Payroll In Austria

Austria is a landlocked country and has an estimated population of 8.92 million in Central Europe. The country shares its borders in the north with the Czech Republic and Germany, Hungary and Slovakia in the east, Italy and Slovenia in the south, and Liechtenstein and Switzerland in the west. 

Vienna is the capital and the largest city in Austria, with a population of 1.9 million. Austria has cemented its status as one of the wealthiest countries in the world, with a nominal per capita GDP of $48,586 (as of 2020). Austria holds the eighth rank on the Quality of Life index, and it was also ranked 18th on the Human Development Index. The country has been an active member of the United Nations since its enrollment in 1955. It joined the European Union in 1995 and is a founding member of the Organization for Economic Co-operation and Development (OECD). Austria adopted the euro as its currency in 1999 after signing the Schengen Agreement. 

How is Payroll Calculated in Austria?

The payroll policies and procedures in Austria are extensive for people who are in paid employment or are self-employed. Austria's payroll rules and regulations demand contributions from both employers and employees. 

The payroll in Austria is a well-thought-out plan and has considerations such as -

  • ~There is no statutory minimum wage in the country; however, collective agreements must require a minimum of 1,500 EUR per month. 
  • ~Oral employment procedures are legal, but a written employment summary is an integral part of the work culture. 
  • ~A compulsory social insurance coverage.
  • ~Both employees and employers have to contribute to social security

Setting the considerations aside, the employees and employers contribute to the funds at various rates: 

  • ~Accident insurance: Employers have to make a 1.2% contribution. 
  • ~Pension insurance: The employers and employees contribute 12.55% and 12.25%, respectively. 
  • ~Health insurance: Employees contribute 3.87%, and employer contributes 2.78%.
  • ~Unemployment insurance: 6% is split equally among the employees and employers. 

Employees may contribute to religious communities through a church tax or a trade union. Employers subtract these contributions from the employee's salary. Austria's payroll requirements demand tax returns by April 30 — but it only needs to be filled if the employee earns over a minimum amount from other areas other than their work.  

Payroll tax in Austria also demands a specific amount of percentage of the employee’s salaries in funds such as - 

  • ~Municipal Employees Tax: 3% of gross salaries
  • ~Tax on insurance contracts: 1% and 11% on insurance premiums
  • ~Chamber of Commerce: 0.44% of the gross salaries
  • ~Pension Fund: 1.53% of the gross salaries

Important Elements of Salary Structure in Austria

Some of the essential elements of the Salary structure in Austria include: 

Basic pay

An employee in Austria demands a basic pay of 1,500 EUR, as stated by the Austrian government. 

Overtime allowance

Employees are entitled to overtime allowances, which is a minimum of 50% for every hour worked. 

Leaves

In Austria, the employee has a contractual right to 25 days of leave each year. Also, every year, the employees receive 13 mandatory holidays. 

Social security deductions

Austria's payroll rules and regulations include compulsory social security deductions such as old age, disability, and unemployment insurance. This means that the employees have basic health insurance and are automatically insured when working for you. Employers also contribute to funds like unemployment funds, work-related disability, and paid parental leaves. If the funds are required, as the employer, you will have to withhold the employee's contribution and pay them with your contributions.

How to Set Up a Payroll in Austria?

Before you decide to set up your payroll deductions in Austria, you must first create a subsidiary. Finishing the step can take months of your crucial time, depending on Austria's structure, policy, and rules and regulations. 

Thankfully, you can choose Multiplier as your global partner and gain access to our team of experts who will outsource your payroll and adhere to the rules and regulations in the country. This will help you in focusing on other vital aspects of your business. 

A Step-by-step Process of Payroll Processing in Austria

Following the set rules and regulations of payroll policies and procedures in Austria is essential for running a successful company. These step-by-step processes of payroll processing should be kept in consideration before you start paying your employees:  

  1. The first step in the payroll processing is to create your Employer Identification Number (EIN); alongside your local tax and state tax IDs. 
  1. Before processing the payroll, your employees should fill out various tax forms so you can account for their salaries and other tax details. As an employer, you should keep documents such as job applications, deductions, and wage garnishments at hand as they are necessary for the process.
  1. Once you file the relevant legal and tax information to create payroll, you can choose a timetable that works the best for your business. The four main schedules are - monthly, semimonthly, biweekly, and weekly. You can select the best plan according to your needs, and once you choose a timetable, set up calendars with paydays and make a note of when to process the payroll.
  1. Employers also benefit from noting down important dates such as tax dates, annual tax filing dates, and holidays. This process has to be repeated at the beginning of every year. You will also have to create a preferred payment system, as many companies allow their employees to choose between direct deposits and paper checks. 
  1. After you have completed your payroll policies in Austria, you can begin processing your first payroll. To do so, you will need to compute each employee's gross salary using - Employee gross salary = (total number of work hours) x (hourly rate),
  1. Survey to gather information about your employees’ insurance requirements, state and federal requirements, and benefits requirements to decide the salary deduction. Social security, Medicare, and other various benefits are considered in most cases. 

Normal working hours and overtime hours must be considered to comply with Austrian payroll policies and procedures.

It is critical to keep track of your transaction records as you process payroll for tax and adherence purposes. If an employee disputes a payment or the government later requests documentation from the company, the records should be kept on hand.

Payroll Contributions

The payroll rules and contributions in Austria state that both the employees and the employers have to make specific contributions to the payroll. Due to these specific rules, the employers and employees follow different sets of contribution percentages, as shown in the tables below:

Employer contributions:

Services Employer’s contribution in %
Health Insurance 3.78
Accident Insurance 1.20
Old-Age Pension Insurance 12.55
Unemployment Insurance 3.00
Insolvency Guarantee Funds Contribution 0.55
Total employment cost 21.08 %

Employee Payroll Contributions:

Services Employee’s contribution in %
Health Insurance 3.87
Old-Age Pension Insurance 10.25
Unemployment Insurance 3.00
Total Employee cost 17.12%

Employee Income Tax:

Total income Tax %
Up to € 11,000 0.00%
€11,001 - €18,000 20.00%
€18,001 - €31,000 30.00%
€31,001 - €60,000 40.00%
€60,001 - €90,000 48.00%
€90,001 - €1,000,000 50.00%
€1,000,001 and over 55.00%

Payroll Cycle

The payroll in Austria is monthly. As the employer, you are responsible for paying wages by the last working day of every month unless described in a collective bargaining agreement (CBA) or on an employment contract. 

The payroll reports are expected to be kept for seven years. Many businesses in Austria provide their employees a 13th-month salary, split into two installments, with one coming in June and the other in November.

Austria Payroll Options for Companies

There are four payroll policies and regulations in Austria that an employer can choose from, the options being - 

Internal: Large companies in Austria often run their local payroll from all employees, local and foreign. To accomplish this, companies have to complete the incorporation of their business, register the business under state, federal, or local laws, and then hire the required staff. Under the internal form, payroll deduction in Austria requires hiring a specific human resources personnel who will manage the Austria payroll while fulfilling all withholding payroll and tax filing requirements. 

Remote: A remote payroll system is when a foreign company, i.e., a non-resident business, payrolls an employee in Austria. Under specific Austrian laws, companies must be registered in other countries to require a business license and hire employees in the country. 

Local Payroll Administration: In many cases, companies register their business in Austria under one of the many available forms:  Foreign branches; Public Companies; Partnerships; Limited liability companies. However, your payroll administration can be accomplished through a payroll provider. 

Payroll Outsourcing: Finally, the last policy is to work with an outsourcing partner for your Payroll policies. You can work with outsourcing companies such as Multiplier, as you gain a qualified team of local experts who will help you in outsourcing both the payroll and the following of payroll rules and regulations in Austria.

Entitlement and Termination Terms

In Austria, employee contracts can be terminated on immediate grounds if the employer has a good reason for the firing. The termination follows the same rule as employment as can be carried out in writing or verbally. 

If an employee chooses to terminate their employment voluntarily, a notice period is required, and the length of the period depends on the length of the employee's service. 

The notice period in Austria is as follows: 

Notice period Service length
Six weeks Two years or less
Two months Three to five years
Three months Six to 15 years
Four months 16 to 25 years
Five months 26 or more years

Upon resignation, the employer must provide the employee with an employment certificate, salary statements, deregistration from health insurance funds, confirmation of remuneration and work, and a payslip alongside a testimonial. The employer also has to pay any outstanding dues to the employee.

Austria Payroll Processing Company

To get the most out of Austria's payroll policies and procedures, you can either choose to do it yourself or partner up with global outsourcing companies like Multiplier. If you are interested in learning more about the process, contact us today to learn more about this!

How Multiplier Can Help With Global Payroll?

The process of creating and regulating an Austrian payroll system involves numerous factors. You must consider the various integral elements, such as setting up the payroll, payroll cycle, etc. These processes can take up a considerable amount of your time and stop you from exploring the other parts of your business. 

You can rest easy by partnering up with Multiplier, as our team will work 24x7 to give you the best experience and help you operate your business without any drawbacks.

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Frequently Asked Questions

How many payroll options can an employer choose from in Austria?

Employers can choose from four methods - Internal, Remote, Local payroll administration, and Payroll outsourcing. 

What is the probationary period of a new employee in Austria?

Probationary period can be defined as an agreement between the employer and employee stating that the employer can dismiss an employee without giving any reasons or prior notice. In Austria, the usual probationary period followed is for one month. Also, the collective bargaining agreements at workplaces require a three-month probationary period for apprentices.

What are the different types of employment in Austria?

Some of the most commonly followed employment types in Austria are full-time employment (38.5 hours per week), part-time employment (20 hours per week), and minimal employment (an average of 10 hours per week).

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