An employee in Spain contributes less to social security than the same profile in France, Germany and the United Kingdom

  • Seresco and SD Worx, two leading experts in payroll outsourcing and members of the biggest international alliance of payroll solutions, the Payroll Services Alliance, has analysed the payslip of managers in Spain, France, the United Kingdom and Germany, with gross annual pay of 60,000€ and data from their partners.
  • Among the main conclusions, the comparison highlights that the employee in France only pays their personal income tax once per year. Thus, each month they receive a higher net pay, up to 86% more than in Spain.
  • In the same scenario, employees in Spain have a larger number of deductions (8) than in Germany and the United Kingdom, which is surpassed only by the employee in France (15).

Understanding the payroll we receive each month is a somewhat complex task due to all the concepts that are included. Seresco, a Spanish leading payroll service company, and SD Worx, the leading international payroll provider, have analysed, in collaboration with its global payroll network, the Payroll Services Alliance (PSA), the payslip of an employee in different countries across Europe. The results have revealed key differences between countries.

To develop the comparison, Seresco and SD Worx under the Payroll Services Alliance have marked the same scenario for four countries (Spain, France, the United Kingdom and Germany): an employee in a management position, with a gross annual pay of 60.000€, which includes payment in kind for a car, restaurant tickets and medical insurance. For each of these countries, Seresco and the PSA have carried out real payslip simulations, with the following conclusions.

Gross pay:

  • The employee in Spain is the only one, along with the one in Germany, that receives two extra annual payments. In the UK and France, the employee receives 12 payments per year.
  • Therefore, the monthly gross pay is higher in Spain and Germany than in the UK and France (4.285,70€ in contrast to 5.000€).

Deductions:

  • The employee in Spain contributes less to social security, 6.35% over the basic pay. The total amount for social security (238.20€) is less than half that of the employee in the United Kingdom, and even less in Germany and France.
  • The employee in France is the only one that does not have a personal income tax in his monthly payslip. This deduction is applied once a year and changes the employee’s perception over his salary. Even though the gross pay is the same in all the countries, the employee in France receives a higher net pay each month. In fact, they make up to 86% more than the employee in Spain.
  • The payslip in Spain has thee second most deductions (8). Only France has more, with 15. Germany is far below, with six, followed by the UK, with five.
  • In Germany, the employee has an extra mandatory tax: Solidaritätszuschlag or solidarity tax. This is a deduction that was established after the German reunification and is still in force. The goal of this tax was to provide support to the old East German Länder (GDR) from the West German Länder (FRG).

Deductions for the employer:

  • In both Spain and France the employee can check the deductions for the employer in his payslip, thus knowing the cost that the company assumes for the employee. However, this is not shown in the UK, and in Germany the employer does not pay any takes for the employee. Instead, he collects the taxes from the employee and gives them to the tax authority.

Payment in kind:

  • The payslip in Spain is the only one in which the payment in kind (medical insurance and restaurant tickets) isn’t included in the total gross pay and, therefore, doesn’t count in the personal income tax and social security. However, the payment in kind for the car does count in the income tax.
  • The deduction for social security of the employee in France includes payment in kind for the car. He also pays an extra tax for restaurant tickets.
  • Medical insurance isn’t included as a payment in kind in the payroll of Germany and France, since it is part of the social security system.

Net pay:

  • Based on the same scenario, although he has more deductions, the employee in France gets the highest net pay each month, with 3.762,29€.
  • Germany, Spain and the UK fall behind with 2.107,97€ (Germany), 2.061,83€ (Spain) and £1.849,90 (UK). Spain and the UK get a similar net pay due to the currency exchange.

Global payroll management with local knowledge and expertise

For global companies or organisations with expatriate employees, managing and processing payrolls face an extra challenge: integrating different payroll systems according to the legislation in each country. Given this fact, companies often rely on a payroll internationalisation. This allows them to save costs and, above all, work on the added value tasks for the business.

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