Marginal Net-to-Gross
Disclaimer:
Nothing has been checked really. Could be quite wrong in the details.
Net-to-Gross
Channeling Dan Niedle at Tax Policy Associates, let's try to understand the marginal throughput of payments for labour and the impact of Taxation. We will ignore a lot of complexities and wrongly treat pensions as savings.
Consider spending associated with employing an individual in the UK. The amount an employee receives relative to how much the company gives up is often called the Net-to-Gross Ratio.
Employee Net Outcome (NO) = Net Income + Employee Pension
(what the worker actually receives: salary minus taxes plus pension)
Employer Expenditure (EE) = Gross Salary + Employer NI + Employer Pension
(your true cost including all employer contributions)
Marginal Net-to-Gross = Δ NO / Δ EE
(how much extra net outcome the employee gets for each additional £1 of total employer cost)
This ratio is the Marginal Net-to-Gross. It answers the question: for each additional pound an employer spends, how much actually lands in the employee's pocket or pension? Let's see what this looks like as we pay an employee more throughout the year.