Various statutes regulate Austrian labor relations and the individual rights and duties of employer and employees. The most important source is the Austrian Constitutional Act on Industrial Relations, which provides a framework regulating the interaction between employees and employers. On top of that, almost all employers and employees are subject to collective bargaining agreements.
There are several key areas to be aware of within the Austrian employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.
Contracts of employment in Austria must state a mutual obligation upon employer and employee, which consists not only in providing services once, but implies a conduct which prevails for some time. There is no specific form required for a contract of employment; this means that it can be concluded orally, in writing or through conclusive action. If the employment contract is not put into writing, the newly-hired employee must be given at least information in written form, outlining his most important rights and responsibilities.
A one month probation period can be arranged. During this time, both the employer and the employee can terminate the contract of employment without explanation.
Normal working time amounts to 40 hours per week. In some cases, the collective agreement can include fewer working hours (i.e. 38.5 per week). The standard time spent at work may also be exceeded. In the case of overtime, employees are to be generally reimbursed with 50 percent extra pay, or 100 percent when the work is carried out at night, on Sundays or on holidays. The maximum working hours allowed is 60 hours a week and 12 hours a day.
After six months of employment, every employee is entitled to an annual paid vacation of 30 working days or five weeks respectively (Saturday is considered a working day). This right applies to people who have been employed for less than 25 years. When employees have been working for 26 years, the entitlement to holidays increases to 36 (paid) working days annually.
The principle of continued remuneration ensures that in the event of sickness, industrial accident and occupational illness and during rest cure and convalescence leave, employees’ remuneration will continue to be paid. How long one continues to be paid mainlydepends on the seniority, and different regulations may apply for white-collar workers and manual workers.
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. As an employee one is obliged to inform the employer as soon as one becomes incapacitated for work.
The protection period for pregnant employees normally begins eight weeks before birth and ends eight weeks thereafter. During the protection period the employment relationship continues to exist, and the employee receives a maternity allowance of about the same amount as the average remuneration during the last 13 weeks before the absolute employment prohibition. Since 1st January 2008, also freelance contractors receive maternity allowance.
Mothers and fathers are entitled to parental leave of until the child reaches the age of 24 months (maximum), provided the parent in parental leave lives in the same household as the child. The minimum period of the parental leave is two months. The dismissal and termination protection ends four weeks after the end of the parental leave.
During the time of parental leave, and provided the conditions are satisfied, childcare allowance may be drawn. From 1 January 2010, parents may choose from five models of childcare allowance. One model is income-based, the others provide a monthly lump sum.
Individual termination may be unilateral, subject to a notice period or by mutual consent. It usually does not require any cause or any specific form.
According to Austrian labor law, an employer must comply with a scale of notice periods for termination of an employee’s employment, which may be lengthened under the terms of a collective bargaining agreement or individual employment agreement.
For salaried employees, the legal term of notice amounts to:
Year of service and Period of notice
1st and 2nd year = 6 weeks
3rd – 5th year = 2 months
6th – 15th year = 3 months
16th – 25th year = 4 months
after 26th year = 5 months.
An employer can immediately dismiss the employee for reasons of insubordination, disloyalty and other types of gross misconduct, or in case of violation of the duty of good faith. If an employer issues a notice of dismissal, the employment will normally end immediately.
However, the employee will be entitled to either full payment for the notice period applying to ordinary termination, or to have the termination cancelled, if he or she initiates and wins a claim under the rules for protection against termination.
Where an employer wishes to terminate or dismiss a protected class of employee it may normally only do so with good cause and where a labor court has approved the termination. The principal protected groups are: members of and candidates to the Works Council, pregnant employees up to four months after giving birth, employees on maternity leave and working parental part-time, employees doing their prescribed military service and disabled employees.
The main element of the Act on the Harmonization of Austrian Pension Systems (2005) represented the introduction of a uniform pension system for all employed under 50 years. As a consequence, this new pension system will gradually take the place of many different pension schemes for private sector employees, self-employed, farmers and civil servants.
Pension entitlements are subject to individual life-time earnings, reaping the maximum benefits of 80% of average earnings in the case of 45 insurance years 1 at the statutory retirement age of 65 years. The annual accrual rate will be continuously lowered from 2 to 1.78 percentage points until 2009. The basis of average individual earnings will be extended gradually from the best 15 to 40 income years until 2028.
A benefit will be granted provided that 7 years of pension contributions in a working life have been established. Pension benefits are adjusted every year by inflation and past contributions and maximum contribution levels are indexed by net wage growth.
The statutory retirement age is 65 years for men and women. Early retirement will be fully eliminated by 2017. A pension corridor was introduced between 62 and 68 years, but with an actuarially fair discount/bonus of 4.2 % per year before/after 65 years and at minimum when 450 insurance months have been acquired. Pension benefits are subject to personal income taxation and to social security contributions, above all on health care.
Concrete arrangements for private pension plans (third pillar) are made by the individual. Traditionally, life insurance has already played a major role, and life insurance contracts have continued to show a significant upward trend over the past years.
Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Austria. For companies, which intend to employ their staff directly through their incorporated Austrian entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Austria.
As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Austria.
The Shield GEO solution is an attractive alternative where
– the company is looking to employ staff quickly
– the company doesn’t have an appropriately incorporated entity in Austria
– the company wants to work within a defined budget
– the company wants to limit its initial commitment in Austria
– the company needs help with tax, employment, immigration and payroll compliance in Austria
Shield GEO can contract directly with the company to employ and payroll their staff in Austria. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits. Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.