In April 2024, the OECD published Taxing Wages 2024, comparing labour taxation across eight model household types using 2023 observations. For a single average wage worker without children, the OECD average tax wedge was 34.8% of labour cost. That measure combines employer and employee labour taxes and social contributions, net of family benefits. It is not an individual’s expatriate tax rate. Mobility teams can use the report to examine the assumptions behind a cost comparison.
Define the question before choosing the figure
A comparison of employer labour cost answers a different question from a comparison of employee take home pay. The mobility team should state which question its model is intended to answer. Finance should understand what is included in the denominator and how employer contributions are treated. A percentage taken from a country table can be accurate in its original setting yet unsuitable for the decision being presented.
This editor recommends putting the population, income assumptions and household structure beside each modelled result. A decision maker should be able to see whether two scenarios represent the same employee circumstances. The model should also distinguish a published benchmark from a calculation prepared for an actual assignment. That distinction makes the result easier to challenge and prevents a general indicator from becoming an implied guarantee of net pay.
Make family circumstances visible
The report’s household comparisons show why a single employee scenario cannot represent every move. Management should ask whether its assignment model accounts for the spouse or partner’s work and the family’s circumstances. The OECD publication also examines second earner incentives. For mobility planning, that offers a reason to consider household outcomes alongside the cost of employing the person who has received the assignment offer.
A family decision can depend on whether a partner can work, the timing of relocation and access to services. The tax model should not be expected to answer all those questions. Mobility specialists can identify which assumptions need separate immigration, benefits or employment review. Management should then decide what assistance it offers and make that assistance explicit, rather than allow a single financial illustration to stand in for the whole relocation discussion.
Distinguish contributions from the benefits they support
A labour tax wedge includes social contributions, but it does not provide a full valuation of the protection available to a particular employee. Benefits teams should examine the relevant coverage separately. An assignment comparison should make clear which arrangements are assumed to continue, which require new enrolment and which need supplementary protection. A lower percentage in a model cannot establish that an employee’s benefit package is more suitable.
The review should also identify any employer funded benefits outside the model’s scope. International medical cover, retirement arrangements and relocation support may be important to the assignment budget. The team should avoid double counting a cost already included elsewhere. A clearly structured model lets reviewers understand how statutory contributions and company benefits have been treated without having to reconstruct the calculation from separate spreadsheets.
Use local advice for the actual assignment
The OECD figures concern model households and a defined observation year. An individual’s residence, treaty position and applicable expatriate arrangements require a separate assessment. A mobility team should obtain advice matched to the proposed facts and period. The model should identify where it relies on a specialist conclusion and record when that conclusion needs updating because the employee’s circumstances or assignment terms have changed.
Sensitivity analysis can help management understand the effect of uncertain assumptions. A team might compare scenarios for the partner’s employment, the timing of a move or the treatment of a particular employer commitment. Each scenario should use assumptions that a reviewer can follow. Presenting a range can make a decision clearer, provided the range represents defined alternatives and is not used to obscure an unresolved technical question.
Keep benchmarks and decisions in separate records
Historical benchmarks are useful for explaining a methodology or questioning a simplifying assumption. They should remain labelled with their data year. An assignment approval needs a record of the actual facts, advice and employer commitments used for that decision. Maintaining both records allows the organisation to refresh an assignment calculation without rewriting the historical evidence on which its analytical framework was originally based.
This editor recommends using Taxing Wages as a starting point for a better question: which household and which cost are being compared? The 2024 report cannot calculate a current expatriate package, but it makes the limitations of a single headline rate easier to see. A credible mobility decision combines a transparent financial model with local advice and an explicit account of the benefits and support offered to the employee’s household.
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