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Comment by PragmaticPulp | Hacker News Reader

> Geo-balanced. Pay so that everyone receives the same amount, regardless of where they live. This means the company will pay very different amounts for each employee. For example, costs in one country in Europe can be twice what they are in another country.

This completely caught me off guard the first time I encountered it.

I knew employment taxes were higher in some locations, but I was blown away by how much higher it was in most of our European offices. It was a lot cheaper to hire a $200K/year engineer in our American offices than to pay someone the equivalent compensation in any of our European offices.

The lower compensation reported by many European devs made a lot more sense after that experience.

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You also need to understand whether the taxes are paid by the company, the employee or both. In my country the company pays around 10% of the gross salary in taxes, and the employee pays 40%.

The distinction between company and employee payroll taxes is completely artificial. The only thing that matters is that the company pays X and the employee gets Y

Yeah so European employers talk of "gross" pay.

Net: what the employee gets on their bank account

Gross: net + employee contributions

Total payroll cost: gross + employer contributions

This geo-balancing approach described makes little sense.

"It was a lot cheaper to hire a $200K/year engineer in our American offices than to pay someone the equivalent compensation in any of our European offices."

This is not a very good frame of reference to take though ... they are getting paid $200K - what they give to their government is their business, not yours.

If people are paying 'higher taxes' well hopefully they get some benefit from that. If not, well, it's their country to work with.

If you consider that that European may be getting big retirement, more vacation, free Uni, free Healthcare, free Childcare etc. - well - then that's kind of 'part of their comp'.

Also, Supply/Demand is a thing.

True 'Geo Balancing' would imply paying the person what their market rate is, in that market - and - if you're based in a market with higher salaries you can actually pay bit more (i.e. this the 'Supply' part).

I guess what I mean to say is ... the 'comp' should be what goes to the staffer + payroll taxes. In the US it's a small amount. In France, it's a lot.

So you basically end up paying someone in a 'high payroll tax country' less - all other things being equal.

The difference is that in the EU you don't necessarily see the payroll taxes your employer pays (as opposed to the income tax you do see), and those payroll taxes can be very high.

Yes, that's what I meant to imply there at the end, but re-reading what I wrote I did a poor job of that, you 'said it right'.

> This is not a very good frame of reference to take though ... they are getting paid $200K - what they give to their government is their business, not yours.

You’ve misunderstood. I’m not referring to individuals’ own taxes.

Most countries have employer paid taxes on payroll. It’s literally an additional cost paid by the employer for having that person on your payroll.

In several European countries, this employer tax can be a lot higher. It can be much more expensive for the company to hire in those countries at equivalent compensation to the employee . Read the article for some more details.

I didn't misunderstand, I indicated 'payroll taxes' there. It just wasn't clear.

I think a good idea would be to tell employees what their total comp is, and then deduct payroll taxes. Tell them they are being paid 'equivalent' as elsewhere.

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