business establishment & outsourcing management consultants

Human resourcing

Legal framework of utilizing workforce

  • - Employment contract
  • - Freelancers / independent contractors
  • - labor leasing companies

With regard to the issue of the two alternative contracts, please note the following.

In the case of higher paid workers, whose specialisation justifies an exercise of a "liberal profession" under Greek tax law, we usually suggest the option of the "contract for the provision of independent services". This does not create an employer-employee relationship. It is a contract by which the "professional" performs his tasks for a specified period, and is paid by monthly instalments.


  • - The "employer" is not burdened with insurance contributions. These are the responsibility of the "professional". In this sense this option is cheaper for the "employer" (even up to 30%).
  • - No risk of potential liabilities with the Social Security.
  • - It can be very advantageous for the "professionals" from the point of view of taxation (if they justify expenses for the exercise of this profession these are deducted from their taxable income), and from the point of view of insurance contributions (this will depend on their present insurance status).
  • - The amount of time they shall be dedicating to the performance of their contractual duties is in theory flexible. A time-schedule may not be mentioned in the contract because in case of dispute a court may identify "disguised employment relationship". Because a time-schedule may not be strictly imposed, an end-result is described as the consideration for payment.

The difference between the two in the way the tax is withheld:

1. In the case of EMPLOYEES the employer is obliged to withhold all the tax after calculating the annual income of the employee.
2. In the other case (no 2) the professional issues a receipt (invoice) to the recipient of the services. In the receipt he mentions that "20% tax has been withheld". When the professional will submit his tax return he shall mention the tax withheld and the tax bill will be calculated on the remaining 15% that was not withheld plus any income he may have earned from other sources minus any expenses he has incurred in the exercise of his profession. These expenses, if they can be justified may significantly reduce the tax bill. V.A.T is also charged, but this is deductible.

The difference between the two with regard to insurance contributions

1. In the case of employees the income is subject to insurance contributions
- of the employer.
- of the employee.
The aggregate of both the above is approximately 47%
2. In the case of professionals the employer is not burdened with insurance contributions. These are the responsibility of the professional who will have to subscribe to an "insurance fund" depending on the class of his profession. If the professional in question is a US citizen and he is insured in the US it is worth investigating the possibility being exempted from having to pay additional insurance in Greece. This will reduce the gross figure drastically.

In order to receive $100.000 "net":

Greek legislation does not allow the employer to pay the tax of its employees. He must withhold it. So in order to calculate what we need to pay the employee gross, so that he gets the $100 grant net, we must do the following calculations.

The problem with this solution is that the insurance contributions must be calculated on the increased figure, which raises the bill considerably.

In order to get the 100.000 net, the gross figure in terms of income tax is approximately 152.000.

The insurance contributions are calculated on the 152.000 @ 47% i.e. approximately 71.440.


Income received after 1.1.2003 (LAW 3091 - 24.12.2002)


According to the provisions of article 4 of Law 2874/2000, Overtime is the hours worked above the statutory 40 hours per week.

The extra hours (above the 40) are compensated to the employee as follows:

1. "SUI GENERIS" OVERTIME : 41st to 43rd hour - the normal per hour compensation increased by 50%. The employer is entitled to these 3 hours and the employee is obliged to provide them if his employer so requests.
2. ORDINARY OVERTIME : 43rd hour up to 120 overtime hours per year - increased by 50%
3. any overtime worked above the limit of 120 overtime hours per year - increased by 75%

Overtime work is subject to conditions (e.g. notice to the Labour Authority, keeping of "overtime book"). Breach of those conditions renders the overtime work illegal and the employee becomes entitled to 250% increase instead of 50% & 75% as above.

Please note that overtime is paid at a rate of 50% on top of the hourly rate for hours 41-43 per week. The overtime above the 43 hours per week up to 120 hours per year is also paid at a rate of 50% on top of the hourly rate, the only difference being the formalities required for its approval. Any overtime above the 120 hours is paid at a rate of 0,75 on top of the hourly rate. Only the illegal overtime is paid at 150% on top of the hourly rate. Illegal overtime is the overtime that has not been declared to the authorities (as is our case until the first normal payroll which will take place at the end of August).


Where the employee is not at fault:

The above apply also in case of redundancy. Employees are listed among the preferred creditors of the employer.

The employees are not entitled to compensation if the quit voluntarily. If the employer fires an employee who is employed by a contract of definite term before the expiration of that term and without serious reason, he is bound to compensate the employee for the remaining salaries until expiration of the fix term.

Other case where the employee is not entitled to compensation

1. intentional breach by the employee of the employment contract.
2. crime commited by the employee, which has been reported to the judicial authorities by the employer.



If the work is provided by the employee on Sundays or public holidays he is entitled to a (per diem) increase of 75% . If the employee works overtime on Sundays or public holidays, the increase for overtime work (50% for ordinary & 75% for overtime above 120 hours per year) is calculated on the basis of the increased (by 75%) salary.


In the case of overtime work, the increase is calculated on the basis of the agreed salary even if this salary is above the statutory minimum. On the contrary, in case of work on Sundays or public holidays the increase is calculated on the statutory minimum salary applicable in the relevant category / class of employment.


  • - where the employee is paid per month.
    The monthly salary is divided by 25 days in order to find the per diem. The per diem figure is multiplied by 6 in order to find the weekly salary. The weekly salary is divided by 40 (hours).
  • - where the employee is paid per diem.
    The per diem is multiplied by 6 to get the weekly salary. The weekly salary is divided by 40.

An employee is paid €50 per diem but the statutory minimum for this type of employment is €40. He is requested to work on a Sunday (or public holiday) + 2 hours above his normal work-hours (overtime). Provided that the overtime is legal, and provided that the "ordinary overtime" rate of 50% applies, the employee will be remunerated as follows:

  • A. €50
  • B. work on Sunday or public holiday 75% on €40 i.e. €30
  • C. The 2 extra hours. The per hour of the specific employee is € 7,5 (after applying the above mentioned method of calculation). He worked for 2 hours, so 2 x €7,5 = €15. + "work on Sundays" rate of 75% on the statutory per diem of the specific category of employment i.e. 75% on €6 (apply blue method above). I.e. 2 hours x 6 x 75% = €9 Add the above figures 15 + 9 and apply the 50% rate for overtime. I.e. 24 x 50% = €12.

So for the 2 extra hours the employee will receive €36 (15 +9 +12)
If the overtime is worked on night hours, i.e. between 22.00 - 06.00 the overtime rate is applied on the statutory minimum increased by 25%.


In order to be entitled to holiday-leave an employee must be continuously be employed for 10 months. I.e. if you hire someone on the 1st of August 2003, he will be entitled to ask for holiday-leave on the 1st of June 2004.

Holidays are paid with the normal agreed salary. Sundays, public holidays, sick leave are not included in the holidays. If, for example an employee takes a holiday leave of 10 days and the 5th is a public holiday , he will come back to work on the 11th day.

If the employer is a business that runs 6 days per week the following apply:


If the employer is a business that operates 5 days per week the days of holiday-leave are 20, 21, 21, 22 accordingly. The other figures remain the same.

A holiday leave without pay may also be agreed between the parties. It is not a right or an obligation of either party. It may be agreed that the leave without pay is on top of the statutory holiday etc. It depends on the individual circumstances.


A holiday bonus is also obligatory by statute. This equals with 50% of the monthly salary or (if the employee is paid per diem) 13 x per diem .


Whether a worker is entitled to overtime pay or not does not depend on the specialization but only on his/ her employment status. Therefore, if one is employed under a fixed term employment contract then he is entitled to overtime pay. The main exception to the right of overtime applies to managerial employees.

In order to class an employee as manager the classification or the wording followed by his/her contract of employment is of little significance. Similarly, it is not sufficient that an employee has been assigned the management of a specific limited post in order to class him as a "manager". To be classed as a manager, one must have been assigned the task of general direction of the business's (employer's) affairs or the general direction of a significant part of it in combination with a supervisory role towards personnel in a way that he/she significantly influences the direction and the development of the business. He/she must act in the interests of the employer and often on the latter's behalf and he/she must be easily distinguished as against other employees. The total number of managers that may be employed by one employer (business) depends on the total number of employees, given that the exercise of control over the personnel is - according to the above - an important criterion for one's classification as manager. So, it is not possible to class many employees as managers, because as a matter of fact, not many of the employees in a company can satisfy the above conditions. It is true that the remuneration of managers is significantly higher than the other employees but that alone would not suffice without the satisfaction of the above conditions. Because it could be that one employee is so highly qualified and skilled to get very high salary but that alone does not constitute him a manager.

Even in the case where an employee has been characterized / named as "manager" by his contract of employment, and in reality he/she does exercise a managerial function, and his contract states that he is entitled to all rights of employees (including overtime pay), the employer is not entitled to deprive him of the overtime pay.

On the other hand, where an employee has been named "manager" by his contract, but in reality does not exercise a managerial function or does not satisfy the conditions mentioned above, he /she would be entitled to overtime pay even if his contract specifically mentions that he is not entitled.

Therefore, the most efficient way to avoid overtime pay is to apply, where possible, the solution of "CONTRACT FOR THE PROVISION OF INDEPENDENT SERVICES" and not a contract of employment.

Practical aspects of employment in Greece