Understanding Payroll in Austria: What Global Companies Need to Know About Austria's Payroll
Despite a population of only nine million, Austria enjoys the eighth-largest annual GDP of any European Union country. Sitting on the eastern side of the Alps in the heart of continental Europe, it represents an ideal place for international businesses to expand into.
Austria is one of the most stable countries in which to live and do business, with a wide variety of goods and services making up its economy, including construction, tourism, electronics, logistics, and food and drink. The country is accommodating to foreign businesses, although a strong emphasis on social welfare for its citizens means taxes can be high in some areas.
To get a fuller understanding of running payroll in Austria and how to get started there from a business perspective, the key considerations are covered in this guide.
There are many different types of business operating in Austria, but incoming foreign organizations will most commonly form as a limited liability company (GmbH). These come with a minimum capital requirement of €35,000 (approximately £30,000; $41,000).
The first step is to apply for a trade license from the local district or municipal authority. After this, registration is required with the Firmenbuch, Austria’s commercial register, including business location, start date, starting capital, social contract, and appointed managers and partners. The whole process takes around seven weeks from start to finish, but the admin fees should come to no more than a few hundred euros in total. Setting up an Austrian bank account takes around four weeks.
Collective bargaining is strong in Austria, with unions and employee bodies regularly negotiating fair pay and conditions. All employment contracts must be in writing. Probationary periods must be agreed upon mutually and last for no longer than one month (three months for apprentices).
Maximum working time is eight hours per day or 40 hours per week. Overtime can be worked as long as total limits of ten hours per day and 50 hours per week are not exceeded. The statutory rates of overtime pay are 125% for hours not in an employment contract but still below 40 per week, 150% for work beyond 40 hours per week, and 200% for work on Sundays, public holidays, or between midnight and 7am. Time off in lieu can also be given with mutual agreement.
Compensation, Bonuses, and Severance
There is no statutory minimum wage in Austria. Wage levels are instead set through collective bargaining, and can therefore fluctuate year to year depending on changing laws and differing negotiations. Both employers and unions normally come to a fair understanding of rates of pay, a major reason why strikes in Austria are rare.
Discretionary bonuses can be paid by employers, and employers retain the right to remove these bonus entitlements at any time. Long-service bonuses negotiated through collective bargaining are also common.
Notice periods for termination start at six weeks, rising to two months after two years of service, three months after five years, four months after 15 years and five months after 25 years. Notice periods can be extended up to a maximum of six months through mutual agreement.
Employers must pay into a severance fund for each employee at the rate of 1.53% of their gross monthly salary. If an employee leaves at least three years after the first payment into the fund, and they have not been dismissed or made redundant, they are entitled to this fund.
Tax and Social Security
Income tax in Austria is levied at progressive rates which are relatively high compared to many countries. The first €11,000 earned per year (approx. £9500; $13,000) is exempt, beyond which the following six bandings apply:
- Beyond €11,000 up to €18,000 (approx. £15,500; $21,000): 20%
- Beyond this up to €31,000 (approx. £26,500; $36,500): 35%
- Beyond this up to €60,000 (approx. £52,000; $71,000): 42%
- Beyond this up to €90,000 (approx. £78,000; $106,000): 48%
- Beyond this up to €1 million (approx. £860,000; $1.18 million): 50%
- Beyond €1 million: 55%
Corporate Income Tax (CIT) is levied at 25%, but is due to be cut to 23% in 2022 and to 21% in 2023. It should also be noted that the Austrian government frequently offers tax relief for investment in certain industries or in certain parts of the country. The VAT rate is 20%, with certain limited goods and services reduced to 10% or 13%.
Social security contributions in Austria are made in five different areas:
- Sickness: 3.78% employer, 3.87% employee
- Unemployment: 3% employer, 3% employee
- Pension: 12.55% employer, 10.25% employee
- Accident: 1.2% employer
- Other contributions: 0.7% employer, 1% employee
Holidays and Leave
Paid leave entitlement in Austria is 30 days per year, assuming the employee works the full Austrian working week of Monday to Saturday. If only working Monday to Friday, the allocation is 25 days per year. These increase to 36 and 30 days respectively after 25 years of service. Employees are also entitled to paid time off on the 13 days of public holidays observed each year.
Fully paid maternity leave entitlement is 16 weeks, eight weeks on either side of the birth. Beyond this, a mother can choose to continue her maternity leave until the child turns two, paid by social insurance and without any employer contributions. Fathers can take unpaid paternity leave for the first two years after a child’s birth, but cannot take this leave at the same time as the mother.
Sick leave entitlement (fully paid) starts at six weeks, increasing to eight weeks after a year of service ten weeks after 15 years, and 12 weeks after 25 years. If an employer has a workforce of 50 employees or less, and an employee has the relevant insurance, then an employer may be eligible to reclaim half of the sick pay from the Austrian authorities.
Public Holidays in Austria
|Date||Austria Public Holiday Schedule|
|January 1st||New Years Day|
|Monday after Easter Sunday||Easter Monday|
|May 1st||Labour Day|
|40 Days After Easter||Ascension Day|
|7th Monday after Easter||Whit Monday|
|Second Thursday after Whitsun||Corpus Christi|
|August 15th||Assumption Day|
|October 26th||National Day|
|November 1st||All Saints Day|
|December 8th||Immaculate Conception Day|
|December 25th||Christmas Day|
|December 26th||St. Stephens Day|
Austria is a great place to do business for a variety of reasons. However, it’s important to remember that it has a very strong set of rules and regulations regarding employee rights and collective bargaining, and these are only likely to strengthen in the years to come. In order to make sure that you remain compliant and keep on the right side of all your responsibilities running payroll in Austria, a partnership with a global payroll provider can take care of all the hard work and ensure everything is above board.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.