Costs of Hiring European Employees

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 a 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 employer has to think about costs related to employee recruitment, employee benefits, payrolls, taxes, insurance, retirement benefits, performance bonuses, specific perks considering the country's 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 lower salaries in countries such as Italy, Spain, and Czech Republic.

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 (the 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 of the costs of employment in Germany.

Annual employer's cost per year (based on a €80.000 annual salary and contributions)
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
10. Ireland

€ 88,800

$ 106,229

11. Switzerland

€ 86,800

$ 103,837

 

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 the Netherlands, these contributions are capped. This year, Dutch employers’ 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 a pension. The statutory contribution is 5% and 3% respectively, reaching a total of 8%. Although not presented in the comparison, in Switzerland, it is also mandatory for employees and employers to contribute to a pension, and the average rate is 7%. Besides pensions, it is also obligatory for employers in Switzerland to provide insurance such as accident insurance and health/sickness insurance. There are many options for employer/employee contribution rates that could be suited to the individual situation. In some countries, for example, Italy, employers accrue severance pay when the employee leaves the company (TFR). This reflects approximately 7% of the salary.

The cost that employers might come across is occupational accident insurance which is mandatory in some countries like Germany and Italy. These are normally charged annually, and the amounts are not too high (depending on the specific sector).

In summary, the following factors are the key drivers of European employment costs:

  1. Salary
  2. Social contributions
  3. Benefits

Social contribution for employers per European country

Social contributions Europe employer

 

Overview Social Contributions & average wages

Social contributions vs. average annual wage europe

 

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 labor 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
     
Benefits:    
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

 

More information

Many companies are dealing with employee shortages by hiring internationally, but dealing with different labor laws and policies is everything but simple and it requires a lot of experience. With EuroDev, you can hire in Europe fast without worrying about setting up an entity. You will stay compliant in every European country of your choice, and you will have an excellent team experienced to offer the necessary HR support. Let’s chat about the next steps for your hiring in Europe

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About EuroDev

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 500 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 

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