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UK employment costs rocket

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The cost of employment in the UK is 40% more than in the US; analysts say the findings could put off US investors.

Employment costs including national average pay, social security and other mandatory and typical voluntary benefits including pension, healthcare and disability benefits have risen so much in Europe that it is now four times more expensive to employ someone in Western Europe than in the East.

While the UK is the fifth most expensive country within the EU, the highest employment costs are to be found in Belgium, Sweden and Germany, where higher social security taxes raise costs. While the cheapest is Latvia and Lithunia.

Survey authors, Mercer Human Resource Consulting say it is no surprise therefore that more companies are now moving their operations to Eastern Europe where employment costs are more affordable.

Mark Sullivan of Mercer said a wider concern was turning US investors away: “With the strength of the pound and Euro against the dollar, there are concerns about whether US companies will continue to invest in the EU. Organisations that do invest are likely to favour Eastern European countries.”

Pay and benefits in the UK now average £31,700 a year and with average pay settlements now breaking the 3% barrier averaging at around 3.3%; analysts are concerned that the high costs of employment will damage the UK’s competitiveness.

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2 Responses

  1. Response from Mercer – Survey authors
    Thanks for your comments, Mark.

    Having relayed them to the survey authors, their response is as follows:

    “This survey provides a comparison of employment costs in Europe, highlighting the trends and differences between countries.

    “Employment costs include both wages and other typical costs including benefits and their inclusion was intentional. Reference to the US was included as an interesting comparison to set the results in a wider context. If you would have any further questions please contact us at mailto:mercer.pressoffice@mercer.com”

  2. Misleading Figures?
    This article confuses a direct comparison of wage levels (on a cash basis) with a comparison of typical on-costs (to include employee benefits and social costs).

    Also, it initially makes comparisons between the US and the UK, and then goes on to discuss investment in Eastern Europe. It left me completely confused.

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Annie Hayes

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