Like most EU Member States, Austria's approach to employment policy fosters a legal environment that provides broad protection and rights for employees. The legal regime comprises a complex combination of overlapping EU and Austrian legislation, broad collective bargaining agreements, shop-floor agreements, and individual employment agreements. The different classifications of employees are defined by statutory provisions, but although these formal distinctions still exist on paper, they are slowly losing their significance as Austria moves towards unifying its laws in respect of blue and white collar employees. However, employers have consistently resisted change because extending white collar employees' rights would result in increased costs for employers.

Issues arising on hiring individuals


In order to work legally in Austria, a foreign national (who is not an EEA-national) must comply with the Employment Act 1975 and obtain an employment permit, a work permit, an exemption certificate or a Red-White-Red card.

An Austrian employer may recruit a foreign national for employment in Austria, but the individual must apply for approval and an employment permit from the regional employment office. This employment permit allows a foreign employee to work in the specifically designated position for the specified employer for a maximum period of one year. The employment office will decide whether to issue the employment permit based on three criterions: (1) an analysis of the current labour market, and whether the market will benefit from employing a foreigner; (2) an assessment of whether any public policy issues conflict with issuing the employment permit to the foreigner; taking into account the specific circumstances of the employment agreement; and (3) an evaluation of whether the employer complies with applicable working conditions minimum wage requirements, and the Social Security Act.

Employment structuring and documentation

The majority of Austrian employment agreements are for an indefinite term. An employment agreement can be terminated by either party giving notice without good reason, the consensual termination of employment, or summary dismissal for misconduct or some other substantial reason.

An individual employment contract is not required to be in writing; an employment contract exists when an individual undertakes to provide services to another person or corporate entity for a specific (definite or indefinite) period. However, like shop-floor agreements, employment agreements must comply with the relevant statutes, or collective bargaining agreements (CBA). An employment agreement may confer additional rights and entitlements than are provided for under the legislation, but never fewer. A probationary period may be included in the agreement, which allows the employer or the employee to terminate the employment agreement at any time during the probationary period without giving notice.

While statutes, such as The Salaried Employees Act, regulate basic employment protections and entitlements, practically every employer and employee in Austria is party to a CBA. The formation of CBAs is regulated by The Labour Relations Act, which governs areas such as the election and tenure of employee representatives on works councils, and the role of works councils in internal, social, personal and business matters.

CBAs are negotiated at industry level, and apply to the employment agreements of all employees within a particular industry, whether or not they are unionised. They cover a very wide range of employment issues, and are the foundation for Austrian employment law policy.

Issues arising during the employment relationship

Wages, annual leave and working time

Austria has no national minimum wage, and instead relies on industry-specific guidelines set out in the relevant CBA Employees' salaries must comply with CBA provisions regarding industry-wide minimum salaries. An individual employment agreement that stipulates a lower salary than that stated in the relevant CBA is considered void from inception.

Overtime work is generally permitted in Austria. Blue collar workers most frequently receive overtime pay. Overtime payment schemes are usually agreed to on a CBA-by-CBA basis, but where overtime in not covered in the employment agreement, the Working Time Act applies. This stipulates that overtime should be 25% higher than the employee's wage for any additional hours worked up to the statutory maximum of 40 hours, and 50% higher for overtime worked in excess of the 40 hours maximum. Overtime performed on Sundays, public holidays, or between midnight and seven o'clock in the morning will attract a 100% wage supplement.

Social insurance

Austria has a contribution based, pay-as-you-go social security system that provides benefits in the three broad spheres of health insurance, unemployment support, and pension entitlements. The pay-as-you-go model means that pensions and benefits paid out within one fiscal year are directly financed by contributions from the workforce in the same fiscal year.

Current workforce contributions are calculated according to an individual's gross monthly salary, including the monetary value of any non-monetary benefits like a company car, or corporate-owned residences. Employee contributions generally amount to approximately 18% of their gross income. The employer's contribution is approximately 21%.

Issues arising on termination of the employment relationship

Business transfers

Austrian law states that, generally, in the case of a business transfer, all employees who are part of the business affected are automatically transferred to the transferee. The transfer of employment rights includes any unsettled employment claims against the transferor, even if the facts underlying those claims occurred before the business transfer.

Austrian law states that, prior to the transfer, the employer must notify the works council of the planned transfer, and of the implications of the transfer on the relevant CBAs. However, there are no legal penalties for failure to comply with these notification requirements.

Terminating employment

Austrian law does not restrict terminating employment to specific conduct or causes. The bulk of statutory and CBA regulation on termination concerns mandatory notice periods and termination dates. As with much of Austrian employment law, termination procedure regulations differ for blue and white collar workers. Blue collar termination regulations are usually dictated by CBAs. Procedures for dismissing white collar employees are laid out in The Salaried Employees Act, which provides that employers must give at least six weeks' notice. There is no requirement to state a reason for termination. Regardless of their length of service, if employees wish to terminate their employment they must give one month's notice.

In addition to the notice requirements, standard termination procedures must also comply with specific statutory or contractually designated termination dates. These are unrelated to the notice period requirements, and usually operate to extend employment from the last day of the notice period to the designated termination date.

As an alternative to the stringent requirements of the notice procedure, employers and employees may agree a termination date, to avoid the notice requirements. The employee is, however, still entitled to their statutory severance payments and cannot legally waive those rights. In this situation, waivers of severance payment and/or annual leave payments are null and void.

The Austrian statutory severance pay system is in a state of transition. There are currently two severance pay schemes that apply: the "old system" applies to employment agreements created on or before 31 December 2002, the "new system" applies to all employment agreements created after December 2002.

The "old system" provides for a sliding scale of severance pay, with the employee's entitlement increasing with length of service. Severance pay entitlements apply once an employee has worked for the same employer for a continuous period of three years.

The "new system" stipulates that employers must withhold 153% of their employees' gross monthly wages (including special payments) and pay this to an independently managed severance pay provider.

Published in collaboration with L&E Global an alliance of employers’ counsel worldwide

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