How to hire employees in Austria

Austria's diverse talent landscape, renowned for its expertise in technology and engineering, positions the country as a prime location for recruitment. It prides itself on a rich reservoir of professionals in fields ranging from IT to renewable energy solutions, establishing Austria as a beacon of innovation and specialized skills.

Additionally, the Austrian labor market presents a cost-efficient framework for securing high-quality talent, giving businesses an edge in competitive pricing. The combination of a proficient workforce and economic efficiency renders Austria an optimal choice for companies aiming to broaden their horizons or cement their global footprint.

What you need to know before hiring employees in Austria

Job market in Austria

When exploring how to hire employees in Austria, the following trends can help you hire cost-effectively and pay talent correctly. 

• Austria experienced a decrease in unemployment by 1.5 percentage points in 2022, indicating a strong labor market.
• Youth unemployment fell by 1.7 percentage points in 2022, signifying a recovering job market for younger workers.
• Employment is projected to increase by 0.01 million by 2024, suggesting gradual workforce growth.
• Austria's projected decrease in inflation to 2.01% by 2028 indicates a stabilizing economy, offering businesses a predictable cost environment for strategic hiring and long-term planning.
• Austria ranks 23rd on the global remote index, underscoring its suitability for remote work and attracting international talent. This ranking reflects Austria’s digital infrastructure, legal framework for remote work, and high living standards, contributing to its global competitiveness.

Understanding Austria’s position in both the national and global job market is crucial for making informed hiring decisions, especially for businesses aiming for remote or international expansion.

Austria Hiring Trends

• Austrian hiring trends in 2024 are influenced by the evolving expectations of a tech-savvy, younger generation prioritizing personal development, skill enhancement, and values like diversity and inclusion over high salaries.
• Economic shifts, including a projected inflation decrease to 2.01% by 2028, compel Austrian businesses to devise flexible compensation strategies amid a modest average wage increase of about 1.7%.
• Austria's competitive labor costs, in comparison to countries such as the USA, UK, and Singapore, necessitate strategic salary budgeting.
• The workforce is expected to expand to 4.45 million by 2024, with average wages increasing by 15% over the last two decades, challenging employers to merge supportive work cultures with strategic flexibility.
• These trends demand Austrian employers to adjust to economic variances and align with the changing preferences of a dynamic workforce, fostering an environment supportive of mutual growth.

How to hire employees from Austria 

1. Set up an entity in the country

Establishing a legal entity in Austria is well-suited for businesses seeking substantial growth or a sustained presence. It affords the advantage of directly managing employees and securing long-term cost savings.

This entails choosing a business framework such as a Gesellschaft mit beschränkter Haftung (GmbH) or Aktiengesellschaft (AG), registering with the Austrian Commercial Register, and acquiring a UID number for tax purposes.

Yet, navigating this route can be intricate and expensive, requiring a comprehensive grasp of Austrian employment regulations and adept handling of HR and payroll functions, underscoring the need for meticulous planning or specialist advice.

2. Hire independent contractors

Hiring contractors in Austria involves forming agreements with individuals or entities for designated tasks or projects, providing considerable flexibility perfect for temporary assignments or particular project requirements. It's essential to accurately classify workers to circumvent legal issues and potential penalties. Moreover, it's worth noting that contractors may not demonstrate the same level of commitment or loyalty as full-time, permanent staff, a critical aspect to weigh in this employment strategy.

3. Partner with an EOR in the country

Leveraging an Employer of Record (EOR) service such as Gloroots provides a seamless entry into Austria's market, sidestepping the complexities of establishing a legal entity. This method notably reduces liabilities and offers cost savings. Collaborating with an EOR ensures compliance with Austrian labor laws, tax obligations, and regulations, significantly reducing legal risks and securing a compliant business environment.

Compliance risk while hiring in Austria

The Austrian Labor Constitution Act regulates Austria's labor market, individual employment laws, and the Austrian Civil Code. Hiring compliantly in Austria demands an in-depth comprehension of its complex legal landscape.

Key Aspects of Austrian Labor Law

Employment Contract:

In Austria, employment agreements are generally considered open-ended unless stated otherwise. While the law does not mandate written contracts, it is customary for businesses to draft agreements in German. These documents usually cover:

• The identities of the employer and employee.
• The employment start date, including the term for fixed-duration contracts.
• Specified work locations.
• A detailed job role description.
• Compensation details in Euros.
• Specified working hours.
• Allotted holiday entitlements.
• Termination notice periods.
• References to any applicable collective bargaining agreements.

While fixed-term contracts are recognized, they come with restrictions, especially regarding pension eligibility, which employees qualify for after completing four years in a temporary role.References to collective bargaining agreements should also be included. 

Working Hours:

In Austria, the standard working schedule is 8 hours per day and 40 hours per week, though certain sectors have reduced this to a 38-hour workweek.

Overtime:

In Austria, hours worked exceeding the conventional 40-hour weekly limit are classified as overtime. For these additional hours, employers are required to compensate employees at a rate of 150% of their normal wage. Legislation amended in September 2018 raised the legal cap on weekly working hours from 50 to 60 hours. Nonetheless, the total working hours in a day, inclusive of overtime, cannot surpass twelve hours.

Minimum Wage:

In Austria, there is no government-mandated national minimum wage. Rather, the minimum pay rates are determined through collective bargaining agreements, differing across various sectors.

Payroll laws in Austria

In Austria, the frequency for payroll distribution is set on a monthly basis.

Employment benefits in Austria

Leave Policies in Austria

1. Paid Time Off

In Austria, employees who have worked for six months are eligible for five weeks (25 working days) of statutory annual leave. For those with under six months of service, leave is accumulated at a rate of two days per month. After 25 years with the same employer, this entitlement increases to six weeks (30 working days). 

Employment history of up to 12 years and educational periods may count towards reducing the tenure requirement to 13 years for this enhanced leave. Variations to these norms may apply under different collective agreements.

Leave accumulation begins from the date of service initiation, and any unused vacation can be transferred to the next year.

2. Public Holidays

There are 14 national holidays.

3. Sick Days

In Austria, employers must provide paid sick leave to employees who are unable to work due to illness or injury. The amount of sick pay and the length of sick leave granted are contingent upon the employee's length of service.

The table below shows the duration of sick leave entitlement and the percentage of wages paid:

For prolonged or severe illnesses, an employee may receive up to an extra four weeks of sick leave, during which Social Security contributes 50% of the usual salary. Should sick leave exceed these periods, Social Security assumes responsibility for the full sick pay.

4. Maternity Leave

In Austria, the duration of maternity leave is set at 16 weeks. During this period, working is not allowed for expectant mothers for eight weeks prior to the anticipated birth date and for eight weeks post-birth (extended to 12 weeks for Cesarean sections or complicated deliveries). 

The maternity leave benefits include a weekly payment from Social Security, calculated from the average income of the last three months preceding the leave. Beyond the initial 16 weeks, mothers can opt for additional unpaid leave up until the child reaches the age of two, during which they may receive childcare benefits according to the Child Care Payment Act.

5. Paternity Leave

Fathers in Austria have the right to take one month of unpaid leave, known as 'Daddy Month,' at any point from the birth of their child until the child reaches two years of age. To avail of this leave, new fathers are required to inform their employer at least three months prior to the child’s expected birth date.

Public Health Insurance 

Austria's public health insurance, a compulsory scheme funded by income-based contributions, guarantees extensive medical care for residents. Managed primarily by the Austrian Health Insurance Fund (ÖGK), it covers general and specialist visits, hospitalizations, and prescriptions. Automatic enrollment occurs through employment, with self-employed individuals having the option for voluntary coverage. This system ensures equitable access to healthcare services, allowing choice among contracted providers, and upholds Austria's high healthcare standards by making quality medical care accessible to all, regardless of income or social status.

Filing tax in Austria

Income Tax:

In Austria, employee income tax rates range from 0% for incomes up to €12,816 annually, to a progressive increase up to 55% for incomes exceeding €1,000,001. The tax structure is designed to ensure fairness, with higher earners contributing a larger percentage. For a snapshot of tax brackets and more detailed information, our guide provides an exhaustive look into Austria's income tax system.

Other Tax and Social Security Contributions:

In Austria, employer payroll contributions encompass health, pension, and unemployment insurance, among others, leading to a total employment cost of about 29.70% to 29.78%. Employee contributions include health and pension insurance, totaling around 17.07%. This structured system supports a comprehensive welfare approach, underlining Austria's dedication to employee well-being. For a concise overview of specific rates and contributions, refer to our detailed guide on Austrian payroll contributions.

Business Culture in Austria 

• Austrian business culture highly values formality, often requiring the use of professional titles and surnames in interactions until a more familiar relationship is established.
• Punctuality is considered a sign of respect and professionalism, with late arrivals potentially viewed as a lack of reliability or respect.
• The business hierarchy is pronounced, with decisions typically made by top-level management, underscoring the importance of respecting authority.
• Communication is expected to be direct and honest, yet delivered with tact and respect for formality, emphasizing detail and thoroughness in discussions.
• Meetings and negotiations in Austria are characterized by their structured and deliberate nature, requiring thorough preparation and patience.
• While building trustworthy business relationships is crucial, Austrians tend to maintain a clear distinction between their professional and private lives.
• A strong emphasis on work-life balance is evident, with a societal norm of respecting personal time outside work hours, reflected in the generous vacation policies.

Top sectors to hire from in Austria

Service Sector 

Dominating employment with 70.64% of the workforce in 2021 and contributing 62.11% to the GDP in 2022, the service sector stands as Austria's largest employment field, highlighting opportunities in areas like tourism, finance, and retail.

Industry

Accounting for 25.63% of employment and 26.18% of GDP contribution in 2022, the industrial sector, encompassing manufacturing, construction, and energy, presents substantial hiring potential.

Top cities to hire from Austria

Vienna: The capital city, a hub for finance, IT, and international organizations, offering a vast talent pool.

Graz: Known for its strong focus on automotive, environmental tech, and innovation.

Linz: A key player in industrial, chemical, and tech sectors, with a growing startup scene.

Salzburg: Renowned for tourism, culture, and a burgeoning creative industry.

Innsbruck: With a focus on tourism, education, and health services, it's a city with a diverse skill set.

Hire in Austria  compliantly with Gloroots

Gloroots, serving as an Employer of Record (EOR) in Austria, provides a seamless solution to overcome hiring challenges. Our EOR platform facilitates quick candidate onboarding, enabling rapid start-up of operations while ensuring compliance with both local and international standards. Tailored for businesses of various scales, Gloroots streamlines payroll, benefits administration, and tax obligations, eliminating the necessity for establishing a local presence. This approach empowers companies to efficiently assemble a remote team in Austria. For detailed insights on how Gloroots can support your Austrian hiring initiatives, please contact us.

Frequently Asked Questions 

1. Can an EOR help with remote team building across different countries?

Yes, an Employer of Record can significantly facilitate the building of remote teams across various countries by managing the legal and administrative complexities of international employment. This includes local labor law compliance, payroll, and benefits administration, allowing companies to focus on team integration and productivity.

2. What are the key considerations when selecting an EOR provider?

When selecting an EOR provider, consider their expertise in the specific countries where you intend to hire, their track record of compliance with local employment laws, the range of services offered (such as payroll processing, tax administration, and benefits management), and their ability to provide scalable solutions as your business grows.

3. How does using an EOR impact the employee experience?

Utilizing an EOR can positively impact the employee experience by ensuring that all legal and HR processes are handled professionally and in compliance with local laws. This can lead to better job security, timely and accurate payroll, access to benefits, and overall satisfaction, contributing to higher engagement and retention rates.