A Fair Deal at Work Means Showing Where the Money Goes

Europe can protect workers while giving responsible employers a simpler, fairer and more transparent system

Workers’ rights and entrepreneurial freedom are too often presented as opposing causes. They are not. A productive economy needs employees who are secure, fairly paid and able to challenge abuse. It also needs people willing to invest, employ others and take commercial risks. Governments should protect both by enforcing firm labour standards, reducing unnecessary costs on employment and ensuring that company-funded contributions deliver visible benefits to workers.

The European debate is frequently reduced to a crude choice. One side demands lower taxes and fewer rules. The other fears that every concession to business will weaken wages, safety or social protection. This framing suits political campaigns, but it does little for an employee struggling with living costs or a small employer wondering whether the company can afford another member of staff.

Europe’s own legal principles point towards a more balanced settlement. The EU Charter of Fundamental Rights recognises both the freedom to conduct a business and workers’ rights to fair conditions, dignity, rest and protection against unjustified dismissal. Neither principle cancels the other.

Rights must remain the floor

No entrepreneur has a right to build a profitable company through unpaid wages, unsafe conditions, discrimination or disguised employment. The freedom to run a business does not include the freedom to transfer its ordinary costs to workers or the public.

That is why national governments must continue to guarantee minimum employment standards. These should include timely payment, safe workplaces, reasonable working hours, paid leave, protection against retaliation, collective representation and accessible remedies when rights are violated.

Enforcement matters as much as legislation. A right that takes several years and thousands of euros to defend is not an effective right. This is particularly important for migrant, seasonal and subcontracted workers, who can face serious obstacles when trying to recover unpaid wages in Europe.

Governments should therefore simplify complaint procedures, properly fund labour inspectorates and make lead companies responsible when abusive subcontracting arrangements are used to evade obligations. Honest employers also benefit from such enforcement because it prevents competitors from gaining an advantage through exploitation.

The problem with an opaque labour wedge

Protecting rights does not require governments to make employment unnecessarily expensive. Taxes and social contributions can create a wide gap between what a company pays and what a worker takes home.

The OECD’s 2026 taxation figures put the average tax wedge for a single worker earning the average wage at 35.1% of total labour costs in 2025. It exceeded 50% in Belgium and approached half of labour costs in Germany, France and Austria.

These figures do not mean that every contribution is wasted. Pensions, healthcare, unemployment protection and parental benefits are valuable parts of Europe’s social model. Workers would be less secure, and businesses would face greater social instability, without them.

But the figures expose a political problem. An employer may spend €4,000 on a position while the employee experiences only a fraction of that amount as disposable income or clearly identifiable protection. The worker feels underpaid. The employer feels overcharged. The state appears to both as an expensive intermediary.

The answer is not to dismantle social insurance. It is to make its value visible and its financing fairer.

Give every worker a transparent benefits account

Every employee should receive a clear annual statement showing the full cost of employment. It should distinguish gross wages, employer contributions, employee contributions and the benefits created by those payments.

Where possible, company-funded contributions should produce identifiable, portable entitlements. These could include pension credits, unemployment coverage, occupational injury protection and an individual training allowance that follows the worker between jobs, regions and forms of employment.

Portability would protect people without tying them permanently to one employer. It would also help entrepreneurs recruit workers who currently fear losing benefits when moving from a large company to a smaller business or start-up.

Not every euro can or should sit in an individual account. Healthcare, disability protection and unemployment insurance depend on pooling risk. A healthy young worker cannot know whether tomorrow will bring serious illness or redundancy. Solidarity is therefore not an administrative defect; it is the purpose of social insurance.

Nevertheless, governments should clearly separate contributions that create individual entitlements from general taxation used for wider public spending. Universal policies should increasingly be financed from broad, progressive revenue sources rather than quietly loaded onto the cost of hiring, particularly at lower wage levels.

National government must redesign the bargain

National authorities control most of the decisive instruments: labour law, taxation, social insurance and the justice system. They should reduce payroll charges on low and moderate wages while preserving the worker’s full benefit entitlement. Lost revenue can be recovered through a broader tax base, better collection and carefully designed taxation of economic rents, pollution, vacant property or other sources that do less direct harm to employment.

Such reform must not become another collection of temporary exemptions negotiated by the best-connected industries. It should be predictable, available to responsible businesses and designed especially carefully for micro and small enterprises.

Governments should also give employers procedural rights: clear rules, reasonable implementation periods, coordinated inspections and a timely avenue to appeal administrative decisions. Tax authorities should provide binding guidance instead of punishing firms for ambiguities that the authorities themselves failed to resolve.

At the same time, deliberate wage theft, sham self-employment and repeated safety violations should face credible sanctions. Simplicity for honest companies and strict accountability for abusive ones belong in the same system.

Regions should connect contributions to opportunity

Regional governments are well placed to align vocational education with real labour-market needs. They can bring employers, trade unions, colleges and employment services together to design apprenticeships and mid-career training that lead to recognised qualifications.

Regional development funding should reward companies that create stable employment, train workers and raise productivity. Public support should not subsidise businesses that distribute profits while offering insecure work or repeatedly replacing permanent employees with publicly funded trainees.

Regions can also operate one-stop services for recruitment, training and business support. A small employer should not have to navigate separate agencies to hire an apprentice, obtain a training grant and understand workplace obligations.

Local government can remove everyday obstacles

Municipalities may not set national payroll taxes, but they shape the conditions in which people work and businesses operate. Reliable transport, affordable childcare and attainable housing expand the pool of people able to accept employment. These services benefit workers directly while easing recruitment problems for employers.

Local authorities should coordinate permits and inspections, publish realistic processing times and offer a single point of contact for small firms. Public procurement should combine prompt payment with enforceable labour clauses. Municipalities cannot demand responsible employment from contractors while making those companies wait months for payment.

Local economic councils can give independent workers, small businesses and trade unions a regular voice alongside larger corporate interests. This would help governments identify problems before they become ideological battles.

A bargain built on visibility and trust

No policy can guarantee that everybody wins from every economic change. Companies fail, industries contract and governments must sometimes make difficult choices. A credible social settlement should not promise a world without conflict.

It can, however, ensure that the rules are understandable and that burdens correspond to benefits. Workers should know that employment brings decent pay, enforceable rights and protection that follows them throughout their careers. Entrepreneurs should know that hiring will not expose them to unpredictable charges, duplicated bureaucracy or unfair competition from businesses that ignore the law.

The central principle is straightforward: protect the worker, respect the risk taken by the entrepreneur and account publicly for every compulsory payment. When companies contribute towards labour costs, as much as reasonably possible should return to workers through wages, portable entitlements, training and genuine social insurance. What cannot be linked individually should be transparently justified as solidarity.

That is not a compromise between social justice and economic freedom. It is how a serious social market economy makes the two reinforce each other.