The Most Expensive Countries to Hire In—and How EOR Helps Reduce Costs

Hiring top talent often means looking beyond borders — but not all countries are equally affordable when it comes to employment. In some markets, high salaries are only the beginning. Employers must also account for payroll taxes, social contributions, mandatory benefits, severance obligations, compliance costs, and legal overhead, all of which can significantly increase the true cost of hiring.

For companies expanding internationally, these hidden costs can quickly add up, making certain countries some of the most expensive places in the world to hire employees. Without a clear understanding of local employment regulations, businesses risk overspending, miscalculating budgets, or facing unexpected liabilities.

An Employer of Record (EOR) helps companies manage and reduce these costs by providing a compliant, efficient employment model. By handling payroll, taxes, benefits, and legal requirements locally — without the need to establish a foreign entity — an EOR allows businesses to hire in high-cost countries more strategically and cost-effectively.

This article explores which countries are the most expensive to hire in, what drives those costs, and how an EOR helps companies reduce expenses while staying compliant.

TL;DR

Some countries are significantly more expensive to hire in due to high wages, payroll taxes, mandatory benefits, and strict labor laws. These costs often go beyond base salary and can surprise companies expanding internationally. An Employer of Record (EOR) helps reduce hiring costs by eliminating the need for local entity setup, optimizing payroll and benefits compliance, and minimizing legal and administrative overhead. With an EOR, companies can hire in expensive markets more efficiently and predictably.

What Makes a Country Expensive to Hire In?

The true cost of hiring an employee goes far beyond salary. In many countries, employers are legally required to cover additional expenses that can increase total employment costs by 20% to 50% or more. Understanding these cost drivers is critical when evaluating international hiring decisions.

High Base Salaries and Wage Expectations

In competitive labor markets, high living costs and strong worker protections drive salaries upward. Employers often need to offer premium compensation to attract and retain talent, especially in sectors like technology, finance, and engineering.

These salary expectations are typically non-negotiable and form the foundation of high hiring costs.

Employer Payroll Taxes and Social Contributions

Many countries require employers to pay significant payroll taxes and social contributions in addition to employee wages. These may include:

• Pension and retirement contributions
• Healthcare and insurance programs
• Unemployment and disability funds

In some countries, employer contributions can add a substantial percentage on top of gross salary.

Mandatory Benefits and Statutory Leave

Certain benefits are legally required and must be fully funded or partially subsidized by employers. These often include:

• Paid annual leave and public holidays
• Sick leave and parental leave
• Health insurance or supplemental coverage

Extended leave entitlements can increase costs indirectly by reducing productive working time.

Strict Employment Protection Laws

Countries with strong labor protections often impose:

• Long notice periods
• Mandatory severance payments
• Just-cause termination requirements

These rules increase the long-term financial commitment of each hire and make workforce adjustments more expensive.

Compliance, Legal, and Administrative Overhead

Hiring without local infrastructure requires legal advice, payroll providers, accountants, and HR support in each country. These indirect costs can significantly increase the total cost of employment, especially when managing multiple hires or markets.

Currency and Cross-Border Payment Costs

Paying employees in foreign currencies can introduce:

• Exchange rate fluctuations
• International transfer fees
• Reconciliation and reporting challenges

These costs are often overlooked but add up over time.

The Most Expensive Countries to Hire Employees In

While hiring costs vary by role and industry, certain countries consistently rank among the most expensive places to employ workers due to high wages, employer taxes, mandatory benefits, and strict labor protections. Below are some of the costliest markets and what makes hiring there particularly expensive.

Switzerland

Switzerland is one of the most expensive countries in the world for employment.

• High average salaries across all skilled roles
• Strong currency that increases costs for foreign employers
• Mandatory pension and social insurance contributions
• Strict employment standards and termination protections

Even a single hire can represent a major long-term financial commitment.

United States

While flexible compared to some European countries, the U.S. remains costly due to:

• High salaries in competitive markets
• Employer-paid healthcare costs
• State-specific payroll taxes and regulations
• Legal exposure related to employment disputes

Healthcare alone can significantly increase total compensation costs.

Germany

Germany combines strong labor protections with high employer contributions.

• Substantial social security and pension payments
• Mandatory health insurance contributions
• Long notice periods and regulated termination processes
• Works council requirements in some cases

Employer costs can add a significant percentage on top of gross salary.

France

France is known for high employment-related taxes and protections.

• Employer social contributions are among the highest globally
• Extensive statutory leave and employee benefits
• Strict termination and severance requirements
• Heavy compliance and reporting obligations

These factors make long-term employment particularly expensive.

United Kingdom

The UK presents a mix of cost drivers:

• Competitive salaries in major cities
• Employer national insurance contributions
• Statutory pension auto-enrollment
• Increasing regulatory complexity

While more flexible than some EU countries, costs still add up quickly.

Canada

Canada’s employment costs are driven by:

• High salaries in tech and professional services
• Mandatory employer contributions to public programs
• Provincial labor law variations
• Strong employee protections

Multi-province hiring increases administrative and compliance costs.

Australia

Australia combines high wages with strict labor laws.

• One of the highest minimum wages globally
• Mandatory superannuation contributions
• Robust employee protections and leave entitlements
• Strong enforcement by labor authorities

Hiring in Australia often requires careful cost planning.

How an Employer of Record Helps Reduce Hiring Costs in Expensive Countries

Hiring in high-cost countries doesn’t have to mean excessive overhead, legal complexity, or long-term financial commitment. An Employer of Record (EOR) helps companies reduce and control costs by providing a compliant employment structure without the need for local infrastructure or internal legal teams.

Instead of absorbing every direct and indirect expense of international hiring, companies leverage the EOR’s existing framework to operate more efficiently.

Eliminating the Cost of Local Entity Setup

Setting up a legal entity in a foreign country can be extremely expensive and time-consuming. Costs often include:

• Legal registration and incorporation fees
• Accounting and tax advisory services
• Ongoing compliance and reporting expenses
• Local HR and payroll staff

An EOR removes this requirement entirely, allowing companies to hire employees without upfront entity costs or long-term commitments.

Reducing Legal and Compliance Overhead

Maintaining compliance internally often requires hiring local legal counsel, payroll providers, and tax advisors. An EOR centralizes these functions, reducing:

• Legal consultation costs
• Compliance management expenses
• Administrative overhead

This is especially valuable in countries with complex labor laws and high regulatory enforcement.

Predictable and Transparent Employment Costs

EOR services typically operate on a predictable pricing model, allowing companies to:

• Forecast employment costs accurately
• Avoid surprise expenses related to compliance or penalties
• Budget effectively across multiple countries

This transparency is critical when hiring in high-cost markets.

Optimizing Payroll and Benefits Management

EORs manage payroll and benefits efficiently by leveraging local expertise and established systems. This helps companies:

• Avoid overpaying due to miscalculations
• Ensure benefits meet — but don’t exceed — statutory requirements
• Reduce payroll processing errors

Proper optimization prevents unnecessary cost inflation.

Lowering Termination and Exit Risk

In expensive labor markets, termination costs can be significant due to severance, notice periods, and legal procedures. An EOR ensures:

• Terminations follow legal requirements
• Severance is calculated accurately
• Risk of disputes or penalties is minimized

This reduces unexpected financial exposure when workforce changes are necessary.

Supporting Market Testing Without Long-Term Cost Commitments

An EOR allows companies to hire in expensive countries without committing to permanent infrastructure. This makes it easier to:

• Test new markets
• Scale teams gradually
• Exit compliantly if business priorities change

This flexibility helps control long-term costs while maintaining compliance.

Final Thoughts: Hire in High-Cost Countries Without High Risk or Overhead

Hiring in the world’s most expensive countries can unlock access to exceptional talent — but it often comes with hidden costs, legal complexity, and long-term financial risk. High salaries, employer taxes, mandatory benefits, and strict labor laws can quickly push hiring budgets beyond expectations.

An Employer of Record gives companies a smarter way to hire in these markets. By removing the need for local entity setup, reducing legal and administrative overhead, and ensuring compliant payroll and benefits management, an EOR helps control costs without sacrificing compliance or employee experience.

For companies expanding internationally, the right EOR partner turns expensive hiring markets into strategic opportunities — not financial liabilities.

Ready to Reduce Hiring Costs in High-Cost Markets?

If your business is planning to hire in expensive countries or already manages an international workforce, now is the time to optimize your approach.

With Toku’s Global Employer of Record service, you can:

• Hire employees in high-cost countries without local entities
• Reduce legal, compliance, and administrative expenses
• Maintain predictable and transparent employment costs
• Scale global teams efficiently and compliantly

👉 Explore Toku’s Employer of Record solution and start hiring smarter in high-cost markets.

Frequently Asked Questions (FAQs)

Why are some countries more expensive to hire in than others?

Hiring costs vary by country due to differences in salary levels, employer payroll taxes, mandatory benefits, statutory leave, and labor law protections. In some countries, these costs can significantly increase total employment expenses beyond base salary.

Does salary represent the full cost of hiring an employee internationally?

No. Salary is only one part of the total cost. Employers must also consider payroll taxes, social contributions, benefits, compliance costs, severance obligations, and administrative overhead, which can add a substantial percentage to overall hiring costs.

How can an Employer of Record help reduce hiring costs?

An Employer of Record reduces costs by eliminating the need for local entity setup, centralizing payroll and compliance, minimizing legal overhead, and providing predictable employment pricing. This makes hiring in expensive countries more efficient and manageable.

Is an EOR more cost-effective than setting up a local entity?

In most cases, yes — especially for small teams or market testing. Entity setup involves legal, accounting, tax, and ongoing compliance costs, while an EOR provides a ready-to-use employment structure with lower upfront and operational expenses.

Can an EOR help control long-term employment costs?

Yes. An EOR helps companies forecast employment expenses accurately, comply with local requirements, and avoid unexpected penalties or legal costs that can inflate long-term hiring budgets.

Does using an EOR affect employee compensation or benefits?

No. Employees hired through an EOR receive locally compliant compensation and benefits. The EOR ensures statutory requirements are met while avoiding unnecessary overpayment or misaligned benefits structures.

Is an EOR suitable for hiring in high-salary markets like the U.S. or Europe?

Yes. EORs are commonly used to hire in high-cost regions, allowing companies to manage payroll, benefits, and compliance efficiently without establishing local infrastructure.

Can an EOR help reduce termination and severance costs?

An EOR ensures terminations follow local labor laws, preventing overpayment, disputes, and penalties. This reduces unexpected costs associated with non-compliant workforce changes.

Is an EOR a short-term or long-term solution for high-cost markets?

Both. Companies often use EORs to test expensive markets or support long-term distributed teams while maintaining cost control and compliance.

How does Toku’s Employer of Record service help reduce hiring costs?

Toku’s Global EOR service manages employment contracts, payroll, taxes, benefits, and compliance across countries, helping companies hire in expensive markets without the cost and complexity of local entity setup.