TPA Group report: Employment costs in Central and Eastern Europe in 2022
March 2023
TPA Group, in cooperation with HR consulting company Kienbaum, has prepared another edition of its report on personnel costs in Central and Eastern Europe. Austria remains the country with the highest employment costs, while dynamic changes are taking place in the remaining countries, with Poland ranking in the middle of the pack.
The report analyzed labor costs for 2022 compared to the previous year in Albania, Austria, Bulgaria, Croatia, Czech Republic, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia and Hungary. The countries taken into account were those in Central, Eastern and Southeastern Europe (referred to as the CEE/SEE region), where the consulting firm TPA Group has offices.
Net salaries, gross salaries and tax wedge in different occupational groups
The report examined average salaries by occupational group for 2022, but also the total costs borne by the employer (gross amount, employer's share in social security contributions, additional costs) and the net amount due to the employee. Salaries were analyzed across four groups of employees: managing directors, executives, office workers, blue-collar workers. Compared to the previous edition of the survey, in the latest report, employment costs for white-collar workers were expanded to include IT services, and for blue-collar workers to include those working in industrial production.
The report devotes considerable space to explaining the structure of the so-called tax wedge in each country in the region, i.e. the difference between the net salary received by the employee and the total cost to the employer. The highest burden on wages is found in Austria, but also in Slovenia and Poland, which may come as a surprise against the backdrop of the significantly smaller size of the tax wedge in the Czech Republic, for instance, not to mention the countries in the south of the region, where net wages account for a much higher share of labor costs.
The earlier in the EU the higher the cost
The report's findings confirm the general principle that employment costs vary significantly between industries. The report also revealed that countries outside the European Union have lower employment costs. Furthermore, countries that joined the EU earlier (Slovenia, Czech Republic, Slovakia, Poland, Hungary) tend to have higher costs than those that joined later (Romania, Bulgaria). An interesting exception is Croatia, where, despite its later accession to the EU, labor costs, and consequently salaries, have on average exceeded Polish and Hungarian levels for mid- and lower-level personnel.
The report also shows that labor costs are significantly lower in Southeastern Europe.
Management and executives most expensive in Austria and Czech Republic
The data presented in the study show that in the case of top executives, the expected average employee costs are traditionally highest in Austria. Moreover, they are about 65% higher than in the Czech Republic, which is second on the list. Poland, Slovenia and Slovakia, which ranked behind the Czech Republic, are also counted among the high-cost countries. Interestingly, in 2022 it was Poland that saw the largest increase in salaries in the region: by 23% for managing directors and by 17% for mid-level mangers (the Czech Republic, for example, saw only 7% in both cases).
In the case of executives (middle managers), the top countries with the highest costs are exactly the same as in the case of managers. In this case, however, the difference between first-ranked Austria and second-ranked Czech Republic is as high as 85%. The lowest labor costs in the region are traditionally reported in Albania (this group also includes Montenegro, Bulgaria and Serbia).
Strategic importance of labor costs
The report by TPA Group and Kienbaum points to major differences in employment costs between Central and Eastern European countries, which is an important competitive and decision-making factor in the process of locating foreign direct investment.
Employment costs are a key element of the bottom line of almost every company, and the dynamics of their changes is an important parameter of strategic importance. The next edition of the annual report by TPA Group and Kienbaum provides important insights into the levels and structure of labor costs of the CEE/SEE countries by different occupational groups. It provides important support in the process of comparative analysis of regional labor markets and the trends developing there.