“Labour Costs in Central and Southeast Europe as a Location Factor”

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The study entitled “Labour Costs as a Factor in Location Decisions” offers a comprehensive analysis of labour cost dynamics across twelve selected countries in Central and Southeast Europe. This study, now in its third edition, dives deep into labour costs, showing how important they are to making smart business decisions. Here are some key highlights of the study:

  1. Nearshoring Dynamics: the study reaffirms the significance of nearshoring for businesses, with labour costs as a critical consideration in location choice
  2. Country-specific Analysis: drawing on data from Albania, Bulgaria, Croatia, Hungary, Montenegro, Romania, Serbia, Slovakia, Slovenia, Czech Republic and Poland, the study provides an analysis of labour cost variations and trends across the region
  3. Industry Insights: the study provides an insightful examination of labour costs within the manufacturing sector for which Central and Southeast European countries have become preferred outsourcing destinations
  4. Gross and Net Salary Comparisons: by means of an in-depth analysis of gross salaries and net earnings, the study also shows the impact of tax structures and social security regulations on employee income after deductions

It is noteworthy that the rates of social security and income tax in Romania remain constant regardless of salary levels. Investors should be aware that the total labour cost for an employee is made up of 58% net remuneration and 42% salary taxes. This ratio remains fairly stable due to Romania’s flat income tax rate of 10%. Similarly, Bulgaria and Hungary also have flat income tax rates, of 10% and 15%, respectively, while other countries have progressive income tax rates ranging from 0 to 50%. Regulations differ from country to country. For instance, in some countries, social contributions do not reduce the taxable base for income tax calculations, whereas in other countries, such as Romania, social contributions are fully deductible.

Given that personnel costs are an important factor when deciding on a business location, we can conclude that Romania remains an attractive option among the countries of Central and Southeast Europe in terms of personnel costs. This translates to low net amounts for employees, which can sometimes cause staff shortages for employers. However, the flat tax on salaries ensures predictability when it comes to how total personnel costs are reflected in the budgets of Romanian companies.

We believe that this study is of significant value to businesses and investors seeking expansion or relocation opportunities in Central and Southeast Europe. By acquiring insights into labour cost dynamics and related factors, stakeholders will be able to make better informed strategic decisions to increase their competitiveness and efficiency in the region.

You can access the publication by clicking on the following link: Study: Labour Costs in Central and Southeast Europe as a Location Factor | www.tpa-group.ro

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