One of the main barriers for early-on ramen-stage startups in many EU countries are compulsory "social, pension and health" insurance and minimal pay rules. Thankfully the health part is not a big component - usually around $100 per person per month if you pay yourself the minimum salary required by the law, but for example in Poland the minimum for other "insurances" is between $150 and $500 depending on if your startup qualifies for various discounts. You have to pay that per owner or employee regardless if you make any money or not.
I was 33-36; my boss was 30-33; the CEO turned 40. At time of IPO the average age was going down, but was still close to 30.
It wouldn't have been practical without the NHS; free healthcare enables older, more experienced people with families (and pre-existing health conditions) to take risks.
Non-health insurance is often about third-party cover—in other words, ensuring that if you accidentally injure someone else (e.g. your office catches fire, everyone in the building is rendered homeless), they aren't out of pocket. I see absolutely no reason why your desire to get rich quick should trump other folks' health and safety.
UK is very different in this regard. This is why many EU companies actually register in UK. You have no compulsory NI nor NHS payments. If you want you can pay yourself a salary of 1GBP per month if you're a director.
Contrast that with Poland (and many other EU countries) where no matter if your company makes money or not you owe the tax man between $300-600 per founder or employee.
I don't know where you get the idea there's no compulsory NI in the UK ...! The NHS is paid for out of income tax; unless you're wealthy going in, you're going to be paying yourself and your employees sooner or later.
Technically there aren't any compulsory NI contributions below a minimum threshold (~£8k per year). Obviously you're going to hit that if you're paying employees, but for companies with multiple directors/founders - they can pay themselves minimum salary + take dividends (which don't require NI contributions to be paid).
Above that threshold means you pay an extra ~13% in employer NI contributions on top of the gross salary of your employees.
assuming you do your homework, file for help programs etc., $250 a month would be high, and event then doesn't seem like such a high hurdle.
If you are that tight, shouldn't you take more time to build enough money before starting your business ? The actual "let's eat ramen for 2 years" mentality is usually unhealthy and you can't expect a gov. to encourage it.
On other angles, cutting these costs to 0 would also create so many loopholes for other businesses that should otherwise pay full price.
>If you are that tight, shouldn't you take more time to build enough money before starting your business ? The actual "let's eat ramen for 2 years" mentality is usually unhealthy and you can't expect a gov. to encourage it.
In general I'm inclined to agree, but contrast this with my experience almost 20 years ago. I was 18, I was doing some ad-hoc programming jobs for few local businesses that earned me some money occasionally. I made a mistake of deciding to register my starting up business as required by the law back then. I immediately had about $340 per month to pay for myself (that was a bit more than $340 is now). I budgeted for this and I had the money for about a year set aside. After two months of making around $500-$600 the majority of which I was loosing to pay for various insurances I decided to move to UK. There if I registered my business as a sole trader I would pay £2.5 per week, or nothing if I registered a limited company. Almost 20 years later I live in Poland but my company is still registered in UK. Income and corporate taxes are actually lower in Poland now (17% in PL vs 20% in UK for personal income tax on company dividends and 9% in PL vs 20% in UK on company profit), but I prefer to deal with the UK tax man where if I make a mistake or I need advice I'm treated like a customer, not a potential tax evader and criminal. This however, is another matter altogether, but it would definitely affect my decision whether to start my startup in PL. Also, I heard some localities are better than others in this regard.
>On other angles, cutting these costs to 0 would also create so many loopholes for other businesses that should otherwise pay full price.
That is the eternal excuse for compulsory payments. "What if employers force their employees to become self-employed and they force them to pay nothing for their pensions?" is the usual argument for minimum contribution legislation. My answer is, if the tax man does its job properly this is a non issue. In UK there is a piece of legislation called IR35, basically it allows the tax man to detect such arrangements where a de-facto employment is hidden behind false self-employment and apply employment taxes backdated to both parties for years. It works pretty well from my perspective.
In the US you're just paying higher salary instead. You really should be taking into account not an employee's salary, but total cost (some call it "gross gross salary") - gross salary + all other taxes (payroll, health & social insurance, etc.). Then you figure out that "cheap" EU countries aren't that much cheaper...
But minimum wage is just 9 Euros or something. Even student software developers get more. So this cannot possibly be a serious limit. Likewise, insurances etc. are 0.15% of the salary. Hardly an issue. And because the employees need to pay less themselves the salary can be lower. And in Europe it‘s lower anyway.
There ate different reasons, like risk taking, culture and the availability of venture capital.
Checking my payslip, health insurance is 10% of gross and pension is 25%. If you want to pay someone €5000/month you spend about €10,000/month in my country (there is also a 10% income tax and other smaller taxes).
In Spain it is essentially 30% of the salary (for standard salaries). Say the minimum is at least like 300€ (and you are not going to start a startup with 1000€ salaries.
Edit: that is: you have to pay the salary and, apart, 30% of that amount to the soc sec.
Depending on where in the US, even half is pushing it in most of Europe. For juniors, probably 20% of the cost of the US is more reasonable - especially in the 'startup land' of the Bay Area for example.
When my company asked me to move to the US headquarter I made some calculations: I am paying more in EU than in US for a smaller salary in EU before tax. This is with the company plan in US and standard rates in my country.
While I agree that salaries can be a pain, especially all the compulsory stuff like health care, social security and so on, for the employer a company that is unable to generate enough revenue or attract enough capital (loans, investment whatever) sounds more like a hobby to me than a viable enterprise. Sooner or later you will have to pay all that anyway, so better get used to it rigzjt of the bat.
Many successful businesses started up as a hobby. The issue with all the compulsory stuff is that you either do your hobby on the "black market" or you have to risk subsidising it.
At least these days some sort of sanity starts to be restored in Poland. New businesses can pay 50% of the minimum rate for first 2 years (if the founder didn't have any other business in last 5 years). And shockingly! there is even talk of possibly allowing people under 30 years of age to make their own decision whether they pay for the pension insurance or not. (Please bear in mind that the money paid for the pension insurance has little relevance to how much you'll actually receive in pension later.)
There is also another thing called non-registered business. Basically anyone can run a non-registered business if the income doesn't exceed approximately $300 per month. Profit is taxed as any other earnings on a personal annual tax return. It is in my opinion a really good thing that allows many hobby-stage businesses to avoid any paperwork whatsoever and still not feel like they operate illegally. Of course good luck trying to find any serious company that will use such a non-registered business as a subcontractor, but if you're in very early stages of starting up it is a very useful construct.
That's true and completely messed up. For Swedish citizens however that works for companies without collective agreements it's anarchy (no minimum wage and no insurance requirements outside the social security contribution).
