries.
Thus, on a gross salary for an amount of 3,000 €, the cost for the Luxembourg employer would be 3,390 € while paying, after social and tax deductions, 2,396 € net to the employee, i.e. an efficiency of 71%, very close the Bulgarian record of 74%.
Gross salary 3.000 € | Bulgaria | Roumania | Luxembourg | France |
Total cost for the employer | 3 337 € | 3 067 € | 3 390 € | 4 116 € |
Employer social contributions | 337 € | 67 € | 390 € | 1 116 € |
Gross salary | 3 000 € | 3 000 € | 3 000 € | 3 000 € |
Employer social contributions | 240 € | 1 050 € | 365 € | 654 € |
Net salary before tax | 2 760 € | 1 950 € | 2 635 € | 2 346 € |
Tax | 276 € | 195 € | 239 € | 186 € |
Net salary | 2 484 € | 1 755 € | 2 396 € | 2 160 € |
| Cost of social charges | 19% | 37% | 25% | 59% |
| Cost of tax | 10% | 10% | 9% | 8% |
| Efficiency (salary/ employer cost) | 74% | 57% | 71% | 52% |
On the other hand, on a higher salary, Luxembourg's competitiveness decreases. Indeed, for a gross salary of €10,000, the cost borne by the Luxembourg employer will be €11,299 for a net salary served of €6,035, i.e. an efficiency of only 53%, due in particular to the heavy tax burden on salaries (31%).
Gross salary 10 000 € | Bulgaria | Roumania | Luxembourg | France | Switzerland |
Total cost for the employer | 10 337 € | 10 225 € | 11 299 € | 14 314 € | 11 869 € |
Employer social contributions | 337 € | 225 € | 1 299 € | 4 314 € | 1 869 € |
Gross salary | 10 000 € | 10 000 € | 10 000 € | 10 000 € | 10 000 € |
Employer social contributions | 240 € | 3 050 € | 1 236 € | 2 031 € | 1 255 € |
Net salary before tax | 9 760 € | 6 500 € | 8 764 € | 7 969 € | 8 745 € |
Tax | 976 € | 650 € | 2 729 € | 1 799 € | 1 789 € |
Net salary | 8 784 € | 5 850 € | 6 035 € | 6 170 € | 6 956 € |
| Cost of social charges | 6% | 37% | 25% | 63% | 31% |
| Cost of tax | 10% | 10% | 31% | 23% | 18% |
| Efficiency (salary/ employer cost) | 85% | 57% | 53% | 43% | 59% |
Luxembourg then makes significantly less well than Bulgaria (with a “record” efficiency of 85% thanks to the double moderation of tax rates and social levy rates).
In this hypothesis, Luxembourg also does less well than Romania (with an efficiency rate of 57% thanks to a low tax rate of 10%) or than Switzerland (with an efficiency rate of 59% thanks to social contributions and a moderate tax).
Even if Luxembourg remains relatively poorly ranked, it nevertheless does much better than France with an efficiency percentage of only 43%, due to the combination of heavy tax and social security contributions.