ADVERTISEMENTHave you ever wondered how much the cost of employing someone varies across different parts of Europe? The answer is very wide. The maximum-to-minimum ratio is more than five times, showing the level of disparities.
So, where do employers face the highest and lowest labour costs across Europe? What factors contribute to these big differences?
In 2024, the hourly labour cost ranged from €10.6 in Bulgaria to €55.2 in Luxembourg among the EU countries according to Eurostat. The average estimated cost in the EU was €33.5.
Highest costs in Northern and Western Europe
The highest labour costs are concentrated in Northern and Western Europe, especially when Iceland and Norway are included alongside EU member states.
All five Nordic countries are above the EU average. Norway, Iceland, and Denmark rank among the top four, each with hourly labour costs exceeding €50.
Besides them, Belgium (€48.2), the Netherlands (€45.2), Austria (€44.5), France (€43.7), and Germany (€43.4) are also among the high-cost countries.
Lowest labour costs in Eastern Europe
Labour costs in the EU are lowest in Eastern Europe. Bulgaria (€10.6), Romania (€12.5), and Hungary (€14.1) have the lowest rates.
Southern Europe sees moderate costs. But there’s still a big gap compared to the North. Italy (€30.9), Spain (€25.5), Portugal (€18.2), and Greece (€16.7) fall into this group.
Dr. Agnieszka Piasna, senior researcher at the European Trade Union Institute (ETUI) stated that these persistent differences follow a very clear regional pattern, with Central and Eastern European (CEE) and Southern European countries having the lowest labour costs and wage levels.
Labour costs differences are smaller in PPS
Dr. Sotiria Theodoropoulou, head of European, economic, employment and social policies unit at ETUI, emphasised that price levels play a key role explaining labour cost disparities. “If costs are expressed in Purchasing Power Standards (PPS), the disparities in labour costs are more limited,” she said.
This can be seen in the data. The maximum-to-minimum ratio among EU countries drops to just over 2 times in PPS, compared to more than 5 times in euros.
The gap in labour costs narrows when measured in PPS. Among EU countries, hourly labour costs range from 19.1 in Bulgaria to 40.3 in Belgium. Norway tops the overall list with 40.7.
Since 2024 PPP conversion rates are not yet available, we used the 2023 rates for actual individual consumption.
Baltics and Balkans countries are still at the bottom but the gap is narrower than in nominal costs.
Labour costs refer to the expenses employers pay for employing workers. In addition to wages and salaries, they also include “non-wage” costs, which are mainly social contributions and employment-related taxes.
ADVERTISEMENTHow non-wage costs impact total labour costs?
The share of non-wage costs in total labour costs varies widely across Europe, ranging from just 5% in Bulgaria and Lithuania to 32% in France and Sweden. The EU average was 25% in 2024.
Dr. Theodoropoulou pointed out that these shares are “linked to the structure and philosophy of social security/insurance and the benefits it provides to citizens”.
Giulia De Lazzari, economist at the International Labour Organization (ILO), noted that in countries such as France and Sweden, the social protection system is designed to be universal and comprehensive, providing a wide range of benefits. They include longer and better-compensated periods of maternity, paternity, and sick leave, as well as more extensive unemployment insurance.
“A substantial share of these benefits is financed directly through employer contributions,” she said.
ADVERTISEMENTBesides the top countries, the share of non-wage costs are high in Austria, Italy and Spain. Eastern countries such as Romania and Bulgaria keep non-wage costs very low.
What drives the big differences in labour costs?
Giulia De Lazzari explained that non-wage costs are very significant in variations in labour costs. “Several additional factors play a significant role,” she added. They included:
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Economic structure and productivity: Higher productivity enables countries to sustain higher wages and thus higher hourly labour costs.
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Labour market institutions: The presence and strength of trade unions, the coverage and depth of collective bargaining agreements, and the level of statutory minimum wages significantly influence wages and, consequently, labour costs.
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Cost of Living and price levels: Labour costs are also partially correlated with the cost of living. Countries with higher consumer price levels generally exhibit higher nominal wages.
