Where Is It Cheaper to Hire Employees—in Europe or the U.S.? A New Study Compares Salaries and Employer Costs

The cost of an employee to an employer depends on more than just the salary. Social security contributions, taxes, and local wage levels can increase a company’s actual costs by tens of thousands of dollars a year. A new study by Payoneer compared hiring costs in six U.S. cities and six European capitals. Learn more about where it’s cheaper to hire employees today and how the picture changes when local wages are taken into account

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It is often believed that hiring employees in Europe is cheaper than in the U.S.. However, the actual cost of an employee is determined not only by their salary, but also by mandatory employer contributions, taxes, and local market wage levels.

These are precisely the factors analyzed by Payoneer in a new study, which compared employer costs across six U.S. and six European cities. Analysts assessed the total cost of employment, the amount an employee takes home, and median salaries for mid-level professionals. The results showed that there is no clear-cut answer to the question of where it is cheaper to hire staff: it all depends on the country, city, and calculation methodology.

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Where is it cheaper for an employer to hire employees—in the U.S. or Europe?

To compare the actual cost of hiring, Payoneer analysts modeled the same scenario for all cities: an employee receives a fixed annual salary of $75,000. The calculations included not only the salary but also mandatory employer contributions, which vary significantly by country. That is why the total cost of an employee to a company can be significantly higher than their salary.

The comparison showed that, among U.S. cities, it is cheapest for an employer to hire an employee in Nashville—$83,054 per year. Nearly identical costs were recorded in Washington, D.C. ($83,126), Chicago ($83,342), San Francisco ($83,383), and New York City ($83,763). Even the most expensive U.S. city in this group turned out to be cheaper than most European cities.

In Europe, the lowest total cost of employment was recorded in Dublin—$86,063. Next are London ($90,375), Berlin ($95,212), Madrid ($99,403), Amsterdam ($104,970), and Paris, where employers spend the most—$109,753 per year for the same salary of $75,000. Thus, the difference between Nashville and Paris exceeds $26,000 per employee each year.

Total cost of employing a worker with a $75,000 salary in the U.S. and Europe. Source: Payoneer, US vs Europe Employment Costs and Net Pay Compared.

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How much does an employee actually take home in different countries?

Employer costs are only one side of the story. It’s equally important to compare the amount the employee actually receives after taxes and mandatory contributions.

To this end, Payoneer also analyzed net income for the same annual salary of $75,000 in each of the cities studied.

The results showed that in most U.S. cities, employees keep a larger portion of their income. The highest net income was recorded in Nashville—$61,593 per year. Next were Seattle ($60,552), Chicago ($57,880), New York ($57,752), San Francisco ($57,397), and Washington, D.C. ($56,818).

In European cities, workers earn less due to higher tax rates and social security contributions. London ranked highest among European cities at $53,686. It is followed by Paris ($52,090), Dublin ($49,089), Amsterdam ($47,621), Madrid ($47,104), and Berlin, where $44,586 remains after all deductions.

The difference between the top cities in the study is significant: an employee in Nashville takes home approximately $17,000 more per year than a comparable professional in Berlin, even though the nominal salary in both cases is the same—$75,000. This demonstrates once again just how significantly the tax system and social security contributions affect employees’ real income.

An employee’s net annual income with a $75,000 salary in the U.S. and Europe. Source: Payoneer, US vs. Europe Employment Costs and Net Pay Compared.

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How does the picture change when local salaries are taken into account?

Comparing employees with a fixed salary of $75,000 allows us to assess the impact of taxes and social security contributions, but it does not reflect the actual situation in the labor market. Therefore, Payoneer conducted another analysis using the median salaries of marketing managers in each of the cities studied. The results turned out to be quite different.

The highest median salary was recorded in San Francisco—$106,599 per year. Next are New York ($95,819), Seattle ($90,473), Washington, D.C. ($88,549), Chicago ($86,552), and Nashville ($82,835). By comparison, this figure is significantly lower in European cities: $74,830 in Dublin, $73,525 in London, $68,021 in Amsterdam, $62,426 in Berlin, $61,326 in Paris, and just $58,122 in Madrid.

Median annual salary for a marketing manager in U.S. and European cities. Source: Payoneer, “US vs Europe Employment Costs and Net Pay Compared.”

When real salaries are taken into account, the picture changes significantly. While in the previous comparison nearly all U.S. cities were cheaper for employers, now four out of six European cities cost companies less than the most affordable U.S. city—Nashville. Madrid had the lowest total cost of employment—$76,929—while in San Francisco it reached $118,720 per year. This suggests that lower salary levels in many European countries often offset higher employer social security contributions.

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What do the study’s findings mean for international businesses?

The Payoneer study shows that when choosing a country to hire employees, it’s not enough to compare salary levels alone. An employer’s final costs depend on a combination of several factors: the size of social security contributions, the tax burden, local salaries, and the specifics of labor laws.

For companies expanding their international teams, this means that a market that appears cheaper at first glance will not always be the most cost-effective. For example, for the same salary of $75,000, an employer’s costs in the U.S. are lower than in Europe in most cases. However, once adjusted for real market salaries, many European cities become more competitive due to lower labor costs.

The study’s authors also note that when entering a new market, companies should consider not only direct personnel costs but also administrative requirements, tax regulations, local labor laws, and the complexity of maintaining HR records. It is precisely this comprehensive approach that allows for a more accurate assessment of the actual cost of hiring and helps avoid unforeseen expenses in the future.

Total cost of employment based on local market wages. Source: Payoneer, US vs Europe Employment Costs and Net Pay Compared.

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