Payroll tax
Payroll taxes are taxes imposed on employers or employees. They are usually calculated as a percentage of the salaries that employers pay their employees. By law, some payroll taxes are the responsibility of the employee and others fall on the employer, but almost all economists agree that the true economic incidence of a payroll tax is unaffected by this distinction, and falls largely or entirely on workers in the form of lower wages. Because payroll taxes fall exclusively on wages and not on returns to financial or physical investments, payroll taxes may contribute to underinvestment in human capital, such as higher education.
National payroll tax systems
Australia
Payroll taxes in Australia are levied by state governments and not at a federal level. Payroll tax rates and the threshold at which these are levied vary between states.Bermuda
In Bermuda, payroll tax accounts for over a third of the annual national budget, making it the primary source of government revenue. The tax is paid by employers based on the total remuneration paid to all employees, at a standard rate of 14%. Employers are allowed to deduct a small percentage of an employee's pay. Another tax, social insurance, is withheld by the employer.Brazil
In Brazil, employers are required to withhold 11% of the employee's wages for Social Security and a certain percentage as Income Tax. The employer is required to contribute an additional 20% of the total payroll value to the Social Security system. Depending on the company's main activity, the employer must also contribute to federally funded insurance and educational programs.There is also a required deposit of 8% of the employee's wages into a bank account that can be withdrawn only when the employee is fired, or under certain other extraordinary circumstances, such as serious illness. All these contributions amount to a total tax burden of almost 40% of the payroll for the employer and 15% of the employee's wages.
Canada
The Northwest Territories in Canada applies a payroll tax of 2% to all employees. It is an example of the second type of payroll tax, but unlike in other jurisdictions, it is paid directly by employees rather than employers. Unlike the first type of payroll tax as it is applied in Canada, though, there is no basic personal exemption below which employees are not required to pay the tax.Ontario applies a health premium tax to all payrolls on a sliding scale up to $900 per year.
China
In China, the payroll tax is a specific tax that is paid to provinces and territories by employers, not by employees. The tax is deducted from the worker's pay. The Chinese Government itself requires only one tax to be withheld from paychecks: the PAYG tax, which includes medicare levies and insurances.Tax calculations and contributions differ from city to city in China, and each city's data will be updated yearly.
Taxable Income = Gross Salary – Social Benefits – ¥3,500 IIT = Taxable Income x Tax Rate – Quick Deduction Net Salary = Gross Salary – Social Benefits – IIT
Croatia
In Croatia, the payroll tax is composed of several items:- national income tax on personal income, which is applied incrementally with rates of 0%, 24% and 36%
- optional local surcharge on personal income, which is applied by some cities and municipalities on the amount of national tax, currently up to 18%
- pension insurance, universal 20%, for some people divided into two different funds, one of which is government-managed and the other is a personal pension fund
- health insurance, universal 16.5%
- health insurance exemption exists for the population below 30 years of age as part of government policy to encourage youth employment.
Czech Republic
For people with trade certificates, the rate applies only to 40% of their revenue. The remaining 60% can be deducted as a standard expense. Freelancers also have to file an Income tax return every year.
Taxpayers can apply a few tax deductions, such as a deduction for a child, for being a student, for a dependent spouse and more.
Health and social insurance are mandatory and a part of a payroll tax. The health insurance rate is 13,5%. For employees with a salary higher than the minimum wage, 9% pay the employers, and only 4,5% pay the employees. Trade license workers pay it themselves. Categories that do not have to pay health and social insurance are, for example, students or people registered at the unemployment department. The social insurance rate is 31,5% for employees and 29,2% for freelancers.
The income tax makes up to half of the national income. The health and social insurance make another 30-40%.
Finland
In Finland, payroll taxes and mandatory social security contributions are divided into those deducted from the employee's gross salary and those paid by the employer.As of 2025, employees are subject to the following withholdings:
- Pension insurance fee : 7.15% for employees aged 17–52 and 63–67; 8.65% for those aged 53–62.
- Unemployment insurance fee : 0.59% for employees aged 18–64.
- Health insurance daily allowance contribution : 1.01% on gross income if annual income exceeds €16,862; otherwise 0%.
- Pension insurance contribution : Averages approximately 17.38%.
- Health insurance contribution : 1.87%.
- Unemployment insurance contribution: 0.20% on the first €2,455,500 of payroll; 0.80% on the amount exceeding the limit.
- Other insurance: Accident and occupational disease insurance and Group life insurance.
France
In France, statutory payroll tax only covers employee and employer contributions to the social security system. Income tax deductions from the payroll are voluntary and may be requested by the employee, otherwise, employees are billed 2 mandatory income tax prepayments during the year directly by the tax authority. Employee payroll tax is made up of assigned taxes for the three branches of the social security system and includes both basic and supplementary coverage. Different percentages apply depending on thresholds that are multiples of the social security earnings ceiling.Contributions for salaries between the minimum wage and 1.6 times the minimum wage are eligible to relief of up to 28 percentage points of employer contributions, effectively halving employer non-wage costs.
Germany
German employers are obliged to withhold wage tax on a monthly basis. The wage tax withheld will be qualified as prepayment of the income tax of the employee in case the taxpayer files an annual income tax return. The actual tax rate depends on the personal income of the employee and the tax class the employee has chosen. The choice of tax class is only important for withholding tax, and therefore for immediately disposable income. The choice of tax class has no effect on tax refunds.In addition to income tax withheld, employees and employers in Germany must pay contributions to finance social security benefits. The social security system consists of four insurances, for which the contribution will be equally shared between employer and employee. Contributions are payable only on wages up to the social security threshold:
| Annual amounts 2019 | Threshold West Germany | Threshold East Germany |
| Health- and Nursing Care insurance | 53,100 Euro | 53,100 Euro |
| Old Age- and Unemployment insurance | 78,000 Euro | 69,600 Euro |
In addition, there are some insurances which are covered by the employee only.
The following table shows employee and employer contributions by category for the year 2015.
| category | Employee | Employer | Notes |
| Old Age | 9.35% | 9.35% | |
| Health | 7.3% | 7.3% | In addition, the health insurance will impose a surcharge up to 0.9%, to be paid by the employee only. |
| Unemployment | 1.5% | 1.5% | |
| Nursing Care | 1.175% | 1.175% | 1.425% childless employees over 23 years old 1.675% in Saxony |
| Accident | 1.6% | depends on risk covered | |
| Sick Pay | 0.7% | Depends on coverage and health insurance. | |
| Maternity | 0.24% | ||
| Insolvency | 0.15% | Payment of outstanding salary in case of bankruptcy |
Greece
An employer is obligated to deduct tax at source from an employee and to make additional contributions to social security as in many other EU member states. The employer's contribution amounts to 28.06% of the salary. The employee's contribution is 16%.Hong Kong
In Hong Kong, salaries tax is capped at 15%. Depending on income, employers fall into different tax brackets.Sweden
In 2018, the Swedish social security contribution paid by the employer is 31.42 percent, calculated on top of the employee's salary. The percentage is lower for old employees. The other type of Swedish payroll tax is the income tax withheld, which consists of municipal, county, and, for higher income brackets, state tax. In most municipalities, the income tax comes to approximately 32 percent, with the two higher income brackets also paying a state tax of 20 or 25 percent respectively. The combination of the two types is a total marginal tax effect of 52 to 60 percent.According to a 2019 study in the American Economic Review, a large employee payroll tax cut for young workers did not lead to increases in wages for young workers, but it did lead to an increase in employment, capital, sales, and profits of firms with many young workers.