Employers in the UK have the lowest cost per employee per year anywhere in Western Europe, according to research by Towers Watson.
Its annual Global 50 remuneration planning report, which includes the latest pay and benefits information for 50 positions across 57 countries worldwide, found that the mandatory costs and taxes associated with employing people in each country shows the UK to be particularly favourable. France was found to have the highest costs for employers operating in Western Europe.
The amount employers are required to contribute in taxes and mandatory pension contributions for employees varies significantly across the major economies of Western Europe.
For a middle-ranking professional or junior manager earning £33,000 per year (approximately €40,000), the UK offers the lowest costs in the region at £3,940. The Netherlands and Germany rank second and third with costs of £5,250 and £6,200, respectively, while France levies the highest costs on employers at £14,200 per employee.
The research found the same trend for lower-earning employees in Western Europe, such as entry-level professionals earning £23,000 (approximately €28,000). The UK maintains the lowest financial costs for employers (£2,570) followed by the Netherlands, Germany and France, respectively, with the latter levying the equivalent of £9,995 per employee at this level.
For higher-salaried employees, such as middle managers earning £65,000 (approximately €80,000), the Netherlands and Spain offer the lowest costs in Western Europe, at £6,180 and £7,830, respectively. The UK and Germany are similar with £8,500 and £8,670, respectively, while France (£27,930) and Italy (£31,720) are the most costly.
The research found that China has the lowest costs to employers anywhere in the world across all three salary brackets. It found the United States to be more globally competitive than Western Europe, with consistently lower costs for employers.
The report also analysed the tax burden placed on employees at different income levels across the world. Within Western European, countries are more consistent with employee taxes than with employer costs.
For instance, an employee earning £33,000 gross in the UK will take home approximately the same as their equivalents in France, Germany, Spain, the Netherlands and Belgium, between £25,860 and £27,270 with the UK employee at the top end of that scale. The only significant difference within Western Europe is Italy, where higher-income taxes result in a lower net salary of £21,750 for this level.
The research also found that the UK also offers the most generous income-tax terms for entry-level professionals earning £23,000 (approximately €28,000), with deductions of £1,140, compared to the equivalent in Italy which of £6,515.
For higher-earning middle managers, the research found that the UK, Germany, Spain and the Netherlands are reasonably consistent with net salaries of between £46,680 and £42,375. Italians paid the highest taxes in this category, taking home £37,080, while French middle managers paid the lowest, enabling them to take home £50,220.
Darryl Davis, senior consultant in Towers Watson’s data service division, said: “The report shows that there is a big difference in costs for employers across Western Europe.
“It appears that the UK is among the most business-friendly countries in the region on the basis that the tax burden on employers is the most favourable.
“The differences in income-tax levels for employees in Western Europe are far less marked. Broadly speaking, mid-level employees in most countries face roughly the same level of deductions making Western Europe quite a level playing field for all employees.”
Mark Reid, managing director of talent and rewards, Europe, Middle East and Africa (EMEA) at Towers Watson, added: “Most European countries are looking at ways to stimulate growth and become more competitive, but there are significant differences in the level of taxes and levies on organisations.
“In a globally-mobile business environment these differences can influence where multinational organisations, wishing to retain a competitive edge, are located.
“Interestingly, while a country like the UK appears to be competitive within Europe, on a global basis it is less so with the US, Russia, China, Australia and Japan all placing lower costs on employers.”
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