Understanding Payroll in Austria: What Global Companies Need to Know About Austria's Payroll
Mar 28, 2017
With around 8.5 million people and a GDP of $50,546 (£40.100; €46.396) per capita, Austria is one of the most stable countries in the EU. Engineering, manufacturing, and luxury good production are all major components of the economy. Austria prides itself in providing a social safety net for those who need it most. They attribute much of their social and economic harmony to workers' rights, but this can also spell high taxes for certain groups.
Case in point, the progressive tax scale was recently reformed and included an increase in tax withholdings from capital gains. However, Austria has also tried to accommodate foreign businesses who want to bring revenue to the country. As you'll see below, the government makes it easy for companies to set up these businesses both practically and financially. What it doesn't do though is make it simple to process payroll or taxes. The advice about international payroll is consistent: it's better to hire a professional payroll service to handle it all.
Austria allows most foreign businesses to get a license for payroll of resident employees, though all businesses will need a trade license first. You can apply for the trade license at the local level, which typically means visiting the municipal council or a district management team. You can register as an LLC, public company, foreign branch or partnership.
It can take up to 7 weeks to fully establish a public or branch business. For those looking for full control over their payroll, it's necessary to register, hire, and go through the incorporation process. It takes about 4 weeks to set up a bank account in Austria. You will need to hire someone within the country who understands human resources, withholdings, and tax requirements.
Collective bargaining is a process between the unions and the economic chambers. Essentially, employees have full entities who are negotiating on their behalf to determine fair conditions. While this bargaining doesn't cover absolutely everyone, it does cover the vast majority of workers. Unless you're working with an apprentice, employment contracts do not have to be in writing. If agreed to by both parties, a probationary period can be put in place for up to one month. During this time, either party can terminate the agreement with or without reason.
Austria protects employees for discrimination based on race, age, gender, and sexual orientation. Anything over 40 hours a week or 8 hours a day must be paid as overtime, and overtime cannot exceed 10 hours a day or 50 a week, unless there are extenuating circumstances.
Wages are typically determined by collective bargaining, and are based on the position and the experience the applicant has. There are no national minimum wage or wage growth requirements (unless hiring apprentices), but employers must follow the collective bargaining laws that were decided upon between the economic chambers and the unions. These may change from year to year. Part of the reason why Austria has so few worker strikes is due to the ability of employers and employees to come to a mutual understanding about what a fair wage is for their time.
Taxes are progressive based on the employee's income. Employees are taxed for income earned in Austria if living there for less than 6 months, and taxed on worldwide income if living there for more than 6 months. The corporate income tax rate is 25%, which makes it a competitive country to establish a payroll in.
If you spend much of the profits on education or R&D, you may get even further tax relief based on recent reforms. The same is true if you set up your business in an underdeveloped area on the country's eastern border. International firms both large and small can set up subsidiaries in Austria for excellent rates, with even more breaks given to those who establish their headquarters in the country. Dividend income and capital gains are automatically withheld, and there is no wealth tax.
Leave, Maternity and Sick Time
Paid time off for those with serious illnesses must be at least 6 weeks according to the Employee Act. Maternity and paternity leave can last until the child is 2 years of age, but the employer is not required to pay the salary of the employee during this time. In addition, an employee can take up to a week off to care for a sick relative. After 6 months of employment, the Holiday Act give 30 days of paid holiday leave for full-time employees and 13 public holidays. Workers accrue 2.5 days of paid time per month before this.
|Date||Austria Public Holiday Schedule|
|January 1st||New Years Day|
|Monday after Easter Sunday||Easter Monday|
|May 1st||Labour Day|
|40 Days After Easter||Ascension Day|
|7th Monday after Easter||Whit Monday|
|Second Thursday after Whitsun||Corpus Christi|
|August 15th||Assumption Day|
|October 26th||National Day|
|November 1st||All Saints Day|
|December 8th||Immaculate Conception Day|
|December 25th||Christmas Day|
|December 26th||St. Stephens Day|
Austria has had few complaints from workers for many years. It appears that if they head in any direction, it will be to continue to honor the employee whenever possible. For example, right now there are a number of distinctions between blue- and white-collar work. These laws are expected to be abolished soon, meaning you may want to give both groups equal consideration starting now.
There is no doubt that you're better off having a global payroll firm handle your finances. The financial laws can get complicated quickly, and would take quite a while to learn to process it all without wasting time or money. A global payroll solution can do the work for you, so your business can concentrate on getting more done.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.