As regards costs, die Zeit has recently published several articles contrasting how Germany and the Scandinavian countries finance social benefits. Germany finances these primarily through wage deductions and matching employer contributions, whereas Scandinavia pays for these through high personal income taxes and VAT rates. The result is that German social benefits represent a 42% surcharge on wages. Meanwhile, unemployment in Denmark and Sweden is running around 5.5%. "Ideas or the lack of them can cause disease." - Kurt Vonnegut
Without have the Die Zeit figures and an explanation avaiable I will have to give generalised answers. Taking the post at face value, if direct taxes on employemnt and the overhead caused by social provisions in Germany total 42%, what is the comparable figure for Denmark and what is included in the calculation? Or is the German figure 42% greater than the equivalent in Denmark - a rather different statement.
Apart from that you have missed two important factors. While tax on the employer is lower, taxes on the employee are higher to partly make up the funds necessary to pay for the social provisions. Indirect taxes (VAT) are also higher to provide the other part of the equation. The difference between the countries are listed here but if you look up the rates you will see Germans pay VAT at 7% on food and 16% for other goods and services compared to 25% for both in Denmark. The employee therefore pays far more for their living expenses and higher direct taxes from their pay packet. The implication of this is that to attain the same real buying power, the Danish worker would expect to be receive a higher basic rate of pay.
The extra VAT also affects the amount the business would receive from selling its services. For a simple comparison this is often referred to as a "purchase tax" when explaining it to Americans. As alluded to earlier, the tax is paid on all goods and servicess. Not explained is that the amount collected is offset by the amount already paid out. So if in Denmark you buy an item for 100 Euro and sell it for 300 Euro, you pay over 25% of the diffence of 200 Euro, hence "value added".
This is where the returns question comes back into play with your example. Programming is a high value added industry, if only because it is heavily dependent on labour costs. In either country you would have to pay VAT on a very high proportion of the final charge however the rate is much higher in Denamrk. So whereas in Denmark you might expect to hand over say 20% of the contract charge as VAT, in Germany it would be nearer 12%.
So in summation, as an employer your would hand over more in direct taxes on the wages you pay in Germany but in Denmark you would have to pay your employees more and hand over more in indirect tazes. While you are deciding, you may want to employ someone in a Baltic state or Slovakia where there are still much lower wages (for the moment) and some very highly skilled workers.
Here is a brief excerpt that I think frames the issue fairly well (xlation m.o.):
In fact, for some time now, experts have distinguished between three different models for national social systems: the Anglo-Saxon model, in which the state organizes large portions of the society such as education and health through private means and social security is restricted to preventing destitution; the continental European model, in which a large portion of social benefits is financed through contribution payments from employers and their employees rather than taxes; the Scandinavian model, in which the welfare state is financed primarily through taxes and self-employed and marginally employed persons are also entitled to comprehensive social benefits.
Fritz W. Scharpf Boston Review Summer 1997
. . . To compare the employment performance of two groups of countries the best available measure in my view is the "employment/population ratio." This ratio is defined by the number of persons actually working compared to the working-age population between 15 and 64. Taking the latest available OECD data for 1995, both groups of countries are quite heterogeneous.
So what gives? The answer is to be found in different structures of employment and in different types of generous welfare states. . . . High-employment countries are countries with a large number of jobs in service sectors that are sheltered from international competition. The most successful countries, however, seem to achieve their success in radically different ways:
