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Ask HN: Salary discussions – numbers are before or after taxes?

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Re: Ask HN: Salary discussions – numbers are before or after taxes?

#41
post #21

Gross = before expenses/taxes. Net = after (which, specifically, depends on the context). Always negotiate your compensation in gross. Always negotiate hourly in hours, salary in years or months (most places prefer the former, but depending on your country it might be customary to discuss in the latter). A multiplication/division by 12 is usually sufficient. Hourly pay means you work time, you get paid for exactly th…

In France (and broadly speaking, in Europe) you are better off negotiating net before taxes.

We have plenty of deductions from our gross that are compulsory, before getting to the net before taxes. It means that the x€ you hear is actually x€*0.6 or less.

Bringing the number down to what actually hits your taxes (and then your bank account) makes the proposal look less grandiose.

Re: Ask HN: Salary discussions – numbers are before or after taxes?

#42

In Germany you negotiate the "gross" salary. But certain mandatory insurance payments (healthcare, unemployment, retirement, nursing) are split between employee (subtracted from gross) and employer (added to gross). So the direct cost to the employer is about 20% higher than the "gross" salary.

That's true in the US as well.

Not always. At a college I worked at the contributions by the school to our health insurance cost was added to employees paychecks as a line item, then the amount of health insurance paid by the employee (a small percentage) subtracted, so the gross salary basically included most of but not all of the schools health contribution. This meant the employee ended up paying some taxes on the schools health contribution I believe. Every other employer I worked for did not show company health insurance contributions on the paycheck stub at all. Maybe this has changed recently (last 20 years?) because applicable laws have changed, or perhaps it only applies to nonprofits or schools?

This had the advantage to the school that employees knew how much of a health benefit they were receiving, employees paychecks looked bigger (until you got to the take home part), and the school paid less taxes (not sure how, but that was the main reason they did it).

It was basically an accounting trick to shift costs to employees, similar to the old trick of giving raises that match inflation; so employees think they are getting raises, and even if they notice the raise only matches inflation (difficult to tell if the business year doesn't match the physical year since official inflation figures for the entire year won't be published till later), what they don't realize is the raise only happens once a year so they are losing to inflation the rest of the year. A very sneaky way to take money away from employees and reduce company costs. I suspect this is part of how USA wages have been held flat for decades.

Re: Ask HN: Salary discussions – numbers are before or after taxes?

#43

Earlier quoted context omitted.

Yes, and to build on your comment regarding the employer's lack of knowledge and control over taxes: Equity comp also means the employee has control over when they get compensated. Maybe the employee will sell equity as it vests, maybe they'll keep it and sell it all ten years later. These choices will all drastically change the tax situation. A good employer will work with you as a team to help you realize your fina…

> Equity comp also means the employee has control over when they get compensated. I wish that were a universal truth, but it decidedly does not apply to RSUs which most equity compensation comes in the form of.

The control is somewhat reduced, but not entirely. While the employee is forced to pay tax at vest, they can still retain the RSU and sell later.

Re: Ask HN: Salary discussions – numbers are before or after taxes?

#44
post #42

Earlier quoted context omitted.

That's true in the US as well.

Not always. At a college I worked at the contributions by the school to our health insurance cost was added to employees paychecks as a line item, then the amount of health insurance paid by the employee (a small percentage) subtracted, so the gross salary basically included most of but not all of the schools health contribution. This meant the employee ended up paying some taxes on the schools health contribution I…

I'm sure there's an edge case for everything, but 99.99% of the time in the US a quoted salary does not include employer-paid benefits, their part of SS, etc.

Re: Ask HN: Salary discussions – numbers are before or after taxes?

#45

Earlier quoted context omitted.

> Equity comp also means the employee has control over when they get compensated. I wish that were a universal truth, but it decidedly does not apply to RSUs which most equity compensation comes in the form of.

The control is somewhat reduced, but not entirely. While the employee is forced to pay tax at vest, they can still retain the RSU and sell later.

That's the exact same thing as getting a salary and buying stock with it.

Re: Ask HN: Salary discussions – numbers are before or after taxes?

#46
post #21

Gross = before expenses/taxes. Net = after (which, specifically, depends on the context). Always negotiate your compensation in gross. Always negotiate hourly in hours, salary in years or months (most places prefer the former, but depending on your country it might be customary to discuss in the latter). A multiplication/division by 12 is usually sufficient. Hourly pay means you work time, you get paid for exactly th…

In France (and broadly speaking, in Europe) you are better off negotiating net before taxes. We have plenty of deductions from our gross that are compulsory, before getting to the net before taxes. It means that the x€ you hear is actually x€*0.6 or less. Bringing the number down to what actually hits your taxes (and then your bank account) makes the proposal look less grandiose.

It's actually just the same in the US - my net salary is exactly 0.6 my gross salary. I've never heard of anyone negotiate by net here, but they should - it would probably be very difficult though.

Re: Ask HN: Salary discussions – numbers are before or after taxes?

#47

Earlier quoted context omitted.

In France (and broadly speaking, in Europe) you are better off negotiating net before taxes. We have plenty of deductions from our gross that are compulsory, before getting to the net before taxes. It means that the x€ you hear is actually x€*0.6 or less. Bringing the number down to what actually hits your taxes (and then your bank account) makes the proposal look less grandiose.

It's actually just the same in the US - my net salary is exactly 0.6 my gross salary. I've never heard of anyone negotiate by net here, but they should - it would probably be very difficult though.

Except there are a lot of ways to change what is taxable in the US: 401h, HSA, FSA, etc.

Re: Ask HN: Salary discussions – numbers are before or after taxes?

#48

Earlier quoted context omitted.

In France (and broadly speaking, in Europe) you are better off negotiating net before taxes. We have plenty of deductions from our gross that are compulsory, before getting to the net before taxes. It means that the x€ you hear is actually x€*0.6 or less. Bringing the number down to what actually hits your taxes (and then your bank account) makes the proposal look less grandiose.

It's actually just the same in the US - my net salary is exactly 0.6 my gross salary. I've never heard of anyone negotiate by net here, but they should - it would probably be very difficult though.

This is before taxes.

We have gross minus "various debits for retirement, health care, etc" (fixed, a percentage of the gross) and then minus income taxes (that vary from person to person)

Re: Ask HN: Salary discussions – numbers are before or after taxes?

#49
post #47

Earlier quoted context omitted.

It's actually just the same in the US - my net salary is exactly 0.6 my gross salary. I've never heard of anyone negotiate by net here, but they should - it would probably be very difficult though.

Except there are a lot of ways to change what is taxable in the US: 401h, HSA, FSA, etc.

This is before taxes.

We have gross minus "various debits for retirement, health care, etc" (fixed, a percentage of the gross) and then minus income taxes (that vary from person to person)

Re: Ask HN: Salary discussions – numbers are before or after taxes?

#50
post #47

Earlier quoted context omitted.

Except there are a lot of ways to change what is taxable in the US: 401h, HSA, FSA, etc.

This is before taxes. We have gross minus "various debits for retirement, health care, etc" (fixed, a percentage of the gross) and then minus income taxes (that vary from person to person)

Yes, it works very similarly in the US.

You have your gross salary - let's say, 100k.

From that, before taxes, is deducted the employee health insurance premiums (may be $0 to ~10k), employee retirement contributions (up to 19k), perhaps health savings account contributions (up to 7k), and possibly some others. Obviously, these can be quite substantial! But, at least, some of them are "optional" in that you are, for example, free to underfund your 401(k).

After that, federal and state income taxes are taken out, and a special tax for Medicare and Social Security.

Many of these are impacted by the vagaries of each employer. If you know your pre-tax income, you can easily calculate your taxes. But figuring out what your pre-tax income will be is not something you can figure out from the headline gross number. The biggest factor is the employer health insurance plans and your expected premium contribution - getting this out of an employer before being hired is like pulling teeth.

Although HSA and 401(k) contributions are elective, so you'd think you could determine that ahead of time...well, if the employer doesn't have a HDHP, then you don't get an HSA at all. Conversely, if they do, the amount of the deductible and the amount of the possible employer contribution (which counts toward the maximum allowable contribution by the IRS) factor into how much you expect to come out of your pay check. This is also tough info to get out ahead of time. 401(k) contributions fall into a similar but less severe problem - there's often an employer contribution, but it counts toward the allowed maximum, so you cannot determine from your gross salary alone how much you will be contributing toward your 401(k), even if you know ahead of time the dollar amount you want to contribute. Employers are often a little better about telling you their 401(k) contribution benefits ahead of hiring, though.

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