What is the True Cost of an Employee in Europe
Article by JobTerix IN DESIGN & ILLUSTRATION - 9/12/2022
The cost and related expenses of employing someone can be difficult to figure out, especially across different countries. In Europe, for example, the cost of employing someone could be up to 6 times higher than the employee's salary depending on which country you are in. Besides the hourly salary, there are certain taxes, fees, and benefits that the company must also cover. Let’s go in-depth to find out the cost of hiring employees in Europe.
Business owners want their employees to be paid well. Someone who works for you should be earning a decent living for their family. But as an employer, there are other costs you're responsible for such as payroll taxes, family allowances, vacation time, sickness and maternity benefits, pensions, disability, and social protection.
In early 2022, hourly labor costs in Europe rose 4.5% compared to the previous year for skilled workers. What can a new business owner expect to pay? And how does it compare to other countries?
For example, if you're hiring a software developer in London, you may be looking at a salary of £53k to £60k. But when you add on costs like benefits, travel, and expenses, their total cost of employment could be closer to £65k (€85k). The average salary in the UK is $30,800 for non-IT jobs. If you go through a recruiter, you’ll add another $3,000 to that estimate.
The cost of hiring someone in the UK is about 10% higher than in the Netherlands. This is due to the difference in tax rates for both countries. The tax rate in the UK is 20%, while the rate in the Netherlands is 15%.
Besides paying an hourly salary and benefits package based on skills and experience, an employer is required to pay for accident insurance, and disability, as well as contribute to the Fund of Guaranteed Workers’ Allowance in some countries. If you were to hire a software engineer in Poland, this would add an additional 20.48% to the gross salary paid for each full-time employee. The typical salary is 13,381 PLN or $2,813 USD per month or $33,000 yearly.
Social & Healthcare Compensation
The social security and healthcare costs for an employee in Europe can be as much as €12,000 per year. These costs vary from country to country. Factors can include the level of healthcare provided by the government as well as the type of insurance plan offered by employers. The most expensive countries are Sweden, Denmark, and Germany.
Sweden has the highest average social security costs in Europe at €12,000 per year. It's one of the highest in the world — only Japan has higher rates. Denmark's rates are also high (€10,000 per year) due to its universal healthcare system that provides generous benefits like long-term care insurance and dental care to everyone living in Denmark regardless of age or income level.
Germany has some of the highest social security costs in Europe at €9,200 per year but its employer-based health insurance system is more affordable than many other countries. Employers contribute 7% of payroll towards health insurance premiums while employees pay just 1% towards their coverage — a much more balanced split than what you'll find elsewhere in Europe (and indeed most places around the world). These are all a part of the cost of doing business in Europe.
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