But isn't it better to find a tax avoidance strategy that's mutually beneficial to both sides? Sure, you can ask for an extra $10k that gets taxed down to $5k, but if you can find a creative workaround to get $8k instead for the same $10k, isn't that better than trying to ask them for a $16k raise to make up for the taxes?
Valuable counter-point, thanks. Still their problem though, and they should make it a bit more transparent: "It would cost us extra to implement this, are you OK with a final offer that's yours minus $3k to offset our costs?".
I think the best thing is to ask for $10k or equivalent, and then let the HR team come up with a sane way to construct that value that works under their system. It's kind of like getting requirements where the customer tries to tell you the exact logic to program, but since it's not their codebase/background, they end up coming up with convoluted solutions.
Just tell me what you want, and let me as SME figure out how to get you there.
The problem comes with progressive taxation, especially in vaguely-socialist countries.
When you're in a high-enough tax bracket (in taxation regimes where such high tax-brackets exist), adding a marginal dollar to your net income becomes impractically expensive for the company, compared to basically anything else the company could offer you.
For some people, in some places, getting an extra $20k/yr tacked onto your net income, would cost your employer more than just, say, hiring you a well-paid full-time personal assistant, with the skills necessary to do enough of your job that you go from "overworked" to "takes off early most days to go play golf."
I’m not sure I follow. In a progressive tax system you pay in brackets, so that extra $20k doesn’t mean the rest of the salary is entirely in the new bracket, so why would it cost an exorbitant amount?
Net income is what goes into your bank after taxes/etc. In the US, the higher tax brackets are around 30% for federal taxes alone, so that extra $20k costs the company around $30k. Not counting state taxes or anything else like paying into benefits. Not sure if retirement savings count here. So let's say between $35k and $40k.
Googling "personal assistant salary", it looks like the average in the US is ~$50k/year. So a personal assistant would cost more, but it is in the right ballpark where that could be a better choice than that raise if this is the reason for the raise:
> with the skills necessary to do enough of your job that you go from "overworked" to "takes off early most days to go play golf."
Yeah but phrasing/negotiating it this way obfuscates it a little. If you're in negotiations and you ask for $60k/yr more gross, then it's clear you're asking for more than a PA would cost (maybe, factor in total comp for them too and it's probably closer to $65k/$75k). Do people negotiate net?
Nobody negotiates net. It's not even practical.
Your tax situation will depend of the other revenues you might receive on top of your wages and the deductions you are eligible to and your employer doesn't have to know about that.
Nobody negotiates net, but companies will keep in mind an employee's lowest possible tax bracket given their gross (and therefore their highest possible net) when determining the cost:benefit of offering marginal "material compensation" increases (vs other components of total compensation) — both during initial negotiation, and when trying to design later incentives.
Which is to say, if you're making USD$100k/yr working for Ericsson in Sweden (where you're in the highest, 52.9%, tax bracket for any marginal income above USD$83k), they're gonna be thinking differently about how to reward you as a high performer, vs if you were making USD$100k/yr at Google in the US (where that salary would instead just have you scraping the top of the 22% tax bracket.)
Google would almost certainly just give you more money — and would likely continue to do that indefinitely, as even the highest US federal tax bracket (37% at USD$600k/yr) isn't too onerous. Ericsson, on the other hand, might already rather offer you something non-monetary and "cheap" for them (e.g. a company car), rather than biting the bullet on a "substantial, productivity-incentivizing" raise (i.e. one that meaningfully increases your net income.)
And that is why precisely why salaries tend to be lower in many European countries (that have these high tax brackets); and why everyone in those countries instead expects / demands / enshrines requirements in law for tons of non-monetary benefits, like long vacations! "Purely salary" and "salary levels off, then tons of non-material benefits" are both Nash equilibria in compensation space; just very different ones.
The only time I've heard of negotiating net is in certain Gulf countries where employers will pay all your taxes for you. Not a thing in the US or Europe though.