Austria is part of the European Union (EU), one of the world’s largest trading blocs. Many companies are looking to Austria as a strong launching platform to expand into the rest of the European Union. Austria is located in the heartland of Europe, bordered by Italy and Slovenia to the south, Slovakia and Hungary to the east, Germany and Czech Republic to the north and Switzerland and Liechtenstein to its western borders. It has a stable economic and political system, a low crime rate, and is considered safe and clean with first-class healthcare; one of the best countries in Europe to live in.
European Union and Swiss citizens do not require a visa to enter, stay and work in the Schengen area, which includes Austria, for three months, after which they have to register their stay. Conditions apply, but to stay longer, they do not require a work visa or permit. Countries that are visa-exempt to enter Austria short term, i.e., 90 days for tourism, business purposes, medical treatment or to transit, can apply for the ETIAS visa waiver from 2023. All other travellers have to apply for a Schengen visa. A National D Visa must be used for longer than three months. However, Third Country Nationals (TCNs) require work documentation and a residence permit to live and work in Austria.
Companies setting up businesses abroad tend to choose a Professional Employment Organisation (PEO) and Employer of Record (EOR) company to help them through all aspects of compliance regarding recruitment, payroll and work and immigration documentation. Bradford Jacobs has both PEO specialists and EOR platforms and uses its expertise of more than 20 years to achieve in a short time what most companies take months to do. Research and know-how, alongside experience, are the roads to success.
The different types of Visas and Work Permits for Austria
Nationals of the European Economic Area (EEA), which includes the European Union plus Swiss citizens, do not require a visa or work documentation to enter, live and find employment in Austria for up to three months. However, conditions apply. If they intend to stay longer, they must register their stay and receive a registration certificate. Countries that are visa-exempt to enter Austria short term, i.e., 90 days for tourism, business purposes, medical treatment or to transit, can apply for the ETIAS visa waiver from 2023.
All other travellers apply for the Schengen Visa for up to 90 days or the D Visa for six months.
C Visa for gainful employment up to 90 days
D Visa. For a particular reason, e.g., work, study, research, sportsman or artist, medical condition. Usually, for six months
Third Country Nationals (TCNs) wanting to be in Austria for longer than six months require either:
Work Visa/ Work Permit (including a residence permit)
Or Residence Permit for those staying longer than six months
Or Study Visa
Types of Visa/Work and Residence Permits
One is required to enter, live and work in Austria and is applied for at a local embassy or consulate.
Red-White-Red Card. Six categories. This type of visa is for highly qualified employees, those with a skills shortage occupation, key workers, skilled self-employed workers and founders of Start-ups. They are issued to Third Country Nationals (TCNs). The popular choice for obtaining a work permit/residence permit, and because Austria prefers highly-skilled employees, this visa is subject to a points system. Applicants must fulfil specific requirements, provide relevant documents and pay the fees to enter the country. Valid for up to two years, attached to a particular company, for the applied job.
EU Blue Card. For highly skilled or qualified TCNs who are assessed on qualifications and work experience. They require a job offer to be able to apply for this work permit/residence permit which is then linked to the job and the company issuing the offer. First, it must be established that no EU or Austrian citizen can fill the position to receive an EU Blue Card. No points are required.
Jobseeker Visa. This visa (not a work permit) is issued to TCNs who want to work in Austria and are highly qualified but have no job offer. This visa allows them to enter Austria legally to look for employment over six months, and once they have a job, they need to apply for a work permit, e.g., a Red-White-Red Card. The Jobseeker Visa is also awarded through the points system.
EU Intra-company Transfer (EU ICT). Suppose employees are going to work for the Austrian branch of the home country company for more than six months. In that case,Austria issues a special residence permit (Aufenthaltstitel) for managers, executives and trainees.
How to apply for Visas and Work Permits for Austria?
The work documentation available to people wanting to live and work in Austria are:
Red-White-Red (RWR) Card – a combined work and residence permit (points required to qualify)
EU Blue Card – a combined work and residence permit which depends on qualifications, skills and work experience
ICT Transfer – special residence permit for seconded employees, up to three years (1 year for a trainee)
The Jobseeker Visa allows prospective employees and the self-employed or those looking to set up a Start-Up company to look for work (6 months). Successful candidates then apply for the relevant work/residence permit, e.g., RWR Card or EU Blue Card
Red-White-Red (RWR) and EU Blue Card process:
Have a confirmed job offer and be included on the Austrian payroll
Gather relevant documents
Apply to a local consulate or embassy abroad
After arriving, employees must register their address with their local city hall
Collect the RWR Card or EU Blue Card at the local immigration department
The typical documents required at some stage of the application process are:
Application form for the RWR Card or EU Blue Card
Passport valid for six months after applicants intend to leave Austria
Recent biometric photographs along with passport guidelines
Legalized birth certificate (and for dependents if applicable)
Legalized marriage certificate (if applicable)
Accommodation address, e.g., lease, rental or hotel accommodation. When the employee arrives in Austria, the address must be registered at the local town hall.
Declaration regarding the confirmed job offer giving salary details, terms of employment etc.
Qualifications and proof of experience for the position
Health insurance is needed at the time of the application to cover costs up to €30,000 (US$30,103). However, once receiving the RWR or EU Card, the employee is covered by public statutory insurance
Clean police report or certificate valid for three months from the date of application
Proof of funds to cover costs while in Austria
Regarding the RWR Card, any extra documentation about the points system qualification (if it applies), e.g., degree or diploma, language skills, work experience, special abilities, vocational training etc.
Intra-company Transfer (ICT) process and documents:
As with the RWR and EU Cards, the application is made at an Austrian embassy or consulate in the home country or country of residence. After arriving, the employee’s address has to be registered with the town hall in that area. Then the ICT permit can be collected at the immigration department in the place of residence.
The documents are the same as the RWR and EU Cards above, PLUS
Confirmation of employment contract with a company abroad
Proof of the assignment to be undertaken and signed by the Austrian company
This residence permit is designed to enable highly qualified and skilled Third Country Nationals (TCNs), such as top-level managers, scientists, specialists or experts, to spend six months in Austria looking for employment or business/investment opportunities. Successful people can apply for the Red-White-Red Card and a combined work and residence permit. General Documents are the same as RWR and EU cards, including points system qualification score (70 points).
Dealing with tax in Austria while being overseas can be a tricky process. Bradford Jacobs is a front-line specialist in providing expert advice on international taxation. Over 20 years of experience in the field ensures our clients and partners comply with every aspect of taxation legislation wherever they operate worldwide. We bring global reach and local know-how to the table, both essential for foreign companies expanding into Austria.
Eight bands apply to taxation on the payroll; exemption up to €11,000 (USD 11,009) with 55% on the excess above €1,000,000 (USD 1,000,850) as the top rate. Bonus payments are taxed; exempt up to €620 (USD 620), with four additional bands up to 50% on the excess over €83,333 (USD 83,404).
Social Insurance Taxes:
Employers contribute the equivalent of 21.23% of employees’ salaries from payroll. In comparison, employees contribute 18.12% to various categories assessed up to a maximum wage of €5,500 (US$5,490) per month for both employers and employees.
Corporate Income Tax (CIT):
Whether profits are retained by the company or distributed, the headline rate is 25%. According to the Eco-Social Tax Reform Act, rates will be reduced to 24% in 2023 and 23% in the following year.
Goods and services attract Value Added Tax (VAT) at 20%. A rate of 13% applies to animals, plants, and cultural and leisure activities, with 10% attached to books, food, medicines, passenger transportation, hotel accommodation and restaurant meals, among other categories.
Withholding Tax on Interest (WTI):
Interest on distributed profits is withheld at 25% for corporations and 27.5% for others.
Capital Gains Tax (CGT):
Gains on investments are taxed at 27.5% and on real estate at 30%.
Personal Income Tax in Austria
Eight bands apply to taxation on the payroll, including an exemption up to €11,000 (USD 11,009) and 55% on the excess above €1,000,000 (USD 1,000,850) as the top rate. Bonus payments are taxed; exempt up to €620 (USD 620), with four additional bands up to 50% on the excess over €83,333 (USD 83,404).
Note: €9,000 is added to the tax base of limited liability non-resident taxpayers, who earn employment income from Austria, or benefit from social insurance payments. The €9,000 is not part of payroll accounting.
Individual Tax Rules in Austria
The tax year is from January 1 until December 31.
Married couples are not permitted to file joint tax returns.
Individual employees’ tax is generally deducted and withheld at source by the employer and remitted to the relevant local tax office of Tax Authority Austria (TAA).
Individuals responsible for their taxation with income not covered by pay-as-you-earn payroll file returns with their local tax office by April 30 of the following year (hard copies) or June 30 (electronically).
Payroll employment income includes salary and all benefits in cash or kind, which may consist of vehicles and housing provided or subsidised by the company.
Individuals are considered tax residents if they have a home or establishment or have lived in Austria for six months.
Non-resident taxpayers who earn employment income in Austria, or benefit from social insurance payments, have €9,000 (US$9,007) added to their tax base. It is not part of payroll accounting.
Individuals have social security contributions totalling 18.12% deducted from their salaries by employers and remitted to the authorities.
Employer’s Social Insurance and Statutory Contributions in Austria
Employers contribute to the Association of Austrian Social Insurance Institutions (HVB) system by remitting percentage equivalents of their employees’ payroll to various funds, capped at a maximum of €5,500 (US$5,504) per month, as follows:
Employers also contribute 1.53% of the employee’s gross monthly salary into an external company pension fund, from which the employee claims severance.
Corporations planning to extend operations beyond their borders and shores can open a subsidiary overseas to establish a foothold for “testing the market”. This can be a risky business venture – costly both in time and money – with no guarantee of success from the effort and financial investment. The strength of Austria’s stable and developing economy sees it inside the world’s top 20 countries for per capita Gross Domestic Product – and the sixth richest in the European Union. Landlocked Austria’s infrastructure and superb logistics capitalize on its ideal location in Central Europe with trading corridors stretching north, south, east and west, plus six international airports.
Foreign companies must establish a subsidiary in Austria to hire staff and operate their payroll. The most popular choice is to open a private limited liability company, a GmbH. It is incorporated through the Commercial Register, operates under the Austrian Company Act and follows the Code of Corporate Governance, which sets out the management rules. Warning! Expanding overseas is a significant step. If the move fails, companies face the added costs and bureaucracy of closing their operation, selling property and paying off employees. These are unwanted distractions while also concentrating on building a business in your home country.
The sensible alternative is to use a Professional Employment Organisation (PEO) and Employer of Record (EOR), such as Bradford Jacobs, to find the best local talent and administer your payroll in Austria. Your company will be up-and-running in days rather than weeks or months without any risks.
How to Set Up an Austrian Subsidiary?
Before taking the first steps into the Austrian economy, foreign companies must decide which business structure best suits their plans. The most popular choice is to launch a subsidiary as a private limited liability company, a GmbH, which offers protection to both its shareholders and the parent company. The company is incorporated through the Commercial Register, operates under the Austrian Company Act and follows the Code of Corporate Governance, which sets out the regulations for management. Incorporation requirements and procedures include:
Filing application form to open a subsidiary at the appropriate office of the Commercial Register, with notarized signatures of the company directors or managers, shareholders’ declaration of intent to set up the subsidiary
To comply with the Company Act, the unique company name must reflect the nature of the business and be verified by the Chamber of Commerce
Registering with the Association of Austrian Social Insurance Institutions (HVB) via ’ELDA’, the electronic data exchange
Registering with the appropriate local municipality office of the Tax Authority Austria (TAA) and for Value Added Tax, which can be delayed until the turnover threshold is reached. Foreign companies must be registered at the start of operations
Filing notarized Articles of Association and the contribution of each shareholder with the Commercial Register
Legally register a business address in Austria with the Commercial Register
The corporate bank account must be opened as part of the incorporation process
Generally, the minimum capital for the GmbH is €35,000 (US$34,895), with €17,500 (US$17,447) paid into the bank account
Confirmation from the bank that the share capital has been deposited
A GmbH ‘privileged at foundation’ GmbH helps start-ups with limited financial resources and can have a minimum share capital of €10,000 (US$9,970) with €5,000 (US$4,985) paid in cash into the bank account. After ten years the share capital must comply with the regulations at the time
Once incorporated, the company must follow other procedures before they can operate payroll for the staff of their subsidiary, including:
Obtaining a contributions account number with the HVB via ’ELDA.’
Registering employees with the HVB to obtain or verify, their social security number (SV) and designate their category of employment, such as white-collar or manual
Registering employee’s date of birth, start date, level of insurance (full or partial), occupational pension plan start date, if there is a formal contract
Employees must be registered with the relevant local office of the Tax Authority Austria (TAA)
Note: Nationals from the European Union (EU) and those from the European Economic Area (EEA) nations of Iceland, Norway and Liechtenstein, plus Switzerland, have free access to the Austrian employment market and do not require authorization from labour market authorities.
Benefits of Setting Up an Austrian Subsidiary
The foreign-owned subsidiary in Austria operates under the Company Act as a separate legal entity independent from the parent company. It follows the management regulations of the Code of Corporate Governance. As a private limited liability company, a GmbH, the subsidiary protects from liabilities to the foreign parent company and the shareholders, who are generally liable only to the value of their share contribution.
Additionally, the subsidiary can ‘test the market’ in Austria by following its business ideas and entering into different areas of operation for the owning company. The subsidiary can also draw up its contracts and agreements with clients. Other benefits for a subsidiary:
Easier to obtain potential benefits and incentives and enter into contracts with other Austrian and European Union companies
Subsidiaries will have more impact on clients and suppliers, as they imply more permanency than branches
Employees feel there is more stability and job security than from being with a branch
However, there is a more straightforward option to the risks and costs of setting up a subsidiary in Austria and working with Bradford Jacobs in Austria. Using a global Professional Employment Organisation (PEO) such as Bradford Jacobs means staff can be sourced, placed in their roles, and be up and running within days rather than months. All the payroll, taxation and compliance difficulties are under control thanks to our Employer of Record (EOR) services.
Subsidiary Laws in Austria
A subsidiary set up in Austria as a private limited liability company (GmbH) is incorporated through the Commercial Register, operates under the Austrian Company Act and follows the Code of Corporate Governance regarding the regulations for management. Incorporation requirements and procedures include:
Registration and Documentation:
Filing application form to open a subsidiary with the Commercial Register, with notarized signatures of the company directors or managers and shareholders’ declaration of intent to set up the subsidiary
Register the company name, unique to Austria, with the local Chamber of Commerce
Register with the Association of Austrian Social Insurance Institutions (HVB) via the electronic data exchange, ’ELDA.’
File notarized Articles of Association and resolution on appointment of directors and the contribution of each shareholder with the Commercial Register
Business address legally registered in Austria
Accounts and Taxation:
Register with the local municipality office of the Tax Authority Austria (TAA)
The corporate bank account must be opened as part of the incorporation process
Generally, the minimum capital for the GmbH is €35,000 (US$34,895), with €17,500 (US$17,447) paid into the bank in cash. Reduced minimum capital requirements apply to a GmbH ‘privileged at the foundation.’
The subsidiary is liable for Corporation Tax, while profits distributed to shareholders are liable for income tax (withholding interest tax)
Corporate tax returns must be filed annually.
Depending on the balance sheet, turnover and number of employees, annual financial statements may need to be audited by a registered auditor and lodged with the Commercial Register
Shareholders’ contributions must be lodged with Commercial Register
Unlimited number of shareholders, limited only by the number of shares as each must equal €70
Appoint a managing director
Management is responsible for running the company, with a supervisory board, if any, to oversee management and sanction certain business transactions
An annual shareholders meeting and quarterly supervisory board meetings, if the supervisory board is in place.
Directors’ meetings need only be held if management decisions are required.
Companies planning on entering the Austrian market, either with investment or by establishing their corporate presence in the country, can enjoy many opportunities.
Austria is situated in the heartland of Europe and is part of the Single Market. It has easy access to the other 27 countries of the European Union, plus Iceland, Liechtenstein, Norway and Switzerland, for the free movement of people, capital, goods and services. It is one of Europe’s wealthiest countries with a stable economic and political landscape. It also provides companies using Austria as a foothold for further expansion into Europe, with around 450 million consumers to target. Its highly developed and steadily growing economy is built on a firm manufacturing base topped by a thriving tourism sector. A key statistic highlights the attraction for foreign companies: the per capita income of US$53,973 is the 13th in the world and makes Austria the sixth-richest nation in the EU.
Manufacturing industries include food production, mechanical engineering, steel construction, chemicals and the automotive sector. The luxury goods market includes hand-crafted articles, costume jewellery, ceramics and glassware. Manufacturing features basic processes and complex, labour-intensive production processes combining technological know-how and operational expertise. Incoming companies can draw on a highly-skilled, well-educated workforce with comparatively low unemployment. Tourism is another strong pillar of the Austrian economy; through 2021-22, Austria was on the fringe of the world’s top 10 most-visited tourist nations.
Starting a business in Austria
Foreign companies entering the Austrian market for their International Expansion plans must establish a legal entity before hiring staff and operating their payroll. The typical choice is to open a subsidiary as a private limited liability company, known in Austria as a GmbH. It incorporates through the Commercial Register, operates under the Austrian Company Act and follows the Code of Corporate Governance regarding management regulations.
Procedures for incorporation include the following steps:
File application form to open a subsidiary at the local office of the Commercial Register, with notarized signatures of the company’s directors or managers and the shareholders’ declaration of intent to set up the company
Under the Company Act, the unique company name must reflect the nature of the business and be verified by the Chamber of Commerce.
Register with the Association of Austrian Social Insurance Institutions (HVB) via’ ELDA’, the electronic data exchange
Register with the appropriate local municipality office of the Tax Authority Austria (TAA)
File notarized Articles of Association with the Commercial Register, plus resolution on appointment of directors and managing director
Register the individual contribution of each shareholder with the Commercial Register
Open a corporate bank account as part of the incorporation process
Generally, minimum capital is €35,000 (US$34,895), with €17,500 (US$17,447) paid into the bank in cash
Confirmation from the bank that the share capital has been deposited
Register a legal business address necessary to be considered a legal entity
Expanding your business into Austria
Opening a subsidiary when entering the Austrian market can create challenges. Moving staff across the world involves complications surrounding immigration documentation and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination and severance? Drawing up an expansion blueprint is not enough. By partnering with a Professional Employment Organisation (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective route to locating and employing staff in Austria.
Austria is an attractive target for foreign investment, with many incentives. Still, there are always considerations regarding compliance with relevant legislation, including the General Civil Code (AGBG) and various employment statutes that lay down the obligations of employers and protect the rights of their employees. There are other issues, too. Where will you find manufacturers, offices and distributors?
Where to locate within the country?
There are nine regions within Austria, all offering opportunities to go-getter entrepreneurs in the business community:
Vienna is Austria’s capital, economic hub and research centre, housing over 200 multinational headquarters. It is a hive of commercial activity for foreign businesses with more than 100,000 employees and an estimated investment of €75 million. This city provides routes to the CEE (Central and Eastern Europe) countries, top-quality international airports and universities with excellent infrastructure.
Lower Austria offers science, technology, medical research locations and Business Clusters for food, plastics, mechatronics and the green construction industry, with 16 state-of-the-art business parks throughout the area with over 1,100 domestic and international companies, employing nearly 24,000 staff.
Burgenland is an essential route to Slovakia, Slovenia and Hungary, has premium road and rail networks, and is within 100 km of three international airports. It boasts six technology centres.
Styria is the place for launching new products. It enjoys a dynamic education system, several research institutions and an innovative community with five Business Clusters in mobilities, materials, eco-world, wood and human technology with 18 Competence Centres.
Considerations when locating your office in the midst of what Austria has to offer:
What government funding, grants, subsidies, or tax benefits exist for start-ups?
Are the premises near wholesalers, manufacturers, and distributors offering ‘just-in-time’ inventory management?
What business hubs or clusters offer networking opportunities, improved supply chains, research, and development opportunities with appropriate office space?
How active and vibrant is the locale, with a healthy business environment providing proximity to commercial services?
Does it have good facilities for staff, make the right impression on clients, and provide suitable transport links?
Is it fit for purpose but within budget … and still has room for expansion?
Does it have good infrastructure with appropriate services such as WIFI, internet etc.?
As of 2022, Austria does not have any Free Trade Zones.
Companies extending their operations into Austria need a complete grasp of Austrian employment contracts. A successful business largely depends on its employees. By creating work contracts that include the right terms and benefits there will be no misconception and the perfect work-life balance can be created for your workforce.
Thanks to our Professional Employment Organisation (PEO) and Employer Of Record (EOR) services, we can provide compliant labour contracts for your employees in Austria, including local benefits. Our team keeps track of Austrian laws and regulations daily to be duly aware of updates that can be implemented in working contracts and to ensure a smooth entry for your business into the Austrian economy.
The different types of Austrian Employment Contracts
The General Civil Code (ABGB) defines the structure of employment contracts (Dienstvertrag) with the Employment Contracts Act (AVRAG). Although there is no legal requirement for employees to be given a written agreement, they are commonly in force and strongly recommended. Without a formal written contract, employees must at least be given a written statement covering the essential elements of the job. This should include full names and address details of the employer’s business and the name and address of the employee; start date with end date if it is a fixed-term agreement; job description; salary and payment schedule; working hours, breaks and paid vacations.
Permanent, open-ended or indefinite employment contracts: These are the norm, ended by retirement, resignation or termination following the correct procedures.
Fixed-term employment contracts are for a specified time, although there is no statutory restriction on their length. Where a contract exceeds five years, the employee has the right to terminate with six months’ notice. If arrangements are renewed without objective justification, they can become open-ended.
Probation periods: These can be up to one month, as stipulated by the contract, written agreement or a Collective Bargaining Agreement. During the trial period, either party can terminate without reason.
Collective Bargaining Agreements (CBAs): Industry-wide CBAs are a significant factor in Austria, overriding any agreements at the company or factory level and covering virtually all employees by law. Where CBAs exceed statutory minimums to benefit employees, they always take precedence. Austria has strong cooperation between trade unions, the state and employers’ Economic Chambers (WKO), to which all employers are required to belong
Austrian Employment Contracts Requirements
Employment legislation in Austria is mainly governed at the federal level, with the General Civil Code (ABGB) supplemented by a large selection of individual statutes dealing with specific areas of employment. Additionally, Austria’s membership of the European Union brings EU directives into play, with industry-level Collective Bargaining Agreements (CBAs) providing comprehensive coverage for most of the workforce.
To a reduced extent, in some sectors, legislation distinguishes between white-collar salaried employees with the White-Collar Employees’ Act (Angestelltengesetz) and blue-collar workers (Arbeiter), who can be regulated by the Trade Ordinance (GewO). The differences in treatment of the two sectors were abolished by law in 2018, and the distinction has significantly decreased being a factor.
General requirements applying to all Austrian contracts include:
Employment contracts are not legally required under the Labour Contract Law (AVRAG), but they are commonly in force and strongly recommended
Employees must at least be given written details of the agreement, including full title and address details of the employer’s business; start date with end date if it is a fixed-term agreement; job description; salary and payment schedule; working hours, breaks and paid vacations.
Employers must comply with legally binding Collective Bargaining Agreements (CBAs)
Probation periods can be entered into the first month of employment
There is no time limit on fixed-term contracts or the number of fixed-term agreements before which the employment is deemed open-ended and permanent. However, if there is no reasonable justification for their renewal, they could be considered to as becoming permanent
Although there is no statutory requirement for written contracts, they are advisable and should be in a language understood by the employee. The contract should confirm that the German version prevails in a dual-language agreement (German plus one other).
Employee Benefits in Austria are mainly governed by the General Civil Code (ABGB), individual Acts, some European Union directives and Collective Bargaining Agreements (CBAs), the latter having comprehensive coverage of the Austrian workforce. Foreign companies must comply with every aspect of legislation as it applies to their employees once they have opened a subsidiary in the country, usually in the form of a private limited liability company, a GmbH. Once staff have been onboarded, employers must comply with Austria’s multi-layered legislation that provides safeguards and minimum guarantees for employees, such as paid vacations, working hours, termination, severance and notice periods, sick leave, and maternity allowances and benefits.
It emphasises that foreign companies’ responsibilities go beyond simply complying with Austrian tax and payroll regulations – although these still present a heavy workload. Employers must have a firm grasp of what is guaranteed for their employees to ensure a fruitful working relationship. Stepping out of line on specific compensation and benefit statutes runs the risk of fines, further sanctions and an unhappy workforce. This is where Bradford Jacobs points you in the right direction, drawing on over 20 years of experience as a Professional Employment Organisation (PEO) and Employer of Record (EOR). We deal with the complexities while your staff focus on work and are always under your daily operational control.
What are the Compensation Laws in Austria?
The General Civil Code (ABGB) lays down regulations governing employee benefits and entitlements in Austria. Additionally, individual Acts refer to specific areas of employment such as working hours, paid vacations, overtime and sickness benefit. Legally-binding Collective Bargaining Agreements (CBAs) cover the majority of the workforce. Austria’s membership in the European Union (EU) also affects some elements of legislation procedures, including the General Protection Data Regulation’s (GDPR) relevance to recruitment.
Maternity Leave and Benefit: Generally for eight weeks each before and after the birth. In the case of early delivery, the 16 weeks of total leave is adjusted accordingly to provide the full term. Premature, multiple and Caesarean section births entitle the mother to 12 weeks’ post-natal holiday. Full-time employees’ benefits are based on their three months’ salary before the due date and are paid at 100% of earnings.
Sick Leave and Benefit: Six weeks of sickness leave on full pay is allowed in the first year of employment under the Sick Pay Act (EFZG). This increases to eight weeks after one year, ten weeks after 15 years and 12 weeks after 25 years. A further four weeks are paid at 50% of the salary, beyond which benefit is from the Association of Austrian Social Insurance Institutions (HVB).
Minimum Wages: Minimum wage levels are not applied federally, but social partners and sector-level CBAs set the amount. The monthly limit agreed in 2017 has been in place since 2020 at €1,500 (US$1,495) per month, including bonuses and overtime.
Probation Periods: Trial periods can be a maximum of one month, according to the contract, written agreement or CBAs. Either party can terminate without reason during the probation period.
Working Hours: Eight hours a day (10 including overtime) and 40 a week (50 including overtime) are limits set by the Working Hours Act (AZG). The Working Time Rest Act (ARG) rules that six hours of non-stop work must include 30 minutes break, continuous or in separate periods, which is unpaid.
Overtime: Under AZG regulations, employees can refuse overtime if it takes them above 10 hours daily or 50 hours weekly. Overtime is reimbursed at a minimum of 50% above the usual hourly rate.
Notice Periods: Notice periods are set by the Employees Act (AngG) according to the length of service. Up to two years’ service – six weeks’ notice; two years to five years – two months; five years to 15 years – three months; 15 years to 25 years – four months; more than 25 years – five months. Employees must give at least one month’s notice regardless of the length of service.
Termination / Severance / Redundancies: Employment can generally be terminated without reason, but works councils must be advised in advance where they are in place. Labour authorities must be involved when five redundancies are planned if employing between 20 and 100, 5% redundancies if using more than 100 and up to 600, and 30 redundancies if using more than 600. Where employment began before 2003, employers contribute 1.53% of the employee’s gross monthly salary to an external company pension fund which provides severance.
Paid Vacations: The Holidays Act (UrlG) allows 30 days of paid annual leave for those working a typical six-day week, Monday to Saturday, increased to 36 days after 25 years of service. Those working five days a week receive 25 days of paid leave.
Guarantees and Restrictions on Employee Benefits in Austria
Maternity Leave and Benefit: It is guaranteed for 16 weeks. Generally, it is eight weeks before and after the due date, but early birth is adjusted accordingly to include the full entitlement. Twelve weeks post-natal applies to premature, multiple or Caesarean section births. Full-time employees’ benefit is assessed on their three monthly payments before the due date and paid at 100% of earnings.
Working Hours and Breaks: The Working Hours Act (AZG) sets maximum daily hours at eight (10 including overtime) or 40 each week (50 including overtime). There must be at least 11 hours between each working day and a minimum of 36 hours of continuous rest in each calendar week, including Sundays. The Act requires a minimum 30 minutes break (unpaid) when working six hours continuously.
Paid Vacations: Employees working the typical six-day week, Monday till Saturday, are guaranteed 30 days paid annual leave under the Holidays Act (UrlG), increased to 36 days after 25 years’ service. Five-day week workers receive 25 days of paid leave.
Unemployment Benefit: Claimants must have been covered by unemployment insurance for 52 weeks in the previous two years or 26 weeks in the last 12 months for under-25s. They must be available for work and registered with the local office of the Austrian Public Employment Service (Arbeitsmarktservice Österreich, AMS).
Social Security in Austria
Compulsory health coverage through insurance funds covers virtually everyone in paid employment, most self-employed, individuals on unemployment benefits, pensioners and dependents of these groups. Patients may have to pay for private treatment and orthodontic procedures, but their funds can partly reimburse them. Patients must also pay towards hospital stays.
The state health insurance fund, the Österreichische Gesundheitskasse, ÖGK, also covers pension and accident insurance. Individuals are automatically covered once they take up employment, are registered by their employer with the relevant social insurance office, and receive a social insurance number.
Employers contribute the equivalent of 21.23% of employees’ salaries from payroll, while employees contribute 18.12% to various categories assessed up to a maximum wage of €5,500 (US$5,490) per month.
Recruiting in Austria is the next step of your Global Expansion into the territory. Austria is a full member of the European Union (EU), which means workers from fellow-EU nations have free movement into the employment market. The same freedom applies to those from the European Economic Area (EEA) countries of Norway, Liechtenstein and Iceland, plus Switzerland. This increases the potential labour pool for companies recruiting from outside Austria. However, the recruitment route is never straightforward. Reels of red tape must be unravelled; then, employers must comply with strictly-applied legislation that sets out their obligations and protects the rights of employees.
Austria boasts well-educated and highly-skilled staff for incoming companies. There is relatively low unemployment post-pandemic, assessed at 8% by the Austrian Public Employment Service (Arbeitsmarktservice Österreich, AMS), but at close to 12% for expatriate workers. The AMS predicts that steady growth in the Austrian economy will boost employment opportunities in all regions, particularly in the hospitality, human resources, health and social welfare sectors. Companies that can adapt quickly to market and staffing fluctuations will benefit, with the AMS predicting skills shortages in the building sector.
Austria is also a member of EURES, THE EU’s job mobility portal, which lists job vacancies and registered jobseekers throughout the community, with free German language courses. Finding and recruiting the best talent in an overseas territory is always a significant task, mainly if it is thousands of miles away from the home base. This is where Bradford Jacobs’ experience is vital for taking the smartest recruitment route into Austria. Our Professional Employment Organisation (PEO) networks have a global reach. We will have your staff up and running in the shortest time and you can trust us to put your company’s brightest talent in place.
Recruiting in Austria
International companies planning to recruit in Austria have a broader target market than just Austrian citizens. Austria’s full membership of the European Union (EU) means workers from fellow-EU members have free movement into the employment market, along with those from the European Economic Area (EEA) countries of Norway, Liechtenstein and Iceland, plus Switzerland. This plays a significant role in the recruitment process, as employers must comply with a Labour Market Test by proving vacant positions could not have been filled by an Austrian or EU national before being offered to a ‘Third Country National’. It complicates recruiting from major employment markets such as the USA, UK, Australia and Asia.
Recruitment is the first stage in making your company successful and competitive in Austria. But these restrictions complicate moving staff into the country along with obtaining correct immigration and work documentation. Knowing where to locate the finest recruits for your company’s international expansion is vital to avoid these issues.
Once employees are recruited and onboarded, the process continues with meeting these responsibilities:
Employers must obtain a contributions account number with the Association of Austrian Social Insurance Institutions (HVB) via ’ELDA’, the electronic data exchange.
They must register employees with the HVB to obtain, or verify they possess, their social security number (SV) and designate their category of employment, such as white-collar or manual, for example.
They must be registered with the relevant local office of the Tax Authority Austria (TAA).
Employees’ Legal Checks in Austria
Under the European Union’s General Data Protection Regulation (GDPR), information can be collected only for specific and legitimate reasons relevant to the position being applied for. Personal information on social networks can be accessed, but under the GDPR’s Article 9, using data on political views or sexual orientation is not permissible if it has no relevance to the job. Generally, the applicant’s permission is needed for all other checks. Employees’ background checks can include the following:
Criminal record checks: they are only allowed if relevant to specific roles, such as security and the financial sector and not allowed to ask about previous convictions already deleted from records.
Education and reference checks: Allowed with the applicant’s permission.
Health checks: Permissible if relevant to the position, but employers who base their decision on such information could be liable for discrimination charges.
Required: Compliance with all immigration procedures.
Basic Facts when Recruiting in Austria
Companies hiring staff in Austria must comply with basic facts on hiring set down by a combination of specific statutes covering different categories of legislation, generally coming under the General Civil Code (ABGB). In some areas, legislation distinguishes between white-collar salaried employees with the White-Collar Employees’ Act (Angestelltengesetz) and blue-collar workers (Arbeiter), who can be regulated by the Trade Ordinance (GewO), for generally unskilled and auxiliary workers. Employers must also be aware of industry-level Collective Bargaining Agreements (CBAs) involving many Austrian workers.
Employers cannot ignore basic employment requirements that apply to their employees, including:
Employees must be registered with the Association of Austrian Social Insurance Institutions (HVB).
Employers must have their employees’ social insurance number (SV).
Under the Labour Contract Law (AVRAG), employment contracts are not legally required, but employees must be given written details, including such as full name and address details of both parties; start date with end date if fixed-term; workplace and job description; salary and payment schedule; working hours, breaks and paid vacations.
CBAs are legally binding.
Probation periods can be entered into the first month of employment.
There is no time limit on fixed-term contracts or the number of contracts before which the employment is deemed open-ended and permanent. Still, there should be justification for renewing a fixed-term contract, or it could become permanent.
Note: Nationals from European Union (EU) countries and those from the European Economic Area (EEA) nations of Iceland, Norway and Liechtenstein, plus Switzerland, have free access to the Austrian employment market and do not require authorization from labour market authorities.
After hiring and onboarding new staff onto the company payroll, employers must ensure they make no mistakes on statutory entitlements for their employees. Mandatory standards include sick leave, working hours, maternity allowances, paid vacations, termination and severance, notice periods and social insurance payments. Contracts or legally-binding CBAs can improve all statutory minimums. Examples include:
The Holidays Act (UrlG) allows 30 days’ paid annual leave for those working a typical six-day week, increasing to 36 days after 25 years of service. Those working five days a week receive 25 days’ paid leave.
Employees can refuse to work overtime if this exceeds 10 hours per day or 50 hours per week. Employees must receive at least 50% extra on their regular pay under the Working Hours Act (AZG)
Maternity leave is 16 weeks, split equally before and after the due date, with 12 weeks post-natal for multiple premature or Caesarean section births. Full-time employees’ benefit is assessed on their three monthly salary payments before the due date and paid at 100% of earnings.
The Republic of Austria has many attractions for international companies and foreign workers looking to find their niche in the country. To succeed in your expansion into Austria, it is vital for both employers and employees to have a strong understanding of the Austrian work culture.
Austria’s highly-developed industrial economy has a significant service sector and is 28th in the world for nominal Gross Domestic Product (GDP). The per capita GDP of US$53,973 makes Austria the 13th richest nation in the world and the sixth wealthiest in the European Union (EU). Vienna, the capital; Salzburg, Mozart’s birthplace and famous for its musical festival; Interlaken and its spectacular landscapes of forests, lakes and the Alps are among the culture, attractions and heritage that attracts workers and visitors. Tourism sees Austria on the fringe of the world’s 10 most-visited nations.
Work-life balance is crucial for Austrians, who are family-oriented and maximise weekends and downtime. Some companies, such as IBM, provide ‘downtime’ at work by offering yoga and massage breaks. Austria’s EU membership brings free labour movement between the community’s nations. This variety can be seen in the work culture, so expatriates must adjust to the business and workplace environment.
Language: German is the official language, with the ethnic minorities in the south and east speaking Croatian, Hungarian or Slovene. English is widely used in business, but make a good impression by learning phrases; foreigners who can conduct business in German will have an advantage.
Punctuality: Essential, as it is the first stage in ‘getting the job done.
Business Meetings and Negotiations: Austrians prefer a calm and hassle-free business environment, with negotiations in the same vein and probably lengthy. The business structure is formal and hierarchical. Small talk is minimal, and they will expect communication to be proper, direct and part of creating a negotiation protocol. Austrians prefer third-party introductions, but their business interactions do not depend on forming a personal relationship.
Greetings: Generally reserved and formal, Austrians respect personal space but maintain eye contact while shaking hands. Initially, address counterparts with their title (or academic qualification) and surname: Herr (Mr.), Frau (Mrs. or Ms.), Herr Doctor or Frau Doctor, before the surname.
Gift Giving: Not generally part of business, but moderate gifts are acceptable if invited to a private home, although this is not typical in Austria.
Business Cards: Exchanged without ritual or fuss; have one side printed in German, offer that side, and include academic qualifications.
Dress Code: Appearance is vital in all situations; business wear for men and women is smart and conservative.
Avoid: Offering opinions on Austria’s history in the 1930s and 40s. Do not confuse Austrians with Germans. Austrians are proud of their unique cultural history despite using the same language.
Labour Law and Austrian Work Culture
Austrian Minimum Wage
The effective minimum since 2020 is €1,500 (US$1,495) per month, including bonuses and overtime. There is no federally-applied minimum, but the limit was agreed upon between social partners and sectors negotiating collective agreements.
Probation Periods in Austria
Trials can be up to one month according to the contract, written agreement or CBA. Either party can terminate without reason.
Working Hours in Austria
The Working Hours Act (AZG) sets the maximums at eight hours a day (10 including overtime) and 40 a week (50 including overtime). The Working Time Rest Act (ARG) stipulates six hours of work must include at least a 30-minute break, continuous or spread between the working hours. CBAs can allow for more hours in some sectors.
Overtime in Austria
Employees can refuse to work extra hours if this would exceed 10 hours per day or 50 a week, under the Working Hours Act (AZG). Employees must receive at least 50% extra on their regular pay.
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