This collaboration is a brief step-by-step guidance. In no case it can be considered as legal advice. If you want -or need – legal advice, ask for a lawyer or a law firm. In that case Kraft & Wildenhofer is an excellent option in Austria.
Austrian labour law is characterized by high standards of protection of the employees’ rights and the importance of collective bargaining (company agreements are less important). Therefore, the possibility to govern the labour conditions by individual contracting is restricted.
The most important distinction is drawn between white-collar workers (Angestellte) and blue-collar workers (Arbeiter). White-collar workers are employed in commercial, higher non-commercial or clerk services, all other employees are blue-collar workers. Since this distinction is commonly seen as antiquated, in recent years the legal rules for white-collar workers and blue-collar workers have been adjusted, but there are still some differences, e.g. the periods of termination still differ. Furthermore, in many sectors there are different collective bargaining agreements for white-collar workers and blue-collar workers.
In addition to the usual labour contract, there is the possibility to enter into a free labour contract (freier Dienstvertrag). In a free labour contract the “employee” is not personally dependent on the “employer” (e.g., he can set his working time by himself, he works with his own equipment etc.). Only a few labour laws apply to free labour contracts.
A labour contract may be concluded for a definite or indefinite period of time. A contract for indefinite time can always be terminated by an ordinary termination (Kündigung) by both of the parties, provided they comply with certain notice requirements (termination periods and dates). The termination period the employer must comply with depends on the years of service: in case of white-collar workers, it may run from 6 weeks (in the first two years of service) to 5 months (after 25 years of service). A white-collar worker must comply with a termination period of one month. The statutory termination period may be lengthened but not shortened by the individual contract. The period the employee has to comply with must not be longer as the period the employer has to comply with. The employer of a white collar worker may terminate the contract to the end of each quarter; the white-collar employee may terminate employment to the end of each month. This rule can be changed by contract, so that both parties may terminate the contract on 15th or the last day of the month. In the case of bluecollar workers, the applicable termination period is two weeks for both parties, there are no certain termination dates. The period may be lengthened or shortened by collective bargaining or by contract. In enterprises where a work council is actually established the work council must be informed by the employer before giving notice of the termination to the employee.
An ordinary termination may be challenged by the employee if he works in a plant/factory where establishment of a work council is required (see below). A termination can be challenged because of a proscribed reason of the termination (e.g., union activity, activities in organizing the election of a work council) or because it was socially unjustified (important for elder employees). For some protected groups as members of the work council, pregnant employees, handicapped people or apprentices terminations are restricted.
Beside ordinary termination contracts (whether for a definite or indefinite period of time) may be terminated with immediate effect if there are important reasons that make the continuation of the employment unacceptable for one of the parties. The employer may immediately terminate the labour contract if the employee is disloyal in his service, incapable of performing his services, refuses to comply with orders of the employer etc. If the dismissal is not justifiable because there is no important reason the employment nevertheless ends immediately, but the employee will be entitled to full pay as if the employer would have ordinarily terminated the employment.
If an employment contract or a freelance contract is terminated after 31.12.2012, generally (e.g., in case the contract is terminated by the employer, in case of unjustified dismissal or contracts ending by passage of time), a fee of EUR 124 in 2017 (Auflösungsabgabe) has to be paid by the employer. Under certain circumstances no such fee applies: termination by employee, justified dismissal, etc.
An employee, whose employment has lasted for at least three years, is entitled to severance payment (Abfertigung) in the event of ordinary termination by the employer, termination by mutual consent, justified immediate resignation by the employee, unjustified dismissal by the employer, time lapse and resignation due to pregnancy. The severance payment depends upon the time of service and ranges from 2 months’ salary to 12 months’ salary. The Act on Statutory Corporate Employment Retirement Scheme (Betriebliches Mitarbeiterversorgungsgesetz) applies to contracts beginning after December 31, 2002 (there is an opt-in-possibility for older contracts). Under this new legislation the employer has to pay 1.53 % of the monthly remuneration to a fund which pays the severance payment.
The members of the managing board of a Stock Corporation are excluded from the protective provisions of the labour law. However, labour law may apply to managing directors of a Company with Limited Liability depending on the rights and duties they have. Shareholders holding a majority or a blocking minority of shares will not be regarded as employees if they serve as managing directors of that company.
Employees Representatives and union representation
In Austria there is only one trade union, the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB). The influence of the trade union is still significant since the Austrian Trade Union Federation conclude collective bargaining agreements (see below).
Members of the staff of companies having at least five employees are entitled to establish a work council (Betriebsrat). The number of members depends on the number of employees. The members of the work council need not to be members of the trade union. The work councils, therefore, are formally independent from the trade union although in fact there are often connections. A work council may conclude company agreements with the owner of the company (see below).
The members of the work council enjoy certain privileges and the law provides them specific protection (e.g., protection against termination). If their duties as members of the work council requires them to perform such activities during normal working hours their salary must not been reduced. In companies with a great number of employees (more than 150) one or more members (2 if there are more than 700 employees, 3 if there are more than 3000 employees) of the work council are entitled to be totally released from their duty under their employment contract. Members of the work council must not be discriminated against.
There are no specific privileges for members of the Trade Union but a termination because of union activities is not justified (see above).
Collective Bargaining Agreements, Company Agreements
The parties of collective bargaining agreements are the Austrian Trade Union Federation and statutory employer organisations, in particular the chamber of commerce (Wirtschaftkammer) and its sub-organizations. Generally collective bargaining agreements are concluded for a specific sector or branch, in most of the cases they apply to the whole territory of Austria, but there are also collective bargaining agreements applicable only in a certain province. The collective bargaining agreements apply to all employees in the specific branch, no matter if they are members of the trade union or not. Collective bargaining agreements govern the main aspects of the employment like wages, working conditions, working time etc. They apply to all employment relations, overriding the individual contract, except where the terms of the individual contract are more favourable to the employee. Collective bargaining agreements are thus of great significance in Austria.
Company Agreements are concluded between the management of the company and the work council (if there is no work council, no company agreement can be concluded). Only specified matters can be governed by a company agreement, e.g., establishing of piece-work system, regulation of the daily work time etc. Company Agreements are less important than collective bargaining agreements.
Wages and other types of compensation
There is no statutory minimum salary in Austria, but minimum salaries are stipulated in the collective bargaining agreements. The minimum salaries depend on the duties and the years of service. It is important that usually collective bargaining agreements grant 14 payments a year (so called 13th and 14th salary or Christmas and vacation pay, these payments are subject to a reduced income tax at a 6 per cent rate).
Other types of compensation common in Austria are the provision of a company housing or a company car, contributions to a pension funds or meals at a reduced price. Since collective bargaining agreements usually stipulate a salary paid in cash (transferred to the bank account of the employee) remuneration in kind has no great importance in Austria. If an employer repeatedly grants additional benefits (e.g., a bonus at the end of the year) the employee is entitled to receive these benefits in the future. The employer can avoid this by explicitly reserving the right to terminate the practice at will.
The normal statutory working time is eight hours a day and 40 hours a week. Many collective bargaining agreements stipulate shorter working-times (38 hours a week are common). Overtime hours have to be paid at the normal hourly rate plus 50 % (collective bargaining agreements may stipulate higher extra pays in particular for overtime hours on Sundays). It is permissible to agree on a lump-sum for overtime hours or an all-in- salary as long as the lump-sum or the all-in-salary exceeds the minimum payment for overtime hours set by the applicable collective bargaining agreement. Besides payment for overtime hours it is also possible that the employee takes a compensatory time off whereby one overtime hour is equal to at least one and a half hours of extra free-time.
Austrian labour law is split up to many different statutes. For white-collar workers the Act on white-collar workers (Angestelltengesetz) is of great importance. Other important acts are the Labour Relations Act (Arbeitsverfassungsgesetz), the Vacation Act (Urlaubsgesetz) and the Working Time Act (Arbeitszeitgesetz).
Social Security costs
The employer must notify the beginning and the end of an employment to the social insurance agency. The employer is liable for the payment of the social security costs. The contributions must be paid monthly by the last day of the month. The social security contributions consist of an employee’s contribution which is deducted from the salary and an employer’s contribution which must be paid in addition to the salary. The employer is liable for the payment of the employer’s contribution and the employee’s contribution.
The employees contribution is currently (2017) 18.12 per cent of the salary for white collar-workers and 18.12 per cent of the salary for blue-collar workers
The employers contribution is currently (2017) 21.48 per cent of the salary for white collar workers and 21.48 per cent of the salary for blue collar workers.
There is a ceiling on the basis for contribution (Höchstbeitragsgrundlage) of EUR 4,980 a month (in the year 2017) which means no social insurance contributions have to be paid for the part of the salary exceeding this ceiling.
Generally, all parts of the remuneration (including remuneration in kind and overtime payments) are the basis for the social insurance contribution, but there are a few exceptions, e.g. work clothes, meals at a reduced price, contributions to a pension’s fund.
Health and Safety
Austrian labour law includes detailed provisions on occupational safety and health which the employer has to comply with. The employer has the duty to take measures to protect the life, the health and the morality of his employees at their work place. These regulations cover the size, lightning and ventilation of rooms, fire prevention, first aid, compulsory safety instructions etc. Compliance with these provisions is monitored by the Work Inspection Authority (Arbeitsinspektorat). Depending on the numbers of employees one or more person responsible for safety (Sicherheitsvertrauensperson) has to be appointed.
Important statutes in this field are the Act on Safety and Protection of Health at work (ArbeitnehmerInnenschutzgesetz) and the Act on Work Inspection (Arbeitsinspektionsgesetz).
Contracting and outsourcing of work or services
If work is outsourced this may be deemed as transfer of business (Betriebsübergang) and the corresponding regulations apply (liability of the old owner, position of the employee must not deteriorate). According to the Austrian provisions any transfer of business, generally, has no consequence for the employees being affected – any purchaser enters into their unchanged contracts. An important exception exists for the transfer of a business by share deal: since the employer (being the company itself) is still the same, no transfer of business is made and the above mentioned protection provisions are not applicable.
If freelancers are engaged it is important to formulate a contract which is not deemed as illegal avoidance of labour law. Therefore the freelancer must not be personally dependent on the employer (see above). If the contract is deemed as illegal avoidance of labour law, labour law nevertheless applies.