Ask someone which country taxes salaries most heavily and they will almost always answer with an income tax rate. That is the number politicians argue about, the number in the headlines and the number most relocation guides compare. For a salaried person, it is often not the biggest deduction on the payslip.
The OECD publishes an annual comparison of what employment actually costs across its 38 member countries, the Taxing Wages series. Take its figures for 2025 for a single worker without children earning the average wage in their country. Across the OECD average, income tax takes 15.5 percent of gross pay. Employee social security contributions take another 9.6 percent. Employer social security contributions add 16.6 percent on top of the gross wage. Put the two social security lines together and they come to 26.2 percent of gross pay, well above the income tax line.
In other words, for an ordinary salary in an ordinary OECD country, the part of employment tax that nobody campaigns about is the larger part. Anyone comparing countries on income tax alone is comparing the smaller number.
The Tax Wedge, Explained Once
The OECD's summary measure is the tax wedge: income tax plus employee and employer social security contributions and employer payroll taxes, net of any cash family benefits, expressed as a share of the employer's total labour cost. It answers a simple question: of every euro, pound or dollar an employer spends on a job, how much reaches the worker?
Here is how the pieces compare for 2025, using the OECD's Taxing Wages data for a single person at 100 percent of the national average wage. The first three columns are percentages of the gross wage; the tax wedge is a percentage of total labour cost.
| Country | Income tax | Employee social security | Employer social security | Tax wedge |
|---|---|---|---|---|
| Belgium | 25.6% | 14.0% | 27.2% | 52.5% |
| Germany | 17.2% | 21.5% | 20.9% | 49.3% |
| France | 16.7% | 11.3% | 36.3% | 47.2% |
| Austria | 14.6% | 17.9% | 27.6% | 47.1% |
| Italy | 19.1% | 9.5% | 31.6% | 45.8% |
| Estonia | 21.6% | 1.6% | 33.8% | 42.6% |
| Spain | 17.1% | 6.5% | 30.6% | 41.4% |
| Sweden | 15.6% | 7.0% | 31.4% | 41.1% |
| Lithuania | 19.2% | 19.5% | 1.8% | 39.8% |
| Portugal | 13.9% | 11.0% | 23.8% | 39.3% |
| Netherlands | 17.8% | 10.0% | 12.6% | 35.9% |
| Denmark | 35.3% | 0.0% | 0.7% | 35.8% |
| OECD average | 15.5% | 9.6% | 16.6% | 35.1% |
| Ireland | 21.0% | 4.1% | 11.2% | 32.6% |
| United Kingdom | 17.6% | 5.6% | 13.7% | 32.4% |
| United States | 16.7% | 7.7% | 8.1% | 30.0% |
| Australia | 23.5% | 0.0% | 6.1% | 27.9% |
| Switzerland | 11.7% | 6.4% | 6.4% | 23.0% |
| New Zealand | 20.8% | 0.0% | 0.0% | 20.8% |
Read the table from left to right and the income tax column tells you surprisingly little about the last one. Germany's income tax on an average wage is lower than Ireland's and barely above the OECD average, yet its tax wedge is the second-highest in the OECD, behind only Belgium. The difference is almost entirely social security: in Germany, employee and employer contributions together come to more than 42 percent of the gross wage.
Same Wedge, Different Labels
The most instructive comparisons are the countries that raise similar totals in completely different ways.
Denmark has the highest income tax in the table, 35.3 percent of the average wage. In the OECD's accounts, it raises almost nothing through separate social security contributions. Its tax wedge of 35.8 percent sits right next to the Netherlands, which raises the same total from a much lower income tax and a mix of employee and employer contributions. A worker comparing only income tax rates would think Denmark was far more expensive. On total cost, they are neighbours.
Estonia is known for its flat income tax, which the country page covers. The OECD figures show why that is only half the picture: the income tax on an average wage is 21.6 percent, but the employer's social contributions add 33.8 percent on top of gross pay. For the employee, the payslip looks light. For the employer, the job is expensive.
Lithuania is Estonia's mirror image. Its employer contributions are just 1.8 percent of the gross wage, while the employee pays 19.5 percent. The total burden is similar to its neighbour's; the label on the deduction is the opposite.
France has the highest employer contribution rate of any OECD country in these figures. The employee sees 16.7 percent income tax and 11.3 percent in contributions, both unremarkable. The employer pays 36.3 percent of the gross wage in contributions before the worker receives anything.
Employer Contributions Are Your Money Too
It is tempting to ignore the employer column, because it never appears as a deduction on your payslip. For three groups of people, ignoring it is a mistake.
The first is anyone negotiating a relocation package. A company comparing the cost of employing you in Paris or in Dublin is comparing total labour cost, not your gross salary. The same budget buys a noticeably higher gross wage in a country with low employer contributions.
The second is anyone who will employ themselves. Founders who pay themselves a salary from their own company carry both columns. The self-employed in many countries pay contribution rates that combine both halves, sometimes on a standardised base rather than actual income. The Brief's analysis of Andorra's real tax rates shows how a fixed monthly social security bill changes the picture for a small business owner in a low-tax country.
The third is anyone building a budget for life abroad. Social security contributions are often the one cost that does not fall when income falls, particularly for the self-employed. They belong in the monthly plan, as the Brief argued in What a Plan B Actually Costs Per Month.
Caps Change Everything at the Top
Averages hide one feature that matters enormously for higher earners: many social security systems stop charging at a ceiling, and income tax never does.
In the United States, the Social Security tax is 6.2 percent for the employee and 6.2 percent for the employer, but only on earnings up to the 2026 contribution and benefit base of 184,500 dollars, according to the Social Security Administration. Above that, the Social Security part stops. Medicare's hospital insurance tax of 1.45 percent each for employee and employer has had no ceiling since 1994.
In the United Kingdom, HMRC's rates for 2026 to 2027 charge employees 8 percent on earnings between the primary threshold of 12,570 pounds and the upper earnings limit of 50,270 pounds a year, and 2 percent above it. The employer, by contrast, pays 15 percent on everything above a secondary threshold of 5,000 pounds, with no upper limit for a standard employee. The UK's country profile covers the income tax side.
In Germany, the statutory pension insurance contribution rate is 18.6 percent, charged only on earnings up to the 2026 ceiling of 8,450 euros a month, according to the Deutsche Rentenversicherung.
The consequence is counter-intuitive. At an average wage, the systems in the table look broadly comparable. At three or four times the average wage, capped systems become much lighter at the margin, while uncapped employer charges keep growing with the salary. The right country for a nurse and the right country for a senior executive can be different countries, even if their income tax brackets look similar.
Which Country Gets Your Contributions
For anyone who lives in one country and works for, or in, another, the first question is not the rate but the jurisdiction. Social security has its own rules for deciding where you belong, and they are not the same as the tax residence rules.
Inside the European Union, the principle is that you are covered by one country's system at a time. According to the EU's official Your Europe guidance, which country depends on your work situation and your country of residence, not your nationality, and you may not choose. If you work in more than one EU country but carry out a substantial part of your activity in your country of residence, you are covered there; "substantial" means at least 25 percent of working time or income. A worker posted to another EU country can stay in the home system with a PD A1 form, issued for a maximum of 24 months, with extensions only by agreement between the two countries.
The United States coordinates through bilateral totalization agreements. The Social Security Administration lists agreements with 31 countries, from Italy in 1978 to Romania, whose agreement entered into force on 1 September 2026. These agreements have two purposes: to eliminate dual social security taxation on the same earnings, and to fill gaps in benefit protection for people whose careers are split between countries. Under the detached-worker rule, an employee sent abroad by a US employer for an assignment expected to last five years or less generally stays in the US system only. The SSA notes that this five-year limit is substantially longer than the norm in other countries' agreements, and that the agreement with Italy works differently, based principally on nationality.
Where no agreement exists, the risk is the one the agreements were designed to remove: paying into two systems on the same income, and qualifying for a full pension from neither.
How to Read a Country Before You Move
The practical method follows from everything above. Before comparing countries for a salaried move, or for paying yourself from your own company, work through five questions:
- What is the full tax wedge at your income, not at the average wage? Add income tax, employee contributions and employer contributions, and check for ceilings.
- Who pays what? An employer-heavy system can look cheap on a payslip and expensive in a budget negotiation.
- Where is the ceiling, if any? For high earners, the cap on contributions can outweigh several points of income tax.
- Which system will cover you? Check the EU coordination rules or the relevant bilateral agreement before you sign a contract that spans two countries.
- What do the contributions buy? Contributions that build a pension you will be able to draw, or health cover you will actually use, are different from contributions that vanish if you leave after three years.
The countries directory covers each destination's income tax regime. The payroll side deserves the same attention. For most people who work for a living, social security is where the real difference between countries is decided, and it is the part of employment tax that relocation brochures almost never mention.
Work with Sebastian
If you are comparing countries for a salaried move, or deciding how to pay yourself from your own company abroad, the social security side of the calculation needs the same care as the income tax side. Book a consultation.
