Payroll & Employment Guide Austria

Employment contracts in Austria don't demand any specific format. They can be made verbally, in writing, or through consistent actions, though opting for a written agreement is advisable.

Notice periods: One month

Termination of employment: Termination can occur by mutual agreement, dismissal, resignation, expiration of agreement, notice of termination, or death of employee.

Employee benefits in Austria include a mix of legally required protections and additional employer-provided perks. Many employers provide extra benefits to attract and retain the best talent.

Mandatory benefits:

• Social security coverage: Employers and employees contribute to Austria’s mandatory social security system (Sozialversicherung), which provides access to healthcare, pension insurance, unemployment insurance, accident insurance, and other social protections.
• Health insurance: Employees are covered by public health insurance, which provides access to medical treatment.
• Pension insurance: Employees are automatically enrolled in the state pension system, with contributions made by both the employer and employee.
• Unemployment insurance: Employees are covered by unemployment insurance, which provides financial support if they lose their job and meet eligibility requirements.
• Accident insurance: Employers must provide mandatory workplace accident insurance, which covers employees for accidents and occupational illnesses related to their work.
• 13th and 14th salary payments: Many Austrian employees receive additional payments known as holiday pay (Urlaubsgeld) and Christmas bonus (Weihnachtsgeld).

Common perks: This includes meal allowances, flexible working arrangements, private health insurance, public transport support, and training and professional development.

Leave policies:

• Annual leave: Employees are entitled to a minimum of 25 working days of paid annual leave per year (based on a five-day working week).
• Sick leave: The duration depends on the employee’s length of service, with longer-serving employees receiving extended paid sick leave.
• Maternity leave: Female employees are entitled to 16 weeks of maternity leave, generally consisting of 8 weeks before and 8 weeks after childbirth.
• Parental leave: Parents can take parental leave (Karenz) until the child reaches 2 years of age.
• Paternity leave: Fathers or the second parent are entitled to one month of unpaid family time leave(Papamonat) shortly after the birth of a child.
• Care leave (Caregiver leave): The duration and conditions depend on the employee’s circumstances.
• Special leave: Employees may be entitled to short periods of paid leave for specific personal situations, such as marriage, bereavement, moving house, or urgent family matters.

In Austria, employers are responsible for withholding payroll taxes and social security contributions from employees’ salaries and making the required payments to the relevant authorities. Austrian tax residents are generally subject to tax on their worldwide income, while non-residents are typically taxed only on income earned in Austria.

Individuals are considered tax residents if they have a domicile or a habitual abode in Austria. A habitual abode is generally assumed if the individual stays in Austria for more than six months.

Personal income tax: Austria applies a progressive income tax system, meaning that individuals are taxed at different rates depending on their income level. The tax brackets for income generated in 2026 are as follows:

• Up to €13,541 - 0%
• €13,542 - €21,995 - 20%
• €21,996 - €36,463 - 30%
• €36,464 - €70,376 - 40%
• €70,377 - €104,876 - 48%
• €104,877 - €1,000,000 - 50%
• Over €1,000,000 - 55%

Withholding and contributions: Here are the withholding rates in Austria:

• Dividends: 27.5%
• Interest: 25%
• Capital gains: 27.5%

Tax allowances and non-taxable benefits:

• Employee performance bonus: Employers can pay up to €1,000 per year tax- and duty-free (voluntary, no collective agreement required).
• Commuter allowance (Pendlerpauschale): Available for commutes> 20 km (public transport) or> 2 km (if public transport is unreasonable).
• Commuter Euro (Pendlereuro): Increased to €6 per km of one-way distance per year (tax credit).
• Family bonus plus: Tax credit of up to €2,000.16 per year per child (<18) and €700.08 for adult children.
• Overtime allowance: The first 15 hours of overtime per month are tax-free up to €170 (2026 limit).
• Holiday pay: Tax-free up to €400 per month for work on public holidays, Sundays, and night shifts.
• Teleworking allowance: Tax-free up to €25 per month to up to €300 per year.

Deductions and tax reliefs:

• Social security contributions: Mandatory contributions for health, pension, and unemployment insurance (approx. 18% of gross pay) are fully tax-deductible.
• Standard allowance for work expenses: All employees receive a standard annual allowance of €132 for employment-related expenses (e.g., work equipment, professional literature). You can claim higher actual expenses if they exceed this amount and are supported by receipts.
• Special payments exemption: The 13th and 14th month salaries (holiday and Christmas bonuses) receive favourable tax treatment, with the first €620 being tax-exempt and the remainder taxed at a low, graduated rate (starting at 6%).

Employers in Austria must manage payroll in compliance with local regulations, including salary payments, income tax withholding, and mandatory social security contributions. Salaries are typically paid monthly.

Salary payment deadline:

• Last working day of the month or fixed company payroll date (e.g., 25th–30th)

Taxes and contributions payment deadline:

• Social security contributions are generally paid monthly by the 15th of the following month

Payroll declarations deadline:

• By the 15th day of the following month

Payroll currency: Euro (€)

Austria’s labour law is primarily governed by a combination of federal employment legislation, collective bargaining agreements (Kollektivverträge), and individual employment contracts. These regulations define key aspects of employment, including contract requirements, working conditions, minimum wage provisions, leave entitlements, termination rules, and employee protections.

Total employment cost: ~21%–23% on top of gross salary

• Employer’s social security contributions: ~21%–23% of gross salary
  • Includes pension insurance (12.55%), health insurance (3.78%), unemployment insurance (2.95%), accident insurance (1.10%), and other statutory levies.
• Employees’ social security contributions: ~18% of gross salary
  • Includes contributions for pension insurance, health insurance, unemployment insurance, and other mandatory social security programs, which are withheld from the employee’s salary.

Additional employer obligations:

• Severance contribution (Abfertigung Neu): 1.53% of gross salary (mandatory employer contribution to the employee provision fund)

Minimum wage: No national statutory minimum wage. Instead, minimum wages are set according to sector through collective bargaining agreements (Kollektivverträge).

Probation period: In Austria, the probation period is limited to a maximum of one month.

EOR services in Austria help you legally hire employees without setting up a local entity. Your EOR partner acts as the official employer and manages key employment responsibilities, including:

• Creating compliant employment contracts
• Processing payroll
• Handling tax withholdings
• Managing employee benefits
• Supporting employee onboarding and offboarding

PEO services in Austria provide HR and administrative support while you remain the legal employer of your workforce. They help companies with an existing local entity streamline workforce management through:

• HR support and employee administration
• Payroll and benefits management
• Compliance support and local labour law guidance
• Assistance with employment contracts

Native Teams’ payroll calculators support 95+ countries, including Austria, and reflect local labour laws and payroll requirements. Use the calculator to estimate gross and net salaries, employer and employee contributions, taxes, and other mandatory deductions.