Built on thousands of years of history, Greece is one of the most developed economies in eastern Europe. Standing as a gateway between Europe and the Middle East, and a member state of the European Union, its geographical and political positioning is excellent for a prospective multinational business looking at expanding there.
Of course, no conversation about business in Greece would be complete without mentioning its severe recession that started in 2009. Officially the longest recession of any advanced economy in the world, and necessitating three bailouts to keep the economy propped up, Greece took a financial hammer blow that deeply affected the entire nation. But the green shoots of recovery are starting to emerge.
Greece’s GDP in 2019 was around $210 billion: around 30% down on its pre-recession peak but still an improvement on recent years. Its unemployment rate, as high as 28% at one stage, has steadily fallen and dropped below 15% in February 2020. And at the time of writing, the effect of COVID-19 on its population of around 11 million has been minimal, and this may strengthen the country’s hand in the post-pandemic business world.
Nonetheless, the deep scars of Greece’s financial woes mean its educated workforce can be employed relatively cheaply. Average wages are still around 20% less than they were in 2012, and are 43% lower than those in Italy, its neighbor across the Ionian Sea. As a result, now is an excellent time to consider expanding into Greece, but it’s important to understand the key employment and payroll requirements before you start. This guide covers the basics around Greek payroll:
The first steps of registering a business in Greece is to check with the Chamber of Commerce that your chosen name is available, and then to draw up your Articles of Association to be notarized. These articles should then be delivered to the National Printing Office so that they can be published in the Greek National Gazette. Setting up a business bank account in Greece is relatively straightforward and shouldn’t take more than a few business days as long as paperwork is complete, although non-EU companies will need to deposit a minimum of €60,000 (approximately £54,000; $67,500). It's recommended that large companies do business in person with well-known bank branches.
Greek employment law was reformed in May 2019. Prior to that, Greek companies could terminate contracts at any time without giving a reason, and many Greek companies took advantage of this to avoid paying severance to employees with less than 12 months of service. However, this loophole has now been closed and employers must now have a valid reason to dismiss employees, whether they pay statutory severance or not.
Probationary periods in Greece generally last for 12 months on open-ended contracts. For fixed-term contracts, these should be determined prior to the start of employment. Employers are not required to provide written contracts to employees upon hiring, though they are highly encouraged to do so. Using fixed-term contracts for permanent work is prohibited in Greece.
The standard working week in Greece is 40 hours, with no more than ten hours in any one day. Greek workers can choose to add a further five hours to this each week, attracting a 25% premium on their normal pay rate. Any work over and above 45 hours each week is classed as overtime, paid with a 50% premium over a maximum of 120 hours per year. If this limit is breached, then any further work is paid with a 75% premium.
Compensation & Severance
After a long period of stagnation, the national minimum wage in Greece was increased in June 2019 to €758.30 per month (approx. £685, $850). Greek workers are also entitled to bonuses through the year which correspond to an extra two months’ salary: a full month for Christmas, half a month for Easter and half a month for vacation.
Severance pay varies significantly depending on an employee’s length of service. Starting at one month’s salary for service between two months and a year, it gradually increases up to six months’ salary for ten years of service. Thereafter, it increases by one month’s salary per year, up to a maximum of two years’ salary for those who have served 28 years or more. However, these figures are halved if due notice is served for the termination.
Tax & Withholding Requirements
In 2019, Greece cut its corporate tax rate from 28% to 24%, a move that increases the attractiveness of the country to foreign businesses and investors.
As is the case in many countries, personal income is taxed on a progressive scale. Employers are required to deduct taxes from the employee paycheck and distribute them to the appropriate tax offices. The first €10,000 of an employee’s annual earnings is taxed at 9%, with further bands of 22%, 28% and 36% introduced for each following €10,000 (approx. £9000; $11,250) band. All earnings above €40,000 (approx. £36,000; $45,000) per year are taxed at the highest rate of 44%.
In addition to these, Greek income is also subject to a solidarity tax to help mitigate the effects of the economic crisis. The rates for these are being gradually reduced over time: as of 2020, the threshold for paying solidarity tax is earnings over €30,000 a year (approx. £27,000; $33,750) and the first band is 2%. Higher rates apply to higher earners.
Social security contributions total 20% of an employee’s income. Two-thirds of this is picked up by the employer, while the employee covers the remaining third. A further 7.1% must be contributed to cover health insurance (4.55% by the employer, 2.55% by the employee).
Holiday and Leave Considerations
Greek paid leave allowance increased according to length of service. For employees that work five-day weeks, the entitlement starts at 20 days in the first year, receiving additional days after certain years of service have been reached. The highest entitlement is 25 days for an employee with at least ten year’s service. These allowances are increased pro-rata for employees who work six days a week rather than five. All Greek employees are also entitled to paid leave on the 12 days of public holidays each year.
Maternity leave entitlement is 17 weeks - eight before the birth and nine after it - paid at 100% of salary. After this, a six-month period of ‘special leave’ may be taken, paid at the national minimum wage. Both these types of leave are funded by Greece’s social insurance body (IKA) and its Manpower Employment Organization (OAED). Paternity leave is two working days at the time of birth, paid by the employer. There is also an entitlement to up to four months of unpaid parental leave per child for each parent, which can be taken up until a child turns six.
Sick leave entitles workers to 50% of normal pay for the first three days of illness, paid by the employer. After this, the Greek social insurance system takes over.
Despite its recent economic turmoil, Greece is an excellent place for foreign enterprises to do business. However, as this guide illustrates, many of the employment and payroll rules for workers in Greece change according to an employee’s length of service. Keeping on top of this can be tricky, especially if you plan to employ a significant headcount in Greece. But a global payroll partner can help you handle all your requirements, and ensure you can easily adjust to any further legislative changes in the future.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.