Take home pay required and taking statutory deductions into account

Up to this point, this manual has discussed how much disposable income a reference size family needs to be able to afford a basic but decent standard of living. However, almost all countries have statutory deductions from pay that need to be taken into account to ensure that workers have sufficient take home pay. Chapter 14 discusses various statutory deductions from pay such as income tax, social security, worker contributions to national health schemes, etc. and indicates how to take them into account in estimating a living wage. The chapter distinguishes between voluntary deductions from pay such as Christmas savings funds (which is treated as ordinary expenditure), personal deductions from pay which apply to only some individuals such as loan repayment or alimony (which are also treated as ordinary expenditure), and statutory deductions from pay such as for taxes or social security paid by all workers. Statutory deductions from pay are taken into consideration in the calculation of a living wage estimate in the Anker methodology. This is important because statutory deductions from pay can be considerable even in poor countries and for workers with low wages. Since statutory deductions vary from country to country and sometimes even between locations within countries, calculating the amount of statutory deductions needs to be location-specific. A hypothetical example is provided of how this calculation should be made in a country with a fairly simple tax code.