Europe’s diverse and complicated payroll climate

Posted on 3 January 2018 by IRIS FMP

Ahhh, Europe. Home of Paris, parliament, pubs, parachutes and…payroll. Really complicated payroll.

Recent research conducted alongside the CIPP (Chartered Institute of Payroll Professionals) has revealed that Europe is home to the most complex payroll systems in the world. When you delve into the 44 countries that make up the continent it quickly becomes evident that each one has its own unique way of doing things. Tax across the EU member states ranges from 9% in Malta to 49% in Sweden. Hungary has 8 allotted public holidays whereas Finland has 15. Greeks receive 20 days of paid annual leave whilst the French get 30. Not the simplest of scenarios for a non-European company with staff located there!

Perhaps one of the most complex discrepancies across payroll in Europe is that different countries deem there to be different numbers of months in a year. Well, not exactly, but here’s what we mean…

Rather than receiving one salary for each of the 12 months in the year, Spain has a fourteen month payroll. Staff either receive extra salaries in July and December (henceforth doubling their earnings in those months) or have the extra salaries divided throughout the year and paid out monthly alongside their normal earnings. This varies from company to company, meaning it’s not even a constant within Spain let alone in Europe!

Similarly, Italy has a thirteen month salary. This is given to staff in December and seen as somewhat of a Christmas bonus. Sounds simple enough, doesn’t it? Well, think again…some employees also receive a fourteenth salary in July, based on their industry, position or their length of service. And some workers in the petroleum and banking industries even receive fifteenth and sixteenth salaries! This doesn’t include the profit-related bonuses that some senior staff receive, which can be anything from 10 to 20% of their annual salary.

Belgium is no simpler. To begin with, it is a country of three official languages and every employment document must be drawn up in the appropriate language for the company’s region. Each employee must be registered in the correct language too; Dutch in the Flanders region, French in Wallonia and German in the East Cantons. Additionally, according to Belgium, there are 13.92 months in the year. The thirteenth month’s salary is received in December just like Spain and Italy. However, in May staff receive 92% of a month’s salary which covers their vacation time.

Don’t leave getting these things right to chance – your employees deserve to have confidence that their employer understands exactly when and what they get paid, and you deserve to rest assured that you are fully compliant in every single country you operate out of.

Need to know more about paying employees internationally. Read our Guide to International Payroll