What are the costs of hiring employees in Europe? The true employment costs contain more than just the gross salary. The European employment costs differ per country due to the differences in social contributions and benefits. For some North American businesses, the associated employment costs are an decisive factor in choosing where to hire an employee. In this blog, we will compare the employment costs across 11 popular European countries.
As mentioned, the true employment costs contain more than just the gross salary. An employers has to think about costs related to employee recruitment, employee benefits, payrolls, taxes, insurance, retirement benefits, performance bonuses, specific perks considering the country culture and the industry and many more.
Average salaries in Europe
On average, salaries are higher in Western and Northern European countries. Examples of countries that have a high average salary include Switzerland, Denmark and the Netherlands. In Eastern and Southern Europe, you can generally find the lower salaries with countries as Italy, Spain and Czech Republic. For more information, we invite you to take a look at the overview of the average annual wages per European country in 2019.
Despite the variation in what salary rate is common for a certain position across the different countries, the comparison below takes a gross annual salary of EUR 80,000.00 as a base. It is assumed that irregularities such as 13th month salary (Italy, Switzerland), 14th month salary (Italy), and holiday allowance (Netherlands, 8%) are included in this gross base salary. It is common to agree upon a set gross annual salary with the client and calculate how that translates to the irregularities such as a 13th salary month or an 8% holiday allowance. Employer's costs such as the social contribution will come on top of the annual gross base salary.
Costs of hiring European employees
In the table below, you can find a summarized overview of the total employer's cost per year. As is already mentioned, the comparison takes a gross annual salary of €80.000,00 as a base. In the calculation, costs such as social contributions, pension contributions and other irregularities as described in the paragraph above are included as well. At the end of this blog, you can find a detailed overview on the costs of employment in Germany.
|Country||Total annual employer's cost per year (€)||Total annual employer's cost per year ($)|
|1. France||€ 116,000||$ 138,768|
|2. Italy||€ 104,774||$ 125,339|
|3. Czech Republic||€ 101,588||$ 121,527|
|4. Spain||€ 99,097||$ 118,547|
|5. Sweden||€ 96,000||$ 114,842|
|6. Germany||€ 95,984||$ 114,823|
|7. Finland||€ 93,320||$ 111,636|
|8. United Kingdom||€ 92,037||$ 110,102|
|9. The Netherlands||€ 90,461||$ 108,216|
Cost of employment Europe
The cost of employment does not only concern salaries, but also social security contributions. the high employment costs in France are mainly due to the high social contributions. France has the highest employer’s social security contributions averaging 45%. On the other hand, employers in Switzerland pay the lowest social contributions, around 8,5%. In some countries, like Netherlands, these contributions are capped. This year, Dutch employer’s social contributions are capped at EUR 871,75.
Insurance, retirement plan, and other benefits are also elements that employers need to take into account. In some countries, employers are obliged to provide certain benefits. For example, in the UK, it is mandatory for both employee and employer to contribute to pension. The statutory contribution is 5% and 3% respectively, reaching to a total of 8%. Although not presented in the comparison, in Switzerland, it is also mandatory for employee and employer to contribute to pension, and the average rate is 7%. Besides pension, it is also obligatory for employers in Switzerland to provide insurances such as accident insurance and health / sickness insurance. There are many options of employer/employee contribution rates which could be suited to the individual situation. In some countries, for example Italy, employers accrue severance pay for when the employee leaves the company (TFR). This reflects approximately 7% of the salary.
More costs that employers might come across are occupational accident insurances which is mandatory in some countries like Germany and Italy. These are normally charged annually, and the amounts are not too high (depending on specific sector).
In summary, the following factors are the key drivers of European employment costs:
- Social contributions
Social contribution for employers per European country
Overview Social Contributions & average wages
Detailed overview of costs of hiring European employees
In case you would like to have a detailed overview of all the costs that would be involved in a specific country, please do not hesitate to contact us. Furthermore, every month we will publish an article on hiring in a specific country that will highlight the topics which a foreign employer should take into account. To give you a short overview of what a "detailed" overview can look like, a German example can be found below. Please note that this can differ per industry and collective labour agreement.
|Country||Germany (Mandatory)||Germany (Common)|
|Gross annual salary||€ 110,000.00||€ 110,000.00|
|Gross annual bonus||€ 15,000.00||€ 15,000.00|
|Gross salary per month||€ 9,166.67||€ 9,166.67|
|Gross salary per month inc. bonus||€ 10,416.67||€ 10,416.67|
|Car allowance||€ 900.00|
|Phone allowance||€ 40.00|
|Additional pension contribution||€ 275.00|
|Paid leave||20 days||25-30 days|
|Social contribution in % (average)||19,38%||19,38%|
|Pension insurance (9.3%)||€ 852.50||€ 852.50|
|Unemployment insurance (1.25%)||€ 114.58||€ 114.58|
|Health insurance (7.3%)||€ 669.17||€ 669.17|
|Long-term insurance (1.525%)||€ 139.79||€ 139.79|
|Social contributions per month||€ 1,776.04||€ 1,776.04|
|Total gross salary per month||€ 12,192.71||€ 13,407.71|
|Total gross salary per year||€ 146,312.50||€ 160,892.50|
In case you would like to have more information on hiring employees in Europe or other European HR related topics, do not hesitate to contact us. You can directly reach Monique Ramondt-Sanders - Executive Vice President of Human Resource Outsourcing at EuroDev - by clicking on the link. Interested in more information concerning our HR Outsourcing services? Please have a look at our HR Outsourcing page.
EuroDev, established in 1996 with offices in The Netherlands, has a single, defined purpose to help mid-sized North American companies expand their business in Europe. We have created a proven, successful business development model and since our founding, have partnered with over 300 companies to help them define and meet their European business goals. Services provided include Sales Outsourcing, HR Outsourcing, and Digital marketing.
Sources: OECD - Annual Wages