How much will an employee cost a company in 2026?

In summary: An employee costs the company far more than their gross salary. In addition to the 14 monthly payments per year, there are the company’s social security contributions (23.75%), the meal allowance, occupational accident insurance, occupational health services and training. For a gross salary of €1,500, the annual cost is around €28,700, approximately €2,390 per month, or 1.37 times the annual salary.

What is included in the cost

14 monthly salaries per year

The monthly salary is paid 12 times a year, plus a holiday allowance and a Christmas bonus, each equal to one month’s salary (Articles 263 and 264 of the Labour Code). These allowances may be paid in twelfths by mutual agreement, but the annual cost remains the same. The minimum wage in 2026 is 920 €.

Company social security (TSU)

The company pays 23,75% on remuneration, including holiday and Christmas bonuses. The employee pays a further 11%, which is deducted from their gross salary and does not represent an additional cost to the company. Managers who receive remuneration are deducted at the same rate: 23.75% and 11%.

There are reductions: the permanent recruitment of young people seeking their first job and the long-term unemployed may entitle the employer to a reduction of 50% or a temporary exemption from the company’s TSU (Decree-Law No. 72/2017). Workers with disabilities are subject to a rate of 11.9%.

Meal allowance

It is not required by law, but it is common practice and is often mandatory under the sector’s collective agreement. In 2026, it is exempt from income tax and social security contributions up to €6.15 per day paid in cash, or 10,46 € in the form of a card or meal vouchers. Any amount exceeding these limits is taxed as salary. When paid via a card, for around 22 days a month and 11 months a year, the annual tax-free allowance per employee amounts to €2,500.

Workers’ compensation insurance

Compulsory for all employees (Law No. 98/2009). The premium depends on the insurer and the risk associated with the activity: in offices, it is usually less than 1% of earnings; in the construction sector, it may exceed 5%.

Health and safety at work

The company must provide occupational health and safety services (Law No. 102/2009), which are usually contracted out to an external company for an annual fee per employee.

Training

Every worker is entitled to 40 hours of training per year (Article 131 of the Labour Code). Unworked hours are carried over and, at the end of the contract, are paid as time off in lieu.

Compensation funds

The Labour Compensation Fund (FCT) has been abolished. The Labour Compensation Guarantee Fund (FGCT), at a rate of 0.075%, has been suspended until the end of 2026. In 2026, therefore, there will be no contributions to these funds.

Example: a gross salary of €1,500

Full-time employee, meal allowance of €10.20 per day paid via a card (22 days, 11 months) and occupational accident insurance 1%:

Occupational health and training add to this figure, depending on the provider.

On the minimum wage (€920), for wages and social security contributions alone: 14 × €920 × 1.2375 = 15 939 € per year, before meal allowances and insurance.

More examples

Minimum wage, all-inclusive

An employee on the minimum wage of €920, with a meal allowance of €6.15 per day paid in cash (22 days, 11 months) and insurance under code 1%:

A salary of €2,500 gross

A salary of €35,000 (14 × €2,500), social security contributions of €8,312.50, a meal allowance paid via a card of €2,468.40 and insurance of €374.68: €46,155.58 per year, around €3,846 a month.

Hire staff with a reduction in the TSU

A young person looking for their first job, hired on a permanent contract with a gross salary of €1,000 and a 50% reduction in the company’s TSU (11.875%):

• with the reduction: 14 × 1,000 € × 1.11875 = 15 662,50 €;
• without any reduction: 14 × 1,000 € × 1.2375 = 17,325.00 €;
• savings: €1,662.50 per year, in wages and social security contributions alone.

Part-time

A part-time worker, working 20 hours a week, on half the minimum wage (€460): 14 × €460 × 1.2375 = 7 969,50 € per year in wages and social security contributions.

Meal allowance above the limit

A company pays €12 per day via a card. The tax-free allowance is €10.46, so €1.54 per day counts as wages: €1.54 × 242 days = €372.68 per year. On this excess amount, the company pays €88.51 in social security contributions, and the employee pays 11% and income tax.

Calculate the cost of a worker

Cost to the company and take-home pay

From the employee’s perspective, Social Security contributions (11%) and income tax are deducted from the gross salary. On a salary of €1,500, there is a significant difference between what the company pays and what the employee actually takes home. To work out the net amount, use the net pay calculator.

The ‘IRS Jovem’ scheme reduces income tax for employees aged 35 and under, but does not affect the cost to the employer. It may, however, be a point to raise during salary negotiations: for the same cost to the employer, the young employee receives a higher take-home pay. See How does the IRS Jovem scheme work?.

Ways to pay more without it costing more

• Meal allowance paid via a card up to €10.46 per day: tax-free for the employee and no TSU for the employer.
• Health insurance and other social benefits provided to all workers: these are subject to favourable tax treatment, subject to certain conditions.
• Daily subsistence allowances for actual travel expenses, within the legal limits: these do not constitute the employee’s income, but are subject to separate taxation at a rate of 5% if they are not invoiced to clients.

Example: Increasing the salary by €100 gross costs the company €100 × 14 × 1.2375 = €1,732.50 per year, and the employee receives well under €100 net per month, after 11% and income tax. Switching the meal allowance from €6.15 in cash to €10.46 on a card costs the company €1,043.02 per year (€4.31 × 242 days), and the employee receives this amount in full, tax-free.

These amounts must correspond to actual expenses and be paid to everyone on an equal basis. If misused, the tax authorities will reclassify them as wages.

Frequently asked questions

Is the cost of an employee deductible for corporation tax purposes?

Yes. Wages, National Insurance, meal allowances, insurance and training are business expenses and reduce taxable profit. See our guide on IRC.

Does a part-time worker cost proportionally less?

Yes. Wages and the TSU are calculated on a pro rata basis according to the number of hours worked. Insurance and occupational health costs are not always calculated this way: they often have a minimum charge per person.

What if the employee leaves?

On leaving, employees are paid for any accrued but unused holiday entitlement, pro-rata payments and, in certain cases, compensation. For this purpose, there is the contract termination compensation calculator.

The role of Serro & Andrade

We handle payroll processing, Social Security and tax returns, and calculate the costs prior to recruitment, taking into account any recruitment incentives to which the company may be entitled. Find out more about the payroll processing or get in touch with us.

Figures for 2026: Code of Contributory Schemes, Labour Code, Ministerial Order No. 51-B/2026/1 (meal allowance) and Decree-Law No. 115/2023 (compensation funds).