Definitive Guide to Hiring in Austria

Hiring Employees in Austria

For companies that want to hire employees and run payroll in Austria without first establishing a business entity or subsidiary, Global Expansion provides Employer of Record services (EOR Canada).

Our EOR services streamline and simplify the global hiring process. We handle your outsourced core global HR tasks - compliance, contracts, payroll, global benefits, and more - so that you forgo hours of ongoing admin, human error, and risky compliance.

In Austria, companies would historically establish a subsidiary or branch office to legally hire in that country. With Global Expansion, this step is no longer necessary. We have subsidiaries all over the world and therefore can legally hire on your behalf. The employees are ours only on paper and report directly to managers within your company.

Labor Law in Austria

Employment law in Austria is uniquely suited to the country’s way of life, and crucial to understand if you want to employ local talent in this country. Find the details below.

Employment contracts in Austria

In Austria, a contract of employment is called Arbeitsvertrag or Dienstvertrag. The contract can be concluded:

• in writing
• orally
• by demonstrating that an employment contract has been agreed upon e.g. performing the work

A written contract is not valid unless it has been signed by both parties. If either party is unsure about any aspect of the contract, The Austrian Chamber of Labour (Arbeiterkammer) will provide advice free of charge, and can verify that the contract is free of defects or potentially illegal clauses.

Dienstzettel

If the employer doesn’t provide a written contract, they must instead provide a Dienstzettel. This is a document that contains all necessary information about the terms and conditions of the employment.

A Dienstzettel must contain the following:

• • Employer’s name and address
  • Employee’s name and address
  • Commencement date of employment
  • Business address where the employee works
  • Employee’s intended tasks
  • Basic compensation package and additional benefits
  • Date payable
  • Annual leaves
  • Daily and weekly working hours
  • Collective agreement or works agreement applicable
  • Period and term of notice

Employers cannot make changes to the contract that are less favorable to the employee than the intitial terms and provisions.

Employees can report illegal or unfavorable contract changes to the works council, the Chamber of Labour, or the trade union.

Types of Employment in Austria

• Full-time worker
  • Full-time employees are permanently employed and enjoy full employment rights, including leave entitlement, protection against dismissal, and social insurance, among others.
• Part-time worker
  • This type of employment is subject to the same labor laws as full-time employment and shares the same insurance protection.
• Minimally employed worker
  • Minimally employed workers (monthly income not exceeding EUR 446.81 in 2019) are covered by accident insurance.
  • The employer must register this part-time employment with the health insurance provider.
  • The worker can apply for voluntary health and pension insurance but must pay for it with their own money.
  • Austrian labor laws protect minimally employed workers to ensure they are treated equally as full-time employees.
• Independent contractor
  • Independent contractors are not entitled to collectively agreed wages and, unless expressly otherwise agreed, to special payments and leave.
• Seasonal worker
  • This type of employment is common in industries that experience peak seasons, such as tourism and hotel and catering.
  • Seasonal workers are subject to special collective treaty provisions regarding their working time.
  • Employees are entitled to full social insurance protection.

Holidays in Austria

Here is the full list of public holidays in Austria:

Maternity Leave Austria

Normally, the protection period (Mutterschutz) for pregnant employees begins 8 weeks before birth and ends 8 weeks after birth. As a result, Austria’s maternity leave policy entitles citizens to 16 weeks of paid leave.

During the protection period, the employment relationship stays the same, and the worker gets a maternity allowance (Wochengeld) equal to the average pay during the 13 weeks before the absolute employment ban.

The amount of maternity allowance paid to employees who are still working will be consistent with their last three net salary payments before the period of maternity leave began. After 3 months of employment, insured employees qualify for 100% of their average pay during maternity.

Any one-time payments, such as holiday or Christmas bonuses, are subject to a supplement. Self-insured people on low incomes receive a fixed rate of 9.61 Euros per day (provided they are self-insured under Section 19a) (as of 2021). Since January 1, 2008, freelance contractors have also received maternity pay.

Paternity Leave in Austria

The Paternity Leave Act entitles Austrian workers to one month of unpaid leave. To take paternity leave, fathers must live in the same household as the child, but they’re not required to complete a minimum service period.

Fathers must submit a paternity leave request at least 3 months before the expected birth, and notify the employer about the final dates within a week of the child’s birth.

Employers are not obligated to pay salaries during the leave period, and they are not allowed to discriminate against employees for requesting and taking the leave.

Sick Leave in Austria

• The principle of continued remuneration ensures that in the event of sickness, industrial accident, and occupational illness and during rest cure and convalescent leave, employees’ remuneration will continue to be paid.
• After continued remuneration, one receives sick pay from the health insurance provider.
• The amount of sick pay depends on the earnings in the last month before the illness and the amount of continued remuneration paid.
• Sickness cash benefit amounts to 50% of an employee’s salary if the employee is sick for 42 days or fewer.
• If employees are sick for a longer period, the sickness cash benefit rises to 60% from the 43rd day.

Working Hours in Austria

According to the Austrian Labor Law, a typical workweek in Austria consists of 8-hour working day (working hours within a 24-hour period). The standard working week is 40 hours (working hours from Monday to Sunday)

• The Working Time Act (Arbeitszeitgesetz) applies to almost all private-sector employees over the age of 18.
• Collective agreements in many industries have shortened the regular weekly working hours. For instance, employees in the iron and metalworking sector only work 38.5 hours per week.
• To obtain a longer continuous period off work (e.g. long weekend), the normal working day can be extended from 8 hours to the maximum of 9 hours/day.
• Under certain conditions, a 4-day week (4 x 10 hours) is possible.

Overtime in Austria

If the regular working hours are not met, overtime is accrued (8 hours per day or 40 hours per week).

Employees can only be forced to work overtime if it doesn't interfere with something important to them, like child care or an urgent doctor's appointment.

Overtime must be compensated with a 50% bonus in money or time balance.

Termination of Employment in Austria

Termination indemnities are to be paid in the case of the employer's termination of an employment contract. An employment relationship can come to an end in one of three ways:

1. by expiration (of a fixed term employment contract)
2. by a mutual agreement on the termination
3. by unilateral termination

When the contract term expires, employment automatically terminates (Expiration). When an employee and an employer mutually agree to end an employment relationship, no notice period is required. It can be ended either verbally or in writing. Written termination is advised (Mutual Consent).

Notice can be given verbally, in writing, or in an implicit manner (handover of employment papers). There is no need to provide a reason for termination (Unilateral Termination).

A dismissal is an immediate termination of an employment relationship. Dismissal can be done orally, in writing, or implicitly. However, there must be an explanation for dismissal (e.g., persistent neglect of duties). Unjustified dismissal also results in the immediate termination of an employment relationship; you may file a complaint with the labor and social security courts.

Employee resignation terminates the employment relationship with immediate effect. Employees can do this if, for example, their employer has been very bad at their job.

Notice Period in Austria

• The notice periods for employees are set out in section 20 of the Employees Act (Angestellten-gesetz).
• The notice period that the employer must give to employees depends on the employee's length of service:

Severance in Austria

If the employment relationship lasts more than one month, employers in Austria must contribute 1.53% of the monthly pay into an employee provision fund known as Mitarbeitervorsorgekass from the start of the relationship.

Employees are entitled to a severance payment, unless the employment relationship is terminated by dismissal of the employee, lawful redundancy or unlawful withdrawal of the employee or less than 3 years have passed since the first payment into the fund.

Austria Salary and Wages

Average Salary in Austria

In Austria, the average income varies, with industry averages listed below:

Austria Minimum Wage

The Austrian government requested social partners in January 2017 to discuss a minimum wage that would apply to all sectors. This corresponded to a monthly minimum pay standard of €1,500.

Employee Benefits in Austria

Strategic bonuses and extra incentives demonstrate that the company values its personnel. These types of incentives improve performance and, ideally, colleague relations.

Flexible working hours (known as Flexitime rosters), remote work capabilities, 30 hour work weeks at full compensation, 4-day workweeks, public transportation subsidies, on-site childcare facilities, and other benefits are among the most popular extra incentives provided by Austrian enterprises.

13th Month Salary in Austria

There is no mandatory requirement to pay out a 13th or 14th month salary.

However, it is common for remuneration (salary) to be paid 14 times per year. The 13th and 14th payments come in the form of one bonus around Christmas time, and one bonus at the start of the summer holiday.

Though customary, these are at the full discretion of the employer and they may be revoked at any time.. Hence, employees will not be able to make a claim for said bonuses in court.

• The social security system in Austria offers broad coverage. It includes provisions for:
  • prevention
  • sickness
  • incapacity for work/invalidity
  • maternity
  • unemployment
  • old age
  • death of a person liable to provide maintenance
  • survivors' pensions
  • nursing care
  • social need
• Austrian social insurance is required for self-employed and salaried individuals, as well as their dependents.
• Some groups, such as minimally employed workers, are only required to carry insurance in certain circumstances. Some, but not all, benefits are legally available to insured individuals. Contributions cover health, unemployment, old age, and disability insurance.

Deductible Expenses in Austria

Employment Expenses

The costs of "acquiring, securing, and maintaining" income are deducted from the taxable income at the source. For all employees, the standard allowance is EUR 132. Overage charges will be accepted if accompanied by receipts (e.g., office at home, continuing education).

Tax deductions are available for employee contributions to Austrian and/or foreign social security obligations. You can usually deduct expenses related to making and receiving money when calculating income from a job.

These expenses include the following:

• Membership fees to certain organizations (e.g. Chamber of Labor, workers’ council)
• Compulsory social and pension insurance contributions
• Commuting expenses between residence and place of work where a standard deduction can be claimed per month; the deductible amount depends on the distance and the possibility of using public transport
• Work equipment and special work clothes
• Business-related travel expenses and per diems
• Technical literature
• Training costs

Extraordinary expenses

Individuals who incur extraordinary expenses can obtain some tax relief. This relief applies to resident individuals who are subject to unlimited tax liability and incur unavoidable expenses (e.g. funeral costs or medical expenses for special treatments not reimbursed by health insurance).

Depending on income and family status, the taxpayer may be able to deduct an amount that exceeds a certain percentage of one's income.

The retention rates are as follows:

The percentage is reduced by 1% for an individual:

• who is eligible for a sole earner tax credit or a single parent tax credit, or
• who is not eligible for a sole earner or a single parent tax credit but the individual is married more than 6 months during the calendar year or living more than 6 months in a registered partnership and is not permanently separated from one's married/registered partner whose income is less than EUR 6,000 per year,
• as well as for every additional child if the taxpayer receives for more than 6 months the child tax-free amount or the alimony tax credit.

Certain expenses (e.g. damage due to disaster) are generally fully tax deductible.

Family Bonus Plus

In 2019 the child care deduction and the child tax-free amount were replaced through the family bonus plus. The family bonus plus is a tax credit, which reduces the amount of tax paid. The annual tax credit of EUR 1,500 per child can be claimed for children up to the age of 18 years, who live in Austria, and are entitled to family allowance.

If both parents claim the family bonus plus, both taxpayers are entitled to 50% of the tax-free amount (EUR 750 per annum for each taxpayer). For children between 19 and 24 (in some cases until 25), the family bonus plus can be granted up to an amount of EUR 500 per annum. The family bonus plus can be taken into account in the payroll during 2022 or in the tax return for 2022 in 2023.

Immigration Austria

Learn about immigration requirements in Austria, work visa requirements, Austrian work permits and more.

The Red-White-Red Card

Most migration to Austria is done on a flexible system which is known as the Red-White-Red Card and is designed to grant residence based on the skills of potential incoming workers and the shortages in the Austrian labor market.

To qualify as a very highly qualified worker, you must score more than 70 points on the points based scheme described on the immigration authorities’ website. Under this system you score different amounts of points for things like your professional qualifications, work experience, language ability and the salary levels you have previously earned.

To be issued the Red-White-Red Card under this type, you must have a job already lined up, although there's a second option known as a Red-White-Red Card Plus. This allows you to get entry to Austria to work without having a specified employer sponsoring you.

The Red-White-Red Card Plus is only issued under certain circumstances and has strict criteria which are set out as follows:

1. If you have held a Red-White-Red Card already for 10 of the preceding 12 months, you can ‘upgrade’ your card to the ‘Plus’ version and get unlimited labor market access. This means you can work for any employer rather than only the one originally named on your card.
   
   
2. Another option for workers in in-demand occupations is to apply for the Red-White-Red Card under the shortage occupations stream. In this case, you still have to complete the points based test, but you need to score only 55 points for your application to be considered.
   
   
3. In the case of Austria, if you’ve already got an EU Blue Card, or fulfill the criteria, you could be issued a Red-White-Red Plus Card which has more favorable terms than a regular work visa.

Temporary Work Permits and Process

Austria offers a specific visa for seasonal workers coming to work in tourism, agriculture and forestry. The quotas set for seasonal worker visas are reviewed regularly, and a visa will only be issued if the authorities are satisfied the work can’t be done by a local person.

As of January 1, 2022, a new regulation for regular seasonal workers has come into effect. Seasonal workers who have been employed under seasonal quotas in tourism or agriculture and forestry for at least 3 months in 3 of the previous 5 calendar years, respectively, may register at the Public Employment Service Austria (AMS) for further employment in the respective economic sector.

Value Added Tax (VAT) in Austria

Generally, the Austrian VAT law is based on the 6th EU VAT Directive. Under the Austrian VAT law, companies and individuals carrying out an active business on a permanent basis are qualified as entrepreneurs for VAT purposes. As entrepreneurs, they have to charge the supply of goods or services provided to their customers with Austrian VAT at a rate of 20%.

A certain limited range of goods and services is taxed at the reduced rate of 10% (e.g. books, food, restaurants, passenger transportation, medicine, hotel accommodation) or 13% (e.g. animals, seeds and plants, cultural services, museums, zoos, film screenings, wood, ex-vineyard sales of wines, domestic air travel, public pools, youth care, athletic events). Certain other transactions are exempted from Austrian VAT (e.g. export transactions).

According to the Tax Reform Act 2020, several changes to the Austrian VAT law enter into force from 1 January 2020 (e.g. reduced VAT rate of 10% for the supply of e-books and e-papers, simplification rule for call-off stocks, new rules for chain transactions).

Withholding Tax in Austria

Mandatory Benefits in Austria

It’s important to understand the legal requirements of hiring employees in Austria (whether it’s remote or in-office) so that your business remains compliant. As part of Global Expansion’s International PEO and Employer of Record (EOR) solution, we guarantee employees are registered with the appropriate government agency, and that they receive mandatory benefits.

Additionally, all tax deductions associated with the employee are processed at the source, meaning our in-country entity will be responsible for paying all taxes to the authorities on behalf of the new hire.

Pension funds, social security, and 13th/14th month salary are all withholdings postualted by law. For more details on 13th/14th month salary and social security contributution requirements read above.

Payroll In Austria

The Austrian tax system is a pay-as-you-earn system. Income tax returns can be filed with the local tax office after the end of each calendar year. Separate returns are required for the period in which an individual is resident and for the period in which an individual is non-resident (but with income subject to Austrian taxation).

In general, income tax is withheld from salaries/wages, interest, and dividends. Income tax on other types of income is payable quarterly, with an annual return filing requirement. The final tax will be assessed by an assessment note and is payable within one month after tax assessment.

Interest is payable on the final tax amount due from 1 October of the following year until the date of tax assessment (or will be paid by the tax office in the case of a tax refund). Interest can be prevented if a sufficient down payment is made by 30 September. The interest rate is the basic interest rate of the ECB plus 2%.

Global Expansion’s international EOR solution can help you run payroll in Austria with ease. In just a few clicks, your employees will be onboarded and enrolled into our payroll system. Additionally, we can invoice for clients locally, meaning we can enroll any new hire quickly and efficiently, whether they're an expatriate or a local national.

Payroll Accrual in Austria

Country Accruals Additional Information

The employer is liable to the Family Burdens Equalisation Levy at the rate of 3.9%, the municipal tax on payroll at the rate of 3% of monthly gross salaries and wages, and a public transportation levy of EUR 2 per week per employee in the city of Vienna.

In addition, a contribution to the Chamber of Commerce is levied at a rate of approximately 0.38% (between 0.34% and 0.42%) of monthly gross salaries paid (depending on the province). Moreover, a contribution to the mandatory employee pension fund at the rate of 1.53% on monthly gross salaries is payable for employments subject to Austrian employment law.

Payroll Accruals Additional Information

Accrued Benefits in Austria

Why use Global Expansion to hire in Austria

Establishing a branch office or subsidiary in Austria can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Austrian labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Austrian law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Austria. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.