.png){kind=logo}
Salary vs daily rate: the visible cost difference
The most common comparison is straightforward:
- a permanent employee is evaluated based on monthly or annual salary
- an external consultant is evaluated based on a daily or hourly rate
When viewed this way, consultants almost always seem more expensive. A consultant’s daily rate multiplied over a year can easily exceed an employee’s gross salary.
However, this approach compares two very different cost structures. While salary is only one component of an employee’s total cost, a consultant’s rate typically includes costs and risks that are handled separately for permanent staff.
The real cost of a permanent employee
Salary is only the starting point
A permanent employee’s gross salary is only one part of what a company actually pays. Beyond salary, companies typically cover employer-side costs such as social contributions, benefits, and other employment-related overheads. This is why comparing salary vs daily rate on its own often creates an incomplete picture.
Paid time that is not productive time
Permanent employees are paid regardless of whether they are actively producing output. This includes:
- vacation days
- public holidays
- sick leave
- training and internal meetings
While these elements are essential and expected, they still represent paid time without direct project output, which increases the effective cost per productive day.
Hiring, onboarding, and ramp-up
Recruiting a permanent employee comes with additional costs that are often underestimated:
- recruitment agency fees or internal hiring costs
- time spent by managers and teams on interviews
- onboarding and training
- reduced productivity during the first months
It is not uncommon for a new hire to take three to six months before reaching full productivity.
Long-term financial commitment and risk
A permanent employee represents a fixed, long-term cost. Even when workloads fluctuate, the cost remains the same. This can lead to:
- underutilization during slower periods
- restructuring or termination costs if priorities change
- limited flexibility to adjust skills quickly
From a financial perspective, this long-term commitment is one of the most significant hidden costs.
This becomes clearer when looking at actual labour cost data.
Reality check: labour costs go beyond salary (Eurostat)
A useful way to think about the full employer-side cost is hourly labour cost, which includes wages and salaries plus non-wage costs such as employers’ social contributions.
According to Eurostat’s Hourly labour costs figures for 2024, average hourly labour costs were €33.5 in the EU and €37.3 in the euro area, with large differences between countries, from €10.6/hour in Bulgaria up to €55.2/hour in Luxembourg (Belgium: €48.2/hour).
Eurostat also highlights that non-wage costs make up a meaningful share of total labour costs: 24.7% in the EU (and 25.5% in the euro area) on average, and much higher in some countries (e.g., France 32.2%, Sweden 31.6%).
Source: Eurostat
What this means in practice: employer contributions can materially change the true cost of an internal hire, depending on the country.
