The 'Ausfallsprinzip' ('Principle of Loss Compensation')

If an employee gives his employer at least three months' notice of his intention to take annual leave of at least two weeks, the Works Council (if any) has to be involved in the negotiations. If no agreement is reached, the employer must file a claim to prevent the annual leave being taken.

In Austria, every employee is entitled to five weeks' annual leave. This entitlement increases to six weeks' leave after 25 years of service.

When taking annual leave, an employee must not suffer any loss of pay as compared to pay received ordinarily, under a principle known as the “Principle of Loss Compensation”.

The Principle of Loss Compensation states that an employee who is on annual leave has to be treated, in financial terms, as if he were working during that period. This means the employee must be paid the same salary he would have earned had he been working during his annual leave and therefore the salary equivalent is not limited to base salary but also includes overtime (if regularly performed), bonus payments and also regular commission.

Where an employee has a commission agreement guaranteeing commission upon reaching specific sales targets in a calendar month, the drawback of the system becomes evident. If the respective employee is on annual leave for, say, three weeks in one calendar month, that employee:

  • is entitled to an average (full) salary during the period of his annual leave, taking overtime, bonus payments and usual commission into account; but
  • may not reach the required monthly sales target in that month and may therefore not be eligible to earn commission.

This has not been tested in the Austrian courts yet, but commentary suggests that the Principle of Loss Compensation could be interpreted as imposing a reduction in the required sales target to give the employee the chance to achieve his target so as not to make gaining commission impossible. In other words, the maxim of statutory loss compensation not only protects the period of absence but has to be construed as having effect on the actual working period as well.

> Table containing jurisdiction by jurisdiction analysis (PDF)