Lavoro Europa Morning Future
Guiding Investigation 24 May May 2019 1301 24 May 2019

Rules and labour costs in Europe: benchmarking for elections

Wages, tax burden and dismissal regulations vary greatly from country to country, highlighting a wide gap especially between Northern and Eastern Europe

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It is easy to say "Union". Despite the Eurozone and the strong trade ties between the 28 EU countries, the rules and costs of the labour market in Europe are very different from one country to another.

The first element of inequality is economic by nature. As far as labour costs are concerned, the data for 2016 tells us that the average hourly cost was 25.40 euros within the Union, 4 euros less than the average of the Euro Zone. The average, however, does not reflect the breadth of the range: in Bulgaria an hour's work costs the company €4.40, in Denmark €42. In the middle are Belgium (39), France (36), Germany (33), Italy (11th out of 28, average cost: about 29 euros per hour) and gradually all the others, with the Baltic countries and Romania close to the Bulgarian minimum.

It should be noted, however, that the impact of non-wage costs (the so-called tax wedge) varies greatly, with France (33.2% of the hourly wage cost) paying the highest percentage of all in this type of charge. In this ranking Italy is in fifth place, with an average of 27.4%, while the lowest incidence is recorded in Malta (6.6%). It is clear, therefore, how the choice of where to set up, for any multinational that chooses to establish itself in Europe, is affected.

The average cost of one hour's work in the EU is €25.40: the highest record is in Denmark (42), the lowest in Bulgaria (4.40)

The same internal differences are true when it comes to average salaries. According to OECD data on average annual wages, in the 28 state European Union, the ranges go from a maximum of 63,062 dollars in Luxembourg to 22,576 dollars in Hungary. In Italy the figure is 36,658 dollars. But it is an average, which is also to be compared to the cost of living. It is therefore useful to also have a look at where the greatest presence of low-income workers is concentrated. In this case, Latvia is in last position (25.5%) together with Romania (24.4%), with Sweden in first place (2.6%). In Italy the percentage is 9.4%.

Europe also appears to be divided in terms of the minimum wages set by law. Almost all EU countries guarantee a minimum wage for their workers, except Austria, Cyprus, Denmark, Finland, Sweden and Italy.

The 22 Member States that have introduced it can be divided into three groups Eastern countries, with a minimum salary of less than 500 euros; Southern countries between 500 and 1,000 euros; Western and Northern countries, with a minimum salary of more than 1,000 euros. It ranges from 235 euros in Bulgaria to 1,999 euros in Luxembourg. That is to say, the minimum salary in Luxembourg is nine times larger than in Bulgaria.

The 22 Member States that have introduced the minimum wage show huge differences: Luxembourg is nine times higher than Bulgaria

That is the way it is with regard to the numbers. Comparative analyses also cover labour market rules.

What changes a lot is the weekly working hours for each country. In Italy we generally have 40 hours per week spread over five or six days, although by law it can reach a maximum of 48 hours, just like in Spain who also has 40 hours spread over 5 days. In France, on the other hand, for the last 20 years or so, weekly working hours have been reduced to 35 hours, above which overtime begins (at least 10% more). In the UK, there is also an 'Italian style' 48-hour limit, but the average is set at 17 weeks, so there is nothing to prevent hours being accumulated over a period and the load being reduced at another time, provided the average is respected.

In Germany the weekly worktime is 35 hours, which goes down again in Norway (33) and especially in Holland, where you can spread 29 hours over 4 days.

A legal minimum wage has been introduced in 22 out of 28 countries, a measure not yet adopted in Italy

But the moving labour market of recent years has led many countries to introduce structural reforms. In Italy we had the Jobs Act, which among other things abolished Article 18, ending the obligation to reinstate for dismissals for economic reasons, as well as introducing the increasing protections contract.

In France, too, things have changed a lot: Emmanuel Macron has focused on a regime through which companies can more easily derogate from collective agreements, reinforcing mobility (removing limits on renewals of fixed-term contracts) and changing the rules on dismissals as well. Whereas before a company could only dismiss if it had global level problems, the dismissal can now also be justified by a productivity crisis limited only to plants in France.

From this perspective, the rules are stricter in Germany: for a dismissal to be 'justified and lawful', the employer must prove that there are reasons relating to the person or conduct of the worker or that there are 'urgent economic needs for the enterprise which are not compatible with the continuation of the employment relationship'. And this has to be approved by the workers council. "Justified grounds" are necessary also in the United Kingdom, where the company must act "reasonably and without unequal treatment". As always in the case of common law, however, it is the law that does much of the work, with judges having wide discretion on whether to reinstate.

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