Despite reductions in tax rates and social security contributions, the so-called “tax wedge” (the taxes and contributions deducted from gross wages) remains high in Greece, discouraging businesses from hiring staff or raising nominal salaries.

According to the latest report from the Organisation for Economic Co-operation and Development (OECD), an average employee in Greece with two children faces the fourth-highest tax wedge among OECD countries, defined as the total burden on labour costs from taxes and contributions, at 37.3%. For an unmarried worker, the burden is even higher, at 39.3%.

Only Costa Rica, Mexico and Turkey rank above Greece, and these three countries apply exactly the same tax and social security burden to both childless workers and those with families.

In practice, a 40-year-old employee on a monthly gross salary of 2,500 euros takes home 1,794.44 euros net after tax (371.31 euros) and contributions (334.25 euros) are deducted. At the same time, that employee costs the business 3,044.75 euros.

Suppose an employer decides to grant a 100 euro pay rise, bringing the gross salary to 2,600 euros. Deductions immediately rise too, with income tax climbing to 402.50 euros and contributions to 347.62 euros, while the cost to the business increases to 3,166.54 euros. The employee’s net pay would then be 1,849.88 euros, meaning that of the 100 euro rise, only 55.44 euros actually reaches their pocket. The rest goes to the state.

This is one of the main reasons large businesses are holding back on nominal pay rises and looking for alternative ways to reward staff outside the payroll, such as meal vouchers, fuel cards and bonuses, seeking a mutual benefit for both sides. Businesses avoid the non-wage costs, while employees escape deductions that would otherwise eat into their net income.

A convenient solution

The trend towards benefits in kind has already grown considerably, as it offers the most convenient solution for businesses reluctant to raise wages because of high social security contributions and taxation that, in many cases, effectively wipe out net pay rises. The spread of such benefits is turning what was once a corporate incentive tool into a significant part of overall pay policy.

Around one in four employees in Greece receives meal vouchers or food cards from their employer, either regularly or occasionally. Some 54.2% of businesses say they choose benefits in kind for their tax advantages. Meanwhile, 40% use them as a tool for staff retention, and 39.2% link them to strengthening corporate culture. These benefits are tax-free as long as their total value does not exceed 300 euros a year, a threshold the Hellenic Federation of Enterprises (SEV) has asked to be raised.

In early August, social partners sent a joint letter to the Minister of National Economy and Finance, requesting that the tax-free daily limit for meal benefits (meal vouchers) be raised from 6 to 10 euros, in order to tackle the rising cost of living. It should be noted that meal cards can currently reach up to 132 euros a month, with higher amounts subject to tax and social security contributions.

What employees lose

However, as trade unionists point out, if a large industrial company shifts towards benthe non-wage costs, while employees escape deductions that would otherwise eat into their net income, social security contributions, employees face difficulties building an adequate pension once their working life ends, while in the event of dismissal, compensation is calculated based on time in salaried employment rather than on vouchers received.

What benefits businesses offer

Benefits in kind include meal and fuel vouchers, mobile phone expenses, company cars, insurance schemes, remote working and “wellbeing and skills” benefits.

According to a 2026 survey by the recruitment firm Randstad, most businesses offer individual performance bonuses (76%), cover mobile phone costs (71%), provide private health insurance (68%), reimburse travel expenses (59%), offer meal vouchers or meal subsidies (58%), provide company cars (58%), parking spaces (45%), life insurance (38%), pension plans (19%) and holiday gift vouchers (7%).