Employment Costs in Spain, Portugal, and France

Calculating actual employment costs can be complex. Furthermore, managing personnel in multiple countries can make an already difficult process seem overwhelming. The true cost of employment is determined not only by discussions about wages but also by complicated calculations and hidden costs that are not evident on the payslip. The cost of compliance, mandatory insurance, taxes, and hidden fees must all be accounted for in order for proper payroll management to be maintained.

This blog will explore the true cost of employment in Spain, Portugal, and France. What are the essential elements of total labor costs? That's exactly what we will find out.

Cost of Employment in Spain

Spain is the second most visited European country in the world, after France. In Spain, the minimum benefits and pensions are fixed by law and are covered by the Social Security Scheme. The total mandatory minimum benefits and pensions (also called Social Security Contributions for an employer or Mandatory Employer Payroll Contributions) are equal to +/- 29.90% of the gross base salary.

Below is an illustration of the actual costs of employment for an employee with a gross monthly salary of €5.000 in Spain.

It is also good to understand that there are two kinds of personal income taxes in Spain: Spanish personal income tax (PIT) for Spanish residents and Spanish non-resident income tax (NRIT). Personal income tax (PIT) rates for the various salary ranges:

Please note tax liability may differ from one autonomous community to another. For non-resident income tax (NRIT), the general rate is 24%. For residents in other EU member states or European Economic Area (EEA) countries with an effective exchange of tax information, the rate is 19%. 

Learn more about hiring in Spain.

Cost of Employment in Portugal

In Portugal, employees receive mandatory 13th and 14th payments. These additional salary instalments are paid in June and December. The employee and the employer both need to contribute to the Portuguese social security system. For the employer, the costs are 26,5% of the employee's gross salary and for the employee, it is 11%.

Below is an illustration of the actual employment costs for an employee with a gross salary of €5.000 in Portugal.   

Income tax in Portugal is assessed on a progressive scale. The tax depends on the annual income of the employee. Personal income tax (PIT) rates for the various salary ranges:

Please note tax liability may differ from one autonomous community to another. Non-residents are taxed at a flat rate of 25% on their taxable income.

Learn more about hiring in Portugal.

Cost of Employment in France

France is the most visited European country. For foreign employers, France is also a popular country to expand to.

In France, employers must offer healthcare insurance coverage to all employees as well as social security, welfare, and pension coverage. Looking at these mandatory social contributions for an employer, it can be said that France is one of the, if not the, most expensive countries to employ in.

The total primary social security contribution in France can total up to 50% for employers and 28% for employees. On average, the social contribution of employers is 45%. The primary social security contributions include:

• Family Benefits
• Health and Sickness
• Social Charges
• Accident at Work
• Unemployment Benefit
• Main Pension
• Complementary Pension

Below is an illustration of the actual costs of employment for an employee with a gross monthly salary of €5.000 in France.

Learn more about hiring in France.

Conclusion

As this blog details, the basic employment costs and expenses can become very complex, especially for foreign employers who do not have experience in managing payroll in different countries. While this blog assumed the same salary across the three countries, it does not adjust for aspects such as the cost of living or industry and country norms.

Hence, international businesses need a trusted partner who can assist them in the successful management of payroll costs and taxes, to avoid massive financial and legal implications.

Professional Employer Organizations (PEOs) such as EuroDev European Business Development Group can provide invaluable assistance in navigating these complex requirements in a fully compliant manner which allows companies to focus their attention, time, and resources on the core of their business operations.

For further information, visit our HR Outsourcing services page.