Deloitte survey shows Slovakia has lowest labour costs within EU

A new survey by the accounting and consultancy firm Deloitte has shown up a dramatic difference in pay packets between the old EU member states and the new ones of Central Europe. The survey took into account tax and social security costs and average pay and found Slovakia has the lowest labour costs in the European Union.

Photo: European Commission

We spoke to Dana Trezziova from the tax and legal department at Deloitte Czech Republic:

"The survey not only covered salary levels but also other expenses related to the total definition of labour costs like social security contributions payable by the employer, recruitment fees, redundancy payments, training expenses, or training needed by already skilled or less skilled labour."

The survey shows that Slovakia has the lowest labour costs. Could you tell us why?

"The social security contributions payable by employers is very low in the Slovak Republic not because of the rate but because of capping - the maximum limits from which the social security contributions are paid."

How much competition is there among post-communist Central Europe to attract international investors?

Photo: European Commission

"I would say there is very large competition and you can also see how the governments of those countries are trying to attract those investors using various ways. These include providing various investment incentives, establishing a very low corporate income tax rate, staring from 16 percent in Hungary and 19 percent in Slovakia and so on. So, yes, there is competition."

But the Czech Republic has 26 percent...

"Yes, it's one of the highest in the new EU countries. The Czech Republic is doing extremely well in offering investment incentives, providing a lot of support and assistance to foreign investors and I believe that one of the biggest advantages of the Czech Republic is offering a well skilled labour force."

Photo: European Commission

Low labour costs are surely attractive for companies but what exactly does it mean for workers?

"The workers or the labour force definitely benefit from the situation because they are being offered new jobs and they are offered to work in a new environment of multi-national companies and they are trained on the job in using new processes, products, and new ways of production."

The gap between Central Europe and the rest of the EU really is significant. How long do you think will it take before the gap is closed?

"It's hard to say. In 1989, I thought that it would take five or ten years to get to the same salary levels or a similar labour situation like in Western Europe. Fifteen years later, now that I'm not so naïve anymore, I think it will take at least another fifteen years. The old EU countries are definitely trying to support the new EU countries. You know that the European Union and the various funds are releasing extremely large sums of money to support the new EU countries. But if you compare the support to the need, the main focus would be that the new EU countries need to help themselves."