In many European countries, employees receive more than their standard monthly salary. The concept of a 13th and even 14th salary is a common practice, providing workers with additional financial support at key times of the year. While not universal, these extra payments are often embedded in labor laws or negotiated through collective agreements, making them an important consideration for businesses operating in Europe.
What Are 13th and 14th Salaries?
Unlike standard monthly salaries, the 13th salary, often referred to as a Christmas bonus, is an extra payment typically made at the end of the year. This additional salary helps employees manage holiday expenses and is often required by law or through collective labor agreements. In countries such as Italy, Austria, Portugal, and Greece, this payment is mandatory, forming an essential part of an employee’s total annual compensation. Even in regions where it is not legally required, many employers choose to offer it as a goodwill gesture to boost employee satisfaction.
The 14th salary, while less common, provides an additional financial boost and is often paid during the summer to help cover vacation expenses. Greece and Portugal are examples of countries where employees receive both a 13th and 14th salary as part of their standard payroll structure. On the other hand, in countries like the UK, France, and the Netherlands, these extra payments are not legally mandated, though some companies may offer performance-based bonuses or other incentives to stay competitive in attracting talent.
Why Do These Extra Salaries Matter?
For employees, receiving a 13th and 14th salary provides greater financial stability and enhances their overall compensation package. These additional payments are especially valuable during high-cost periods, such as the holiday season or summer vacation.
For employers, offering these extra salaries can be a strategic tool for talent acquisition and retention. In markets where these payments are standard, failing to provide them could put companies at a disadvantage when competing for top talent. Even in countries where they are not mandatory, offering similar financial incentives can improve employee satisfaction and loyalty.
However, these extra salaries also come with financial and compliance responsibilities. Businesses must factor them into their payroll planning to ensure they meet legal requirements in countries where they are mandatory. Failing to comply with labor laws regarding these payments can result in penalties and reputational damage, making it essential for companies to have a clear and compliant payroll strategy when hiring in Europe.
Key Considerations
Successfully navigating these salary structures requires a deep understanding of European labor laws and payroll regulations. Since these extra payments vary by country, businesses must ensure their payroll policies align with both local legal requirements and industry standards.
Some key factors companies should consider include:
- Allocating funds for additional payments within payroll budget constraints: Employers can structure compensation in a way that accommodates these extra salaries without significantly impacting overall payroll costs. Understanding the available options and aligning them with local regulations ensures both compliance and financial stability.
- Staying informed about legal and contractual obligations: Employers should stay up-to-date on local labor laws and collective agreements to ensure compliance.
- Providing competitive compensation: In countries where 13th and 14th salaries are not required, companies may need to offer alternative incentives, such as performance-based bonuses, to remain attractive to employees.
Need Expert Guidance? EuroDev Can Help
Managing payroll across multiple European countries can be complex, especially when factoring in varying salary structures, labor laws, and compliance requirements. At EuroDev, we specialize in helping international businesses expand and operate seamlessly in Europe, ensuring they meet all payroll obligations while optimizing employee compensation.
We are the first call you should make if you're looking to navigate European labor laws while ensuring payroll compliance.
Contact EuroDev today to learn how our payroll and legal expertise can support your business across Europe, or explore the rest of our HR Outsourcing services.
