Payroll & Employment Guide: Austria

🇦🇹 Hire and Pay Employees in Austria

Payroll & Employment Guide: Austria
Austria is known for its highly skilled workforce, strong employment protections, structured collective agreements, and robust social security system. Hiring in Austria requires adherence to strict labour laws, mandatory benefits, and detailed payroll compliance. This guide provides a full overview of hiring and paying employees in Austria.

Employee Benefits

Austria offers one of Europe’s strongest benefits frameworks, combining statutory rights with mandatory employer contributions.

Mandatory Benefits

• Paid annual leave: 25 days
• Sick leave (employer-paid initially, then social insurance)
• Pension insurance
• Health and accident insurance
• Unemployment insurance
• Family allowance
• Holiday & Christmas bonuses (13th & 14th month salary) under most collective agreements

Leave Policies

• Annual Leave
  25 days per year
  Increases to 30 days after 25 years of service
• Sick Leave
  Employer pays: 100% salary for first 6–12 weeks depending on tenure
  50% salary for additional weeks
  Then health insurance pays partial compensation.
• Parental Leave
  Maternity leave: 16 weeks (8 before, 8 after birth)
  Parental leave: Up to 2 years, shared by parents
  Paternity leave: 1 month optional leave (“Papa Monat”)
• Public Holidays
  13 national holidays per year

Healthcare
Austria provides universal healthcare through ÖGK (Austrian Health Insurance Fund).
Covers:

• Doctor visits
• Hospitalization
• Medication subsidies
• Occupational health services

Employers and employees contribute jointly.
Many companies provide supplemental private health insurance.

Retirement Benefits
Austria’s pension system includes:

• State pension (mandatory)
• Company pension funds (optional)
• Private retirement plans (optional)

Employees earn credits through social insurance contributions.

Social Security Contributions (2026)

• Employer Contributions
  Approx. 21%–22% of salary covering:
  • Pension insurance
  • Health insurance
  • Accident insurance
  • Unemployment insurance
  • Severance fund (Abfertigung Neu)
• Employee Contributions
  Approx. 18% covering: Pension
  • Pension
  • Health
  • Unemployment
  • Other statutory insurances

Bonus & Incentive Programs
Austria commonly offers: Performance bonuses,

• Performance bonuses
• Holiday bonus (13th month)
• Christmas bonus (14th month)
• Sales incentives

These are often mandated by collective agreements.

Taxes in Austria

Income tax (Einkommensteuer) applies progressively.

Personal Income Tax (High-level 2026)
Approx 0% to 55% depending on income bracket.
Employees benefit from:

• Tax-free allowances
• Commuter allowances
• Family tax credits

Payroll in Austria

Managing payroll in Austria requires strict adherence to local labor laws, tax regulations, and collective bargaining agreements. Employers must follow specific monthly payroll processes to ensure full compliance.

Payroll Cycle

• Monthly payroll cycle
• Salary payments are typically made by the last business day of the month
• All statutory deductions and filings must be completed before payment is processed

Payroll Requirements

• Deducting income tax (equivalent to PAYE) based on progressive tax brackets
• Deducting employee social security contributions, including health, pension, accident, unemployment, and housing funds
• Submitting mandatory electronic filings to Austrian authorities, including tax and social insurance institutions
• Maintaining accurate payroll records and documentation for audits and statutory checks
• Ensuring compliance with collective agreement (Kollektivvertrag) wage tables, which define minimum salaries and benefits for many industries

Payroll Currency
EUR (Euro) is used for all payroll payments and statutory contributions.

Payroll Deadlines
Tax & social security: Monthly
Annual declarations: End-of-year reporting (Lohnzettel)

Legal Regulations

Austria's employment regulations come from:

• Austrian Labour Code
• Working Time Act
• Collective Agreements (KV)
• Social Security Act

Total Employment Cost
Employer costs add approximately: +22% above the gross salary

Work Permits & Visas for Austria

Non-EU workers require a valid permit.

Most common permit:

Red-White-Red Card (Skilled Worker Permit)
Processing time: 8–12 weeks

Employer of Record (EOR) Services in Austria

Employer of Record (EOR) services in Austria allow companies to hire employees quickly and compliantly without establishing an Austrian legal entity. This helps businesses expand into Austria while avoiding complex payroll regulations, statutory contributions, and HR administration.

An EOR in Austria manages:

• Locally compliant employment contracts aligned with Austrian labor laws and collective agreements
• Payroll compliance, including salary calculations, statutory deductions, and monthly reporting
• Mandatory employer and employee contributions to health insurance, pension, unemployment, and accident insurance
• Social insurance and tax filings submitted to Austrian authorities on your behalf
• Local HR administration and full employee lifecycle management, from onboarding to termination
• Ongoing compliance guidance with Austrian employment regulations and wage requirements

Payroll Calculator

An Austrian payroll calculator helps estimate:

• Net salary
• Employer contributions
• Tax withholding
• Total employment cost