This is how expensive work is: comparison of countries regarding charges & tax rates

05.10.2017
  • Austria is at the forefront regarding labour costs for companies
  • For employees, Slovenia and Croatia are the most expensive

How expensive is work(ing) in a cross-country comparison – for employees and employers? How does Austria compare with the countries of Central and South-Eastern Europe? Where are the ancillary wage costs for companies particularly high? And where do employees retain the highest net amount of their salary or wages, after deductions? A recent study conducted by the TPA advisory company provides answers to these questions.

The results of the TPA work cost study in CEE indicate

  • Austria is at the top of the list when it comes to ancillary wage costs for companies, especially in the case of high salaries. However, employers in Hungary, Romania, the Czech Republic and Slovakia are still higher on the list – depending on the size of the salary.
  • The net earnings of Austrian employees are comparatively low. Bulgaria, Serbia and Albania are the most lucrative countries in this regard.

An increasing number of Austrian companies are also deploying their employees outside of Austria. According to the EU Commission, in 2015, a total of 11.3 million EU citizens worked in another member state. For enterprises and employees, this means: the respective provisions in tax, social security and labour laws must be taken into account. The question of how the posting of employees to other countries affects the costs of employees for a company, and what the employees' take-home income or “bottom line” is, was the target of a comparative study by country recently conducted by the TPA tax advisory and auditing services company.

Burden of costs for employers and employees

The TPA experts compared the burden of cost in Austria with those in the following ten Central and South-Eastern European countries, in three “typical” salary classes, which correspond to the positions of an employee, as well as middle and senior management: Albania, Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia, and Slovenia.

With the exception of Albania and Serbia, all of these countries are part of the EU, and thus they fall within the scope of the EU social security legislation. A corresponding EU ordinance stipulates that only one state is entitled to social security payments on earnings. This country is usually the state in which the activity is performed. Usually, taxation also takes place in the country of employment.

Where do companies experience the greatest disadvantages?

Austria is the only one among the eleven countries in the study, which, in addition to the employer’s social security contributions, also requires ancillary wage costs to be paid by the employer – a total of app. 9% of the gross salary.

Romania, Slovenia and Hungary are countries that do not have a cap on social security contributions. The cost of personnel for employers increases proportionally to the gross salary, which is why Hungary and Romania are among those countries with the highest employer costs.

What is the net take-home income of employees from their gross earnings?

What is left after the deduction of social security and payroll tax, in the account?

Some countries have a “flat tax”, i.e. a uniform tax rate for natural persons – in Bulgaria and Serbia, this is only 10%. But: the tax base for income tax differs: In Bulgaria, the income tax is calculated like in Austria, by the taxable income; while in Serbia, the gross income is the basis.

In a nutshell: Austria is expensive, but offers a lot

The result of the TPA study, summarised:

  • Austria is among the countries with the highest ancillary wage costs, especially for manager salaries.
  • At a lower gross salary (“salaried income”), countries such as Hungary, Romania, the Czech Republic and Slovakia show higher, or similar high ancillary wage costs. On the other hand, Bulgaria, Albania or Serbia are clearly below Austria, when it comes to ancillary wage costs.

“In any case, it is worthwhile to take a careful look at these details, for the people who are sent, and those sending them, to work in other countries. Although the social security system in Austria is expensive, in most other countries there is no comparatively good system in the field of health insurance and pension benefits,” says Andrea Rieser.

The current study was conducted in the spring/summer of 2017, by TPA expert and tax consultant Mag. Andrea Rieser and Dr. Wolfgang Höfle, TPA partners and social security experts.

 

 

TPA Study: How expensive is work?

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