The average Portuguese employee earns 72.4% of their gross salary

  • ECO News
  • 11 April 2017

The average Portuguese employee pockets 72.4% of their gross salary. The percentage was revealed this Tuesday by the OECD in their "Taxing Wages 2017" report.

In Portugal the take-home pay of an average single worker, after tax and benefits, was 72.4% of their gross wage, compared with the OECD average of 74.5%”, discloses the Organization for Economic Cooperation and Development this Tuesday in their Taxing Wages 2017. In other words, the Portuguese average employee pays a net average tax rate of 27.6% in 2016, in comparison with the OECD average of 25.5%.

The report also explains that concerning an average married worker with two children, Portugal is above the OECD countries’ average. Considering benefits given to taxpayers with children, the average married worker with two children payed an average tax rate of 11.2% in 2016, the 25th lowest in the OECD, whose average is 14.3%. This means the “average married worker with two children in Portugal had a take-home pay, after tax and family benefits, of 88.8% of their gross wage compared to 85.7% for the OECD average”, is stated in the report.

Average tax rate and benefits per single worker in comparison to one-earner married couple with two children. OECD

In addition, the report from the OECD discloses the “tax wedge”, which is a measure of the tax on labor income. In practice, the ratio includes the taxes and contributions concerning labor, paid by both the employee and the employer (in the latter, gross wage and Social Security’s contributions are also included). In Portugal, the tax wedge was 41.5%.

Let’s clarify the percentage: imagine you have a job offer from an employer. From your viewpoint, you care about what you will earn in the end of the month, meaning, what is your net salary. However, in order to understand what that amount is, the employee will have to do the math considering the 23% of Single Social Tax (TSU) they will have to pay in order to give you the job. In addition, on the gross salary they offer, the employee has to make the Personal Income Tax (IRS) and the 11% TSU deductions. All in all, out of the overall cost coming from the employer, the average worker in Portugal last year only pocketed 58.5%.

To summarize, the measure translates the weight of these taxes and contributions on the overall job cost from the perspective of the employer.