Blogs

Austria – Employer of Record

EWS helps you to hire an international workforce quickly and compliantly, without setting up a legal entity locally. If you’d like to get in touch about our employer of record solution in Austria, click here

Country Introduction – Austria

Capital – Vienna
Currency – Euro
GDP – 480.4 billion USD (2021)
People/Nationality- Austrian
Language – Greek/Indo – German
Major Religion – Catholicism
Population – 9,157,600 (as of June 15, 2023)

With the 30th highest GDP worldwide and the 22nd highest GDP per capita, Austria is a wealthy market. According to World Bank statistics, the manufacturing sector makes up 17% of the nation’s GDP, and the economy is both diversified and highly international. Democracy and the rule of law are firmly established, social stability is strong, and historical unemployment rates are modest.

Vienna’s capital city consistently ranks at the top of lists of places with the highest standards of living.Austria’s high ratings for government integrity and property rights are a result of its robust legal system and growing economic freedom. The open and aggressive business climate has been successful.

Its economy’s social welfare enables it to preserve stability and low unemployment rates. Additionally, it can maintain a positive trade balance and a low debt to GDP ratio, thanks to its exports, services, and high taxes (especially on luxury goods).

The ninth-safest nation in the world is Austria. It has a stable political climate, a low crime rate, and excellent healthcare. Living in Austria is generally regarded as being safe and tranquil.

Contract of Employment

The Employment Contracts Act (AVRAG), in conjunction with the General Civil Code (ABGB), defines the framework of employment contracts (Dienstvertrag). Even though it is not legally required, written agreements with employees are frequently used and highly advised. Employees must at the very least receive a written statement outlining the fundamental aspects of the employment in the absence of a formal written contract.

This should include the full names and addresses of the employer and the employee, as well as the start and end dates of any fixed-term agreements, the job description, the employee’s compensation and payment schedule, and the working hours, breaks, and paid time off.

Probation Period

The probationary period’s duration varies depending on the type of agreement. Usually, the length of the probationary period is determined by the employer. It typically lasts between three and six months, starting from the day the employee starts work.

Termination

In general, there are 3 different ways in which an employment relationship might end. Termination indemnities to be paid in the case of the employer terminating an employment contract:

– Expiration (of a fixed term employment contract)
– Mutual agreement on the termination
– Unilateral termination

Depending on how long they’ve been employed, employees have a right to at least six weeks’ and up to five months’ notice. Up until the end of the second year of employment, the notice period is six weeks.

Working Hours

A maximum of 40 hours per week are allowed for working, with an eight-hour daily workday maximum. The time between the start of work and the end of work is referred to as working time. Unless otherwise specified by collective agreements, breaks or rest periods are not paid.

Overtime

A maximum of 20 overtime hours per week are permitted. However, in a typical 17-week period, the weekly average workweek cannot exceed 48 hours.

For each hour worked in excess of the typical workweek of 40, employers are required to pay overtime at a rate equal to 150% of the employee’s gross wage. Employers may also offer overtime pay in the form of one to five days’ worth of paid time off.

13^th Month Pay

Austrian law mandates that wages be paid fourteen times per year. At the end of June and the end of November, the 13th and 14th months’ salaries are paid.

Annual Leave

If an employee has been with the company for less than 25 years, they are entitled to an uninterrupted paid vacation of at least 30 working days (five weeks) per working year. 36 working days (six weeks) of annual vacation are given to those with 25 years or more of service.

Sick leave

Employees are entitled to six weeks of fully compensated sick leave. With service rendered, these increases, and the breakdown is as follows:

• Eight weeks for a one full year’s amount of work
• Ten weeks for fifteen years of service
• 12 weeks after 25 years of service

The additional four weeks of half-pay that employees are entitled to are covered by social security.

Maternity and Paternity Leave

Maternity benefits in Austria are offered over a 16-week period. Eight weeks of vacation time are given to expectant mothers before and after the baby is born.

The child and the father must share a residence. The general paternity leave must last at least two months and be taken before the child turns two years old. It cannot be taken concurrently with the mother’s maternity leave.

VAT / GST:

The VAT rate ceiling is not fixed. The standard VAT rate in Austria is 20% (and in some locations, 19%). A reduced VAT rate of 10% or an intermediate rate of 13% apply to certain goods and services. Due to the Coronavirus pandemic, a second reduced VAT rate of 5% was temporarily implemented.

Income Tax

Every person who resides in Austria is liable for paying Austrian income tax on all their worldwide earnings, including any from a trade or business, a profession, a job, investments, or real estate. Only in Austria do non-residents pay taxes on their income from specific sources. Non-residents must pay income tax at the standard rates on income with an Austrian source.

Employer/ Employee Contributions

Social Security Contributions:

Public Holidays

January 1 – New Year’s Day
January 6 – Epiphany
April 10 – Easter Monday
May 1 – International Workers’ Day
May – Ascension
May – Whit Monday
June 8 – Corpus Christi
August 15 – Assumption Day
October 26 -Austrian National Holiday
November 1 – All Saints’ Day
November 11 – Saint Martin’s Day
December 8 – Immaculate Conception
December 25 – Christmas
December 26 – St. Stephen’s Day
December 31 – New Year’s Eve

There are also 7 holidays observed in some Federal states in Austria:

March 19 – Saint Joseph’s Day
April 7 – Good Friday
May 4 – Saint Florian’s Day
September 24 – Saint Rupert’s Day
October 10 – Plebiscite Day
November 15 – Saint Leopold’s Day

Severance Pay

Under the new severance model, severance benefits are legally due to every employee whose employment started after January 1, 2003. This still holds true if the worker quits their job unexpectedly.

Businesses in Austria are required to put 1.53% of their employees’ gross wages – bonus payments included – into a severance fund (also known as an (“Abfertigungskasse”). The second month of an employment contract is when this starts.

This fund is also in charge of each employee’s severance package.  Employers should therefore keep track of the required contribution caps. The employee has options if the employment relationship ends, in addition to receiving a lump sum from their severance fund contributions (after three years of employment).

Work and Residence Permits (Expatriates)

If you are not a citizen of the EU, EEA, or Switzerland, you are regarded as a citizen of a third country. To stay in Austria as a result, you will need a residence permit. The best way to obtain a Red-White-Red Card is to apply for permanent residence in Austria. This makes it easier for qualified workers to immigrate with their families and the possibility of settling permanently. Cards are given out for a year and grant the holder the right to settlement and employment with a particular employer. The following individuals qualify:

– Highly qualified professionals
– Skilled workers in fields where there is a lack of workers
– Graduates from higher education institutions in Austria

Consider the following for shorter stays:

You will require a travel visa (Visa C) (Schengenvisum) for stays up to 90 days within six months or a residence visa (Visa D) for stays between 91 days and six months if your stay is for less than six months. You must go to an Austrian embassy or consulate in your home country to apply for such a visa.