Employer of Record in Austria

Navigating international employment can be complex, especially when considering a country with specific labor laws and regulations like Austria. For businesses looking to expand their talent pool into the Austrian market, understanding the various methods of engaging employees is crucial for ensuring compliance and operational efficiency. The approach you choose will significantly impact your administrative responsibilities and legal obligations.

When hiring in Austria, companies typically have three main options:

• Establishing a Local Legal Entity: This involves setting up a subsidiary or branch office in Austria, which requires significant time, investment, and adherence to local corporate registration and tax laws.
• Utilizing an Employer of Record (EOR): Partnering with a third-party service provider like Rivermate allows your company to legally employ individuals in Austria without establishing your own entity. The EOR acts as the legal employer, handling all compliance, payroll, and HR tasks.
• Engaging Independent Contractors: For project-based or short-term work, you might consider hiring individuals as independent contractors. However, it's essential to classify them correctly to avoid risks of misclassification under Austrian labor laws, which could lead to severe penalties.

How an EOR Works in Austria

An Employer of Record simplifies the process of hiring in Austria by taking on the majority of the administrative and legal burden. Specifically, an EOR in Austria will handle:

• Legal employment registration: Ensuring your employees are registered with all necessary Austrian authorities.
• Payroll processing and administration: Calculating and distributing salaries, bonuses, and severance in compliance with Austrian labor law.
• Tax withholding and remittances: Managing income tax, social security contributions, and other mandatory deductions according to Austrian regulations.
• Benefits administration: Administering statutory benefits such as health insurance, pension contributions, and parental leave, and potentially optional benefits.
• Employment contract compliance: Drafting and managing compliant employment contracts in line with Austrian labor law.
• HR support and termination management: Providing guidance on local HR best practices and managing compliant termination processes, if necessary.

Benefits for Companies Hiring in Austria

Engaging an EOR like Rivermate offers distinct advantages for businesses aiming to expand into Austria without the overhead of establishing a local entity:

• Rapid Market Entry: Hire employees in Austria quickly, often within days, without waiting months for entity registration.
• Reduced Administrative Burden: Outsource complex payroll, tax, and HR compliance tasks, freeing up internal resources.
• Guaranteed Compliance: Mitigate risks associated with navigating unfamiliar Austrian labor laws, tax regulations, and social security requirements.
• Cost-Effectiveness: Avoid the significant costs and ongoing expenses of establishing and maintaining a local subsidiary.
• Flexibility: Easily scale your workforce up or down in Austria based on business needs, without major structural changes.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Austria includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Austria.

In Austria, employers are responsible for significant social security and payroll tax contributions, totaling approximately 25.06% of gross payroll, covering health, pension, accident, unemployment insurance, and additional funds like severance and family burden. They must also pay a payroll tax (DZ) of 3.9% and regional municipal taxes (~3%). Employers are obligated to withhold income tax (Lohnsteuer) from employees based on progressive brackets, with rates ranging from 0% up to 55% for incomes over €1,000,000, and remit these monthly.

Employees benefit from deductions such as commuting allowances, professional expenses, and tax credits, which reduce taxable income. Employers must adhere to strict reporting deadlines: monthly payroll tax returns by the 15th of the following month and annual reconciliations by end-January. Employees earning above certain thresholds are required to file annual income tax returns by end-April, with extensions possible for electronic submissions.

Foreign workers and companies face additional considerations, including double taxation treaties, limited tax liability for non-residents, and expatriate allowances. Foreign residents are taxed on worldwide income, while non-residents are taxed only on Austrian-sourced income. Professional advice is recommended to navigate these complexities effectively.

Austria offers competitive salaries that vary by industry, role, experience, and region, with Vienna generally offering higher pay. Typical annual salaries range from €40,000 to €120,000, depending on the position, such as Software Engineers (€55,000–€85,000) or Physicians (€70,000–€120,000). Employers should note that salary levels are influenced by market conditions and individual qualifications.

Minimum wages are governed by industry-specific collective bargaining agreements (Kollektivverträge), with typical minimums between €1,600 and €2,000 monthly in 2025. Non-compliance can lead to penalties. Compensation packages often include statutory bonuses like the 13th and 14th month salaries, vacation and Christmas allowances, and discretionary performance bonuses. Additional benefits such as company cars, meal vouchers, and travel allowances are common.

Salaries are paid monthly via bank transfer, with detailed payslips required. Salary trends in 2025 are expected to rise due to inflation, skills shortages in sectors like IT and healthcare, and economic growth. Remote work may also influence salary structures, making it essential for companies to stay updated on these trends to attract and retain talent.

Austria mandates at least 5 weeks (25 days) of paid annual vacation for employees working a five-day week, increasing to 6 weeks (30 days) after 25 years of service. Collective agreements may offer more generous leave. Vacation should generally be taken within the current year, with some flexibility for carry-over.

Employees are entitled to paid time off for 13 public holidays annually, with additional pay if required to work on these days. Key holidays include New Year’s Day, Christmas, and National Day, among others.

Sick leave entitlements depend on length of service, with continued wage payments during sick leave varying accordingly.

Austria's employee benefits system is comprehensive, combining mandatory and optional benefits that are essential for attracting and retaining talent. Mandatory benefits include health insurance, pension, accident, and unemployment insurance, along with paid vacation, public holidays, sick pay, and severance pay. These are funded through contributions from both employers and employees. Optional benefits often enhance the core package and include supplementary health insurance, company pension plans, life and disability insurance, employee assistance programs, subsidized meals, transportation allowances, flexible work arrangements, and professional development opportunities.

Health insurance is universal and mandatory, covering a wide range of medical services, with many employees opting for supplementary private coverage. Retirement benefits consist of a state pension, funded through contributions, and optional company pension plans, which may offer tax advantages. Benefit packages vary by company size and industry, with larger firms typically providing more extensive options. Employers must budget for social security contributions and ensure compliance with labor laws and collective bargaining agreements, which often specify minimum benefits.

In Austria, employment agreements are governed by statutory laws, collective bargaining agreements (Kollektivverträge), and individual contracts, emphasizing employee protection. Essential clauses include employer and employee details, job description, start date, work location, salary, working hours, notice periods, and references to applicable collective agreements. Agreements can be fixed-term or indefinite, with fixed-term contracts subject to limitations on renewal to prevent misuse; exceeding these may convert them into indefinite contracts.

Probation periods are typically up to one month, allowing either party to terminate without cause during this time. Confidentiality and non-compete clauses are common, with enforceability depending on reasonableness and compensation; non-compete durations are generally limited to one year. Contract modifications must be in writing and mutually agreed, while terminations require valid reasons for indefinite contracts, adherence to notice periods, and may involve severance pay. Employees can challenge unfair dismissals in court.

Austria's remote work landscape has expanded significantly, driven by technological progress and evolving workplace norms. While there is no explicit legal right to remote work, arrangements are typically based on mutual agreement, with employers responsible for ensuring safe, compliant, and well-supported remote environments. Key legal obligations include adherence to working hours (Arbeitszeitgesetz), workplace safety (ArbeitnehmerInnenschutzgesetz), and data protection (GDPR). Employers must also provide or reimburse necessary equipment and expenses, ensuring transparency and compliance with tax implications.

Flexible work options are increasingly popular, including telecommuting, mobile work, flextime, compressed workweeks, and job sharing. Data security remains paramount, requiring policies on secure data handling, technical safeguards like VPNs and encryption, and regular employee training. Reliable technology infrastructure—such as communication platforms (Zoom, Teams), secure remote access, and cloud solutions—is essential for productivity. Employers should establish clear policies on equipment provision and expense reimbursement, with considerations for internet stipends and device use, to support effective remote work arrangements.

This concise overview highlights the critical legal, practical, and technological considerations for Austrian employers implementing remote work policies.

In Austria, employment termination is highly regulated, with strict legal protections for employees. Employers must adhere to specific notice periods, which vary based on employee category and tenure. For white-collar workers, notice periods range from 6 weeks to 5 months depending on service length, while blue-collar workers often follow collective bargaining agreements with potentially shorter periods. Employees typically have a minimum one-month notice period, which can be extended by agreement.

Severance pay (Abfertigung) depends on the employee's length of service and the system in place—either the "old" system (pre-2003) or the "new" system (post-2002). Under the old system, entitlements range from 2 to 12 months' salary, while the new system involves mandatory contributions to benefit funds, with options for payout or transfer upon termination. Termination grounds include with cause (serious breaches like theft or insubordination) and without cause, with the latter requiring compliance with notice periods and avoiding discrimination.

Procedural compliance is essential: terminations must be in writing, possibly include reasons if requested, involve works council consultation if applicable, and be delivered in a provable manner. Employee protections against wrongful dismissal are robust, covering discrimination, illness, and works council members. Employees can challenge unjustified terminations in court, which may result in reinstatement or compensation. Employers should seek legal advice to ensure lawful compliance and mitigate risks.

Austria offers a conducive environment for engaging independent contractors, crucial for businesses seeking flexible talent. The distinction between employees and independent contractors is defined by the nature of the work relationship, focusing on personal dependency, integration into the client's organization, control, and economic risk. Misclassification can result in significant legal and financial repercussions, making it essential to establish clear contracts that reflect the independent nature of the relationship. Contracts should include detailed scope of work, deliverables, timelines, remuneration, and clauses on confidentiality, intellectual property, and liability.

Intellectual property rights in Austria default to the creator, necessitating explicit contract clauses for IP assignment or licensing to clients. Tax obligations for independent contractors include income tax and VAT, with registration required if turnover exceeds €35,000. Social security contributions are mandatory under the Social Insurance Scheme for the Self-Employed, covering health, pension, and accident insurance, with unemployment insurance being optional. Independent contractors are prevalent in sectors like IT, creative industries, consulting, education, healthcare, and construction, providing specialized skills and flexibility.

Austria attracts foreign workers through various visa options, with the most common being the Red-White-Red Card for qualified non-EU/EEA nationals, the EU Blue Card for highly skilled professionals, and the Settlement Permit for long-term residence and employment. In 2025, key criteria include points-based assessments for the Red-White-Red Card, minimum salary thresholds for the EU Blue Card (€51,500 gross annually), and visa durations ranging from 91 days up to 6 months for Visa D. Employers must sponsor and ensure compliance with Austrian regulations, while employees need to maintain legal status and adhere to legal obligations.