Employer of Record (EOR) Greece

Employment Contracts in Greece

Employment contracts in Greece are governed by specific labor laws that ensure the rights and responsibilities of both employers and employees are upheld. The legal framework includes multiple provisions designed to protect employment security, employee benefits, and fair working conditions.

Dependent Employment Contracts

A dependent employment contract is characterized by a relationship of personal dependence. Under Greek law, employees working under such contracts must adhere to the employer’s instructions and control. This contract type is required for applying many protective labor law provisions, like mandatory salary and working conditions. Greek labor law mandates that the existence of such a contract necessitates employer compliance with set legal standards, including specified wages, work hours, location, and the provision of necessary work equipment.

Employment Contract Types

• Open-Ended Contracts: These have no fixed duration, continuing indefinitely until terminated by either party. Termination terms are regulated by Law 2112/1920, which requires severance pay unless specific exceptions apply.
• Fixed-Term Contracts: Fixed-term contracts automatically expire when their agreed-upon period ends. However, continuous renewal of these contracts may lead to reclassification as open-ended contracts if they exceed three years or have more than three renewals. Law 2639/1998, as updated by Law 3846/2010, presumes an employment contract to be dependent labor when an individual works exclusively for one employer for nine consecutive months.
• Project and Independent Services Contracts: Contracts for specific projects or independent services lack the dependence characteristic of an employment contract, with contractors working independently and without direct employer supervision. They are not covered by standard labor protections for dependent employees.

Probationary Period

For open-ended contracts, a probationary period of up to 12 months is permitted, as per Law 3899/2010. During this period, the employer may terminate the contract without notice or severance.

Employer’s Managerial Rights and Limitations

The employer’s right to manage encompasses the authority to organize and operate their business and to determine employment terms, provided these do not contravene labor laws or contractual terms. The law (Article 281, Greek Civil Code) restricts this right from being exercised abusively, requiring good faith and consideration of the employee’s personal circumstances, such as family needs or mobility limitations.

Misclassification and Circumvention

In economic challenges, it’s not uncommon for dependent contracts to be misclassified to save on labor costs, bypassing insurance contributions (EFKA, IKA) and avoiding severance payments. Law 2639/1998, updated by Law 3846/2010, presumes a dependent employment relationship when work is performed primarily for one employer for a period exceeding nine months, countering potential circumventions.

Legal Recourse for Employees

Employees have the right to assert the true nature of their employment, especially in cases of misclassified contracts. Greek courts assess contract character based on criteria like regular working hours, employer instructions, and dependency, regardless of the contract title.

Working Hours

Article 58 of Law 4808/2021 (Government Gazette A’ 101) amended Article 4 of Law 2874/2000, establishing the legal framework for working hours in Greece. Under this law, the standard weekly working hours are set at 45 for a five-day work week and 48 for a six-day work week. Following the introduction of the five-day work week, the legal daily limit was defined as 9 hours, while for the six-day work week, it remained at 8 hours, as stipulated in various legal documents including Article 6 of the EGSSE (26-2-1975), Law 2269/1920, and further clarified by Decision No. Pagou 119/97 and Circular No. 64597/03-09-2021.

Recently, the government has introduced a new optional six-day work schedule under Law 5053/2023. This initiative is voluntary for companies to implement and aims to stimulate economic recovery in Greece, which is still recovering from the effects of Europe’s most severe financial crisis in recent decades.

Probation Period

When entering into an indefinite employment contract, employers may establish a probationary period lasting up to six months. During this time, the contract or employment relationship is treated as a trial phase, allowing both parties to evaluate the fit of the employment arrangement.

This provision is often intended to give employers the opportunity to assess the employee’s skills and compatibility with the workplace, while also providing employees a chance to gauge their suitability for the position.

13th Month Salary

In Greece, the 13th month salary is a legally mandated benefit in the private sector. Typically, this extra salary is paid in two parts: half is distributed during the Christmas season, while the remaining amount is divided and paid out at Easter and during the summer months. This arrangement is designed to provide employees with additional financial support during key periods of the year.

Termination, Severance Pay and Notice Period

In Greece, the termination of indefinite-term employment contracts can occur in two primary forms:

• Regular Termination (with Notice): This process is specifically applicable to white-collar employees.
• Irregular Termination (without Notice): This form does not necessitate any advance notification.

The notice period for regular termination is determined by the employee’s length of service with their employer, as outlined in Law No. 3863/2010 (Article 74, paragraph 2 B):

• No notice required for employment lasting up to 12 months
• 1 month notice for 1 to 2 years of service
• 2 months notice for 2 to 5 years of service
• 3 months notice for 5 to 10 years of service
• 4 months notice for employment exceeding 10 years

Employers who issue the appropriate written notice are also responsible for providing the dismissed employee with half of the severance pay that would typically be granted in cases of termination without notice.

Severance Pay in Greece

Under Greek law, specifically Law No. 2112/1920 and Law No. 3198/1955, severance pay is mandated for the validity of dismissals, applicable to both those made with and without notice.

For dismissals with notice, the severance amount is reduced by 50%. The calculation follows this formula: the last month’s gross salary for full-time employment is multiplied by the number of years the employee has worked for the same employer. Additionally, in cases of termination due to full retirement, a reduced severance amount of 40% to 50% applies, along with a cap for high earners.

Treatment Based on Length of Service as of 12 November 2012

Employees with Less Than 17 Years of Service

For employees with less than 17 years of service as of 12 November 2012, severance pay is capped at a maximum of 16 years of service. This translates to a maximum severance payment of 12 months’ gross salary, regardless of the total years worked at the time of termination.

Employees with More Than 17 Years of Service

Employees with more than 17 years of service as of 12 November 2012 receive an additional 1 month’s gross salary for each year of service beyond 17 years. For these employees, their length of service is considered frozen as of this date, meaning that any additional years of service after 12 November 2012 do not impact the severance calculation.

Employees vs Independent Contractors

In Greece, the distinction between employees and independent contractors hinges on the nature of the working relationship. An employee operates under a dependent service agreement, which stipulates that services will be rendered in exchange for a salary. This arrangement is characterized by a significant level of dependence, as the employer has the authority to issue binding commands regarding how, when, and where the services are performed. Additionally, the employer is responsible for monitoring the employee’s compliance with these directives.

Conversely, an independent contractor provides services autonomously, free from any employer control. They are not obligated to follow specific instructions or directives. There is no formal statutory checklist to differentiate between dependent employment and freelance services; rather, this classification is determined by courts on a case-by-case basis. Judges evaluate the specific terms and conditions of the work, considering the type and nature of the tasks involved.

Misclassifying a worker can expose an employer to significant risks, including administrative penalties and potential claims arising from a terminated employment relationship. Proper classification is crucial to mitigate these legal and financial liabilities.

Social Security in Greece

Social security contributions in Greece are required on both salary and benefits—whether in cash or kind—provided by employers to their employees. However, specific extraordinary benefits of a social nature, such as marriage and birth gifts, are exempt from these contributions. The applicable social security contributions depend on the specific fund to which the employee is registered.

Starting January 1, 2023, the primary social security fund (EFKA) withholds contributions at a rate of 13.87% from employees, while employers contribute 22.29%. For 2024, the monthly cap on social security contributions for EFKA is set at €7,373.53, an increase from €7,126.94 in 2023 .

Payroll in Greece

• Minimum Wage: In Greece, the minimum wage is set at €830.00 for employees.
• Payroll Cycle: The payroll cycle typically operates on a monthly basis. Employers are required to make salary payments on the same date each month, ensuring that payments are completed no later than the last working day of that month.
• Overtime Compensation: According to Article 74(2) of Law 3863/2010, any work performed beyond 45 hours per week for a five-day work schedule, or over 48 hours for a six-day schedule, is classified as overtime. Overtime work is subject to specific legal requirements and must be compensated at an increased rate of 40% above the employee’s standard hourly wage.

Mercans’ payroll capabilities

• Payroll Cycle: Mercans ensures seamless payroll processing, enabling businesses to pay employees and contractors in the local currency. Our payroll cycle is designed to be efficient and compliant with Greek regulations, ensuring timely payments that align with local practices.
• Payroll Setup, Processing, and Administration: At Mercans, we offer comprehensive payroll setup, processing, and administration services tailored to the unique requirements of businesses operating in Greece. Our team manages every aspect of payroll with meticulous attention to detail, ensuring accuracy and compliance with local laws. This allows you to focus on your core business operations without the worry of payroll management.
• Statutory Filings and Payments: Navigating the regulatory landscape in Greece can be complex. Mercans simplifies this process by handling all necessary statutory filings and payments on your behalf. Our dedicated team ensures that your business remains compliant with all legal obligations, delivering peace of mind through timely and accurate submissions.

Personal Income Tax in Greece

In Greece, individual income tax is levied on all individuals earning income within the country, irrespective of their nationality or permanent residency status. Permanent residents are liable to pay taxes on their worldwide income.

Taxation of Benefits in Kind

Benefits in kind provided to employees are generally subject to payroll withholding taxes (WHT). However, since January 1, 2015, due to challenges in determining the taxable value of these benefits at the time of receipt, they are not subject to immediate withholding. Instead, the value of these benefits is aggregated with the employee’s overall employment income and taxed during the annual income tax assessment.

Personal Income Tax Rates

As of January 1, 2013, personal income tax rates in Greece vary depending on the income source, including employment, pensions, and rental income. The legislation that came into effect on May 8, 2016, introduced significant reforms in individual income taxation as part of a broader pension reform initiative.

Tax Scale for Employment Income, Pensions, and Business Profits

The income tax scale for employment income, pensions, and business profits is as follows:

Rental Income Taxation

New tax rates and a broader tax base for rental income were also established. The tax scale for rental income is as follows:

Incentives for Building Upgrades

There is an incentive for individuals upgrading their buildings for energy efficiency, functionality, and aesthetics, which applies to expenditures not included in prior upgrade programs. Specifically, taxpayers can receive a 40% reduction on income tax for qualifying expenses incurred between January 1, 2020, and December 31, 2024.

Greece Employee Hiring Cost

Employing individuals in Greece entails various employer costs, including social security contributions, income tax withholding, and mandatory benefits. Here’s a breakdown of the employer costs for an employee with a gross annual salary of €100,000:

Social Security Contributions

In Greece, employers are required to contribute to social security programs, which provide benefits such as health insurance, pensions, and unemployment insurance. For an employee with a gross annual salary of €100,000, the total annual employer cost for social security contributions is approximately €28,290. This figure includes contributions to the main social security fund, EFKA (Unified Social Security Fund) .

Income Tax Withholding

Income tax in Greece is progressive, with rates applied according to specific income brackets. For a gross annual salary of €100,000, the income tax withholding can be summarized as follows:

• First €10,000: 9%
• Next €10,000: 22%
• Next €10,000: 28%
• Next €10,000: 36%
• Above €40,000: 44%

For a gross income of €100,000, the total income tax withholding would be approximately €41,900 .

Total Annual Cost

When combining social security contributions and income tax withholding, the total annual cost of employing an individual with a gross salary of €100,000 is estimated at around €70,190. This estimate does not account for additional expenses such as private pension contributions, health insurance, or bonuses, which could further increase the overall cost.

Employee Benefits in Greece

In Greece, the employee benefits landscape is designed to provide support and enhance the well-being of employees across various life events. Here’s an overview of the key benefits available to employees:

• Sickness Allowance (eEFKA): Employees are entitled to sickness allowances provided by the Unified Social Security Fund (eEFKA). This benefit ensures that employees receive financial support during periods of illness, reflecting the country’s commitment to social welfare.
• Parental Leave Allowance: Greece offers parental leave allowances to new parents, helping them balance work and family responsibilities. This includes both maternity and paternity leave, which is crucial for promoting family welfare.
• Book Purchase Vouchers: To encourage education and personal development, employees can access book purchase vouchers. This benefit is aimed at promoting literacy and continuous learning among employees.
• Spectacle Checks: Employees can receive checks to cover the cost of spectacles, reflecting the importance of eye health and vision correction in the workplace.
• Social Tourism Programs (STPs): The government offers various Social Tourism Programs aimed at making vacationing more accessible for employees. These programs provide financial support for travel and leisure activities, fostering a healthier work-life balance.
• Social Tourism Programs for eEFKA Pensioners: Former employees who are now pensioners can also benefit from tailored social tourism programs, enabling them to enjoy leisure activities post-retirement.
• Programs of a Public Interest Nature: These programs are designed to promote community involvement and public welfare, offering employees opportunities to engage in initiatives that benefit society.
• Maternity Benefits: In addition to parental leave, special maternity benefits are available for both employees and freelancers. This includes supplementary maternity benefits and special provisions to protect the rights of pregnant employees.
• Providers of Voucher Services: Employees can access various voucher services, including providers for book purchase vouchers and spectacle checks. These services enhance the accessibility of essential resources.
• Social Tourism Providers: A network of providers supports social tourism programs, ensuring that employees have access to affordable travel options, contributing to overall well-being.

Work Permit in Greece

Obtaining a work permit in Greece is a necessary step for foreign nationals wishing to work legally in the country. The process is regulated and requires several steps, including documentation and compliance with specific legal requirements.

Types of Work Permits

In Greece, work permits are primarily categorized based on the type of employment and the applicant’s nationality. The two main categories are:

• Work Permits for EU/EEA Citizens: Citizens from EU or EEA countries do not require a work permit to work in Greece. They can freely enter and work without the need for any additional authorization.
• Work Permits for Non-EU Citizens: Non-EU nationals must obtain a work permit before they can legally work in Greece. This process typically involves securing a job offer from a Greek employer who is willing to sponsor the application.

Application Process

The process of obtaining a work permit in Greece generally involves the following steps:

• Job Offer: Applicants must first secure a job offer from a Greek employer. The employer must be locally incorporated and licensed to hire foreign workers.
• Residence Permit Application: After receiving the job offer, the applicant can apply for a residence permit for employment purposes, which includes a work permit. This application is submitted to the local immigration office.
• Required Documentation:
  • Completed application form for a residence permit.
  • Valid passport (with at least two blank pages).
  • Employment contract with the Greek employer.
  • Proof of educational qualifications or relevant work experience.
  • Medical fitness certificate.
  • Criminal record check.
  • Health insurance coverage.
  • Local address proof and evidence of self-sufficiency.
• Processing Time: The processing time can vary, but applicants should allow several weeks to months for their applications to be processed. Upon approval, the applicant receives a work permit along with their residence permit.
• Validity and Renewal: Work permits are generally valid for two years, with the possibility of renewal. It is crucial to apply for renewal at least 60 days before the expiration date to avoid any legal issues.

Important Considerations

• Sector-Specific Work Permits: Certain sectors may have additional requirements or quotas for foreign workers, particularly in fields like healthcare, education, or technical professions.
• Language Proficiency: While not always mandatory, proficiency in Greek or English can enhance employment opportunities and may be required by some employers.
• Compliance with Labor Laws: Employers are responsible for ensuring that the working conditions comply with Greek labor laws, including salary standards and working hours.

EOR Solutions in Greece

Mercans provides efficient Employer of Record (EOR) solutions for businesses that have already identified their ideal candidates in Greece. Our services cover all aspects of the employee lifecycle, ensuring compliance with Greek labor laws and regulations.

• EOR + Recruitment: For companies seeking help with talent acquisition, our combined EOR and recruitment services offer a comprehensive solution. We leverage our extensive network and expertise to assist you in finding, onboarding, and retaining top talent, facilitating your entry into the Greek market.
• Visa Sponsorship and Global Mobility: Navigating the complexities of expatriate employment becomes easier with our visa sponsorship and global mobility services. We streamline the relocation process for your international workforce, ensuring adherence to Greek immigration and employment laws.
• AOR for Contractor Payments: Businesses facing challenges with contractor payments can utilize our Assistance on Record (AOR) services. We manage the intricacies of contractor payments, ensuring accuracy and compliance with local regulations.
• Converting Freelancers to Employees: Mercans supports the transition from independent contractors to permanent employees in Greece. Our expertise ensures a smooth conversion process while maintaining compliance with legal requirements.
• HCM Integration: Seamlessly integrate Mercans’ EOR services with your Human Capital Management (HCM) system in Greece for real-time data exchange, enhanced compliance, and cost-efficiency. Rely on our expertise for a unified, compliant, and efficient approach, improving your workforce management and payroll operations.