The True Cost of Employment
Gross salary is just the starting point. Total employment cost includes employer contributions, benefits, and administrative overhead. The formula varies significantly by country.
Gross x 1.21
Germany Formula
Gross x 14/12 x 1.22
Austria Formula
Gross x 1.15
Switzerland Formula
Austria's 14-payment system (13th/14th salary) significantly increases base costs before employer contributions are even added.
Germany: Cost Breakdown
| Contribution | Rate | Annual Ceiling | Notes |
|---|---|---|---|
| Pension (Rentenversicherung) | 9.3% | EUR 90,600/yr | |
| Health Insurance | 7.3% | EUR 62,100/yr | Average rate |
| Unemployment | 1.3% | EUR 90,600/yr | |
| Long-term Care | 1.7% | EUR 62,100/yr | Higher for childless |
| Accident Insurance | ~1.3% | None | Varies by industry |
| Total | ~20-22% | - |
Example: EUR 60,000 gross salary x 1.21 = EUR 72,600 total annual cost
Contribution ceilings mean high earners have lower effective rates. Above EUR 90,600, no additional pension contributions apply.
Austria: Cost Breakdown
| Contribution | Rate | Notes |
|---|---|---|
| Pension | 12.55% | |
| Health Insurance | 3.78% | |
| Unemployment | 3.0% | |
| Accident Insurance (AUVA) | 1.1% | |
| IESG (Insolvency) | 0.2% | |
| Chamber Fees | ~0.4% | |
| Abfertigung (Severance Fund) | 1.53% | New system since 2003 |
| Base Total | ~22.5% | |
| 13th/14th Salary Impact | +16.67% | Two extra monthly payments |
| Effective Total | ~29-32% |
Example: EUR 50,000 monthly salary x 14 months = EUR 58,333 base, then x 1.225 contributions = ~EUR 71,500 total
Austria's 13th/14th salary adds 16.67% to base cost BEFORE contributions. This is the most common budgeting mistake for Austria.
Switzerland: Cost Breakdown
| Contribution | Rate | Notes |
|---|---|---|
| AHV/IV/EO (Social Security) | 5.3% | No ceiling |
| ALV (Unemployment) | 1.1% | Ceiling CHF 148,200 |
| BVG (Pension) | Variable | Age-dependent, typically 3-9% |
| UVG (Accident) | ~0.5% | Non-occupational |
| FAK (Family Allowances) | ~1.5% | Varies by canton |
| Total | ~13-17% | Lower rates than DE/AT |
Example: CHF 120,000 gross x 1.15 = CHF 138,000 total. Note: Swiss salaries are 30-50% higher than German equivalents.
Swiss contribution rates are the lowest in DACH, but higher gross salaries mean absolute costs exceed Germany for comparable roles.
Side-by-Side Comparison
| Cost Element | Germany | Austria | Switzerland |
|---|---|---|---|
| Gross Salary | EUR 60,000 | EUR 60,000 x 14 = EUR 70,000 | CHF 90,000 (equivalent role) |
| Employer Contributions | ~EUR 12,600 (21%) | ~EUR 15,750 (22.5% of 70K) | ~CHF 13,500 (15%) |
| Total Annual Cost | ~EUR 72,600 | ~EUR 85,750 | ~CHF 103,500 |
| Monthly Cost | ~EUR 6,050 | ~EUR 7,150 | ~CHF 8,625 |
EUR 72.6K
Germany Total
EUR 85.7K
Austria Total
CHF 103.5K
Switzerland Total
When comparing DACH costs, remember: Austria has 14 payments, and Switzerland roles command 30-50% salary premiums. Apples-to-apples comparisons require adjusting for these factors.
Entity Setup vs. EOR: True Cost Comparison
| Factor | Own Entity | EOR (Virmondo EOR) |
|---|---|---|
| Setup Time | 8-16 weeks | 3-5 days |
| Setup Cost | EUR 25-50K | €0 |
| Annual Admin | EUR 15-30K | Included |
| Compliance Risk | High (self-managed) | Shared with EOR |
| Exit Flexibility | Complex (liquidation) | 30-day notice |
| 3-Year Total (admin only) | EUR 70-140K | ~€108K (5 x €599 x 36) |
| Break-even Point | - | ~15-20 employees |
For teams under 15 employees, EOR is almost always more cost-effective. The break-even point depends on your specific situation. Virmondo EOR can model both scenarios for you.