Tax wedge
The OECD measure of the gap between an employee’s total labour cost and their net take-home — capturing both employee and employer contributions.
The tax wedge is the share of total labour cost (gross salary + employer payroll taxes) that does NOT arrive as net take-home pay. It is the metric the OECD uses in its annual "Taxing Wages" publication for cross-country comparisons. A high tax wedge means a large gap between what the employer pays out and what the employee receives — driven by both employee deductions and employer contributions.
OECD 2024 estimates for a single worker on the average wage: Belgium ~52%, Germany ~47%, France ~47%, Italy ~46%, Spain ~40%, UK ~31%, US ~30%, Switzerland ~23%. Continental Europe sits at the top because employer-side contributions are heavy; English-speaking jurisdictions sit lower because more of the social-insurance burden is shifted to general taxation or private provision.
The tax wedge is the right metric for an employer comparing the cost of equivalent roles across countries. The effective tax rate (see /glossary/effective-rate) is the right metric for the employee comparing net take-home. This calculator computes the latter; the former requires adding employer contributions on top.
Calculator pages that use this term
See also
- Effective tax rate — Total deductions divided by gross pay — the single percentage that summarises the overall tax bite.
- Employer contributions — The portion of payroll taxes paid by the employer on top of gross salary — not part of take-home but part of total labour cost.
- Gross pay — The total annual salary before any tax, social-insurance, or pension deductions are taken out.
- Net pay (take-home) — The amount actually deposited in the employee's bank account after every statutory deduction.