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Austria PEO (Professional Employer Organization)

VERDICT: The best Austria PEO in 2024 is Horizons. Horizons stands apart from other Austrian PEOs with its in-depth understanding of Austrian tax and labor law. 

Austria PEO Summary

  • An Austria PEO (Professional Employer Organization) is a professional HR company that becomes the legal employer of your workforce in Austria, taking care of HR, payroll, and employment taxes. 
  • PEOs can provide HR and payroll services, guidance on compliance, and legal know-how.
  • The leading Austria PEOs in 2024 are Horizons, Remote, Deel, People2.0, and Lano

Austria is renowned for its rich history and beautiful landscapes, however as a business destination, Austria also presents some excellent opportunities. For companies daunted by the prospect of setting up operations in Austria, it is worth considering the benefits of an Austria Professional Employer Organization (PEO). 

In this guide, we look at the benefits of Austria PEO services for companies seeking to hire employees in Austria, and who the top providers are in 2024. 

What Is an Austria PEO?

An Austria PEO (Professional Employer Organization) helps companies legally and compliantly hire, manage, and pay employees. They do this by becoming the legal employer of staff in Austria, taking care of contracts, payroll and employment compliance.  A PEO in Austria can also help foreign companies expand their operations in the country without having to set up a separate legal entity.

Note, with an Austria PEO arrangement, the employees still work directly for client companies on a day-to-day basis, with that company being known as the “operational employer”. 

Austria has a complex employment law system, and compliance with local regulations is crucial. A reliable PEO in Austria can help companies navigate the legal requirements and ensure that they are fully compliant with all the necessary regulations.

By working with a PEO in Austria, companies can focus on their core business activities while leaving the HR management to the experts. This can help companies save time and money, as well as reduce the risks associated with non-compliance.

Top 5 Leading Austria PEOs

  1. Horizons: Horizons, with its in-depth knowledge of Austrian employment laws and HR practices, provides comprehensive PEO services in Austria. Horizons can assist with everything from recruitment to payroll, ensuring complete regulatory compliance.
  2. Remote: Remote excels in providing a tech-driven PEO service. Their robust platform ensures that all employment tasks, from onboarding to offboarding, comply with Austrian laws.
  3. Deel: Deel is an international PEO platform supporting companies in Austria, Europe and throughout the world. It’s differentiator is the Deel HR platform with has a free tier and integrates with most popular HR apps. 
  4. People2.0: This global workforce SaaS has earned a reputation for efficient and flexible solutions. People2.0’s understanding of Austrian employment regulations and their focus on compliance makes them an excellent PEO choice.
  5. Lano: Known for its broad range of global HR solutions, Lano simplifies the complexities of international hiring in Austria, and throughout Europe and the world. Their team of experts and efficient software ensures compliance and streamlined HR operations.

What Does an Austria PEO Do?

When expanding a business to Austria, it is important to ensure that all HR and payroll functions comply with local regulations. Professional Employer Organizations (PEOs) in Austria can provide a range of HR and payroll services to small and medium-sized businesses. 

The hiring and onboarding process with a PEO typically involves several steps.

First, the company must identify the position they wish to fill and create a job description. The PEO service can then help to advertise the position and screen potential candidates. Once a suitable candidate has been identified, the PEO service can help to negotiate the terms of the employment contract and ensure that it complies with Austrian labor laws.

Second, the initial screening can also be managed by the PEO service. This may include conducting background checks, verifying references, and providing the new employee with an employment contract and any necessary documentation.

Third, the PEO or EOR service can also help to set up payroll and benefits for the new employee, ensuring that they are paid on time and that they have access to the benefits they are entitled to.

From that point on, the PEO provides comprehensive payroll and HR services

Payroll services can include processing paychecks, calculating taxes and deductions, and managing employee benefits. PEOs can provide the platform that serves as the digital infrastructure for payroll management.

The PEO will also deal with any compliance or HR issues as they arise. 

Austria Labor and Employment Law 

Ensuring compliance with Austrian labor law is, perhaps, one of the most important roles for a PEO. Below we set out the key elements of Austria labor law. 

1. Labor Law Overview

Austria has a well-structured and easy-to-understand legal framework for employment and labor laws. The most important legislation regulating employment relationships in Austria includes the Labour Constitution Act (ArbVG), the Salaried Employee Act (AngG), and the Working Hours Act (AZG). These laws cover a wide range of topics, including working hours, leave entitlements, termination of employment, and more.

Austria’s labor laws also provide for a number of employee rights, including the right to a minimum wage, the right to annual leave, and the right to maternity and paternity leave. Employees are also entitled to sick leave and compassionate leave, as well as protection against discrimination and harassment in the workplace.

Austrian employment law provides for generous annual leave entitlements. Workers are entitled to 25 days of paid holiday per year, which increases to 30 days after 25 years of service. Additionally, there are 13 paid public holidays every year. Sick leave is also provided, with employees receiving full pay for up to six weeks of illness.

Austria law requires companies that have at least 5 employees working in-country to establish a Works Council. The size of the council depends on the number of employees working for the business. A PEO can help clients navigate the legal requirements for establishing a Works Council and ensure that they are in compliance with local labor laws.

The Austrian setup is very similar to German Works Council arrangements. 

The table below demonstrates how Works Council requirements change as a company employs more st

austria work council

2. Employment Contracts and Terms

An Austria PEO will ensure that all employees in Austria are set up with a comprehensive and compliant labor contract. 

In Austria, employment contracts typically have an indefinite term, meaning they are permanent employment contracts. These contracts may be concluded in writing, verbally, or implicitly, such as through the commencement of the activity with subsequent payment. Apprenticeship agreements, on the other hand, must be concluded in writing.

Employment contracts in Austria are subject to various statutory regulations, including the Employment Contract Act (Arbeitsvertragsrechts-Anpassungsgesetz) and the Working Time Act (Arbeitszeitgesetz). These regulations govern the terms and conditions of employment, including working hours, vacation entitlements, and notice periods for termination.

The terms of an employment contract in Austria must be agreed upon by both the employer and the employee. These terms may include the job title, job description, salary, working hours, and any other conditions of employment. Employers are required to provide employees with a written statement of the essential terms of their employment within one month of the start of their employment.

It is important to note that in Austria, employment contracts may be terminated by either the employer or the employee. However, notice periods must be observed, and termination must be in accordance with the terms of the employment contract and the relevant statutory regulations. In some cases, termination may also require the approval of the labor court.

Employment contracts in Austria are subject to various statutory regulations, and it is important for both employers and employees to understand their rights and obligations under these regulations.3. 

3. Working Hours and Leave Policies

Employees in Austria generally work 40 hours per week and 8 hours per day. However, several collective agreements specify a weekly working time of 38.5 hours. The employer may also require the employee to work up to 12 hours per day and 60 hours per week. The Working Hours Act in Austria contains provisions for various forms of employment and special working hours.

In addition to the standard full-time work, there are other employment options and special forms of working hours. The most frequent forms are part-time work, shift work, and on-call work. The Working Hours Act in Austria contains provisions for these forms of work.

Paternal and maternal leave austria

Parental leave is also available, with both parents being entitled to a maximum of 2 years of leave per child. During this time, the employer is required to keep the job open for the employee. Maternity leave is 16 weeks long, with expectant mothers prohibited from working for eight weeks before the child’s expected due date and for eight weeks after the child’s birth. Maternity leave is paid by a weekly allowance through the Social Security system.

Austria has generous working hours and leave policies, providing employees with ample time off for rest and relaxation.

4. Salary and Benefits

Austria has a well-developed social welfare system that provides employees with a range of benefits. Employers are legally required to provide their employees with a minimum level of benefits, including health insurance, accident insurance, and pension insurance.

The minimum wage in Austria is €1,500 per month, which is higher than the minimum wage in many other European countries. However, salaries in Austria vary widely depending on the industry, location, and experience of the employee. In general, employees in Austria are well-compensated and can expect to receive a salary that is commensurate with their experience and qualifications.

In addition to the mandatory benefits, many employers in Austria offer their employees additional benefits such as paid vacation time, sick leave, and maternity leave. The amount of paid vacation time that an employee is entitled to depends on their length of service, but most employees can expect to receive at least 25 days of paid vacation time per year.

Austria Labour rights
Austria Labour Rights - European Trade Union Confederation Country Report, 2022

Employees in Austria are also entitled to 10 paid public holidays per year. In addition, employees are entitled to sick leave if they are unable to work due to illness or injury. The amount of sick leave that an employee is entitled to depends on their length of service and can range from six to 12 weeks per year.

5. Income Tax and Social Security

Employees in Austria are subject to income tax and social security contributions. The income tax rate in Austria ranges from 0% to 55% depending on the employee’s income. Social security contributions are split between the employer and the employee and are used to fund the social welfare system in Austria.

austria tax bracket

Employees in Austria can expect to receive a competitive salary and a range of benefits. Employers are legally required to provide their employees with a minimum level of benefits, including health insurance, accident insurance, and pension insurance. In addition, many employers offer their employees additional benefits such as paid vacation time, sick leave, and maternity leave. Employees in Austria are also subject to income tax and social security contributions, which are used to fund the social welfare system in Austria.

6. Taxation and Social Contributions

Austria has a complex tax system that includes various taxes and contributions. Employers and employees are required to pay various taxes and social contributions to the government. These taxes and contributions are used to fund various social programs and services, such as healthcare, pensions, and unemployment benefits.

austria social security tax

In Austria, the tax system is progressive, meaning that higher income earners pay a higher percentage of their income in taxes. The tax system is divided into two main categories: direct taxes and indirect taxes.

Direct Taxes

Direct taxes are taxes that are levied directly on income. In Austria, the main direct taxes are income tax, corporate tax, and capital gains tax. The income tax rate ranges from 0% to 55%, depending on the income level. The corporate tax rate is 27.5%. The capital gains tax rate is 27.5%.

Indirect Taxes

Indirect taxes are taxes that are levied on goods and services. In Austria, the main indirect taxes are value-added tax (VAT) and excise taxes. The VAT rate is 10%-20%. Excise taxes are levied on specific goods, such as tobacco, alcohol, and fuel.

Austria tax brackets

Social Contributions

In addition to taxes, employers and employees are required to pay social contributions to the government. These contributions are used to fund various social programs, such as healthcare, pensions, and unemployment benefits.

austria social contributions

Employer & Employee Contributions

Employers are required to pay contributions to various social insurance programs, such as health insurance, accident insurance, and pension insurance. The amount of the contribution varies depending on the employee’s salary and the specific program.

Other Contributions

In addition to social insurance contributions, employees may also be required to pay other contributions, such as the Family Burdens Equalization Levy and the Municipal Tax. These contributions are used to fund various social programs and services.

Overall, Austria’s tax and social contribution system is complex and requires careful management and compliance. Employers and employees should be aware of their tax and social contribution obligations to avoid penalties and fines.

7. Severance and Termination Policies

Employment termination can be a challenging process for both employers and employees. In Austria, the termination of employment relationships is governed by the Labour Constitution Act (Arbeitsverfassungsgesetz) (ArbVG) and the Salaried Employee Act (Angestelltengesetz) (AngG). These laws provide guidelines for both white-collar and blue-collar workers, with different termination models for each.

Termination of Employment

Under Austrian law, an employment contract can be terminated by either the employer or the employee. During the probationary period, an employment contract may be terminated by either party without giving reasons. If the parties stipulate a probationary period, it must not exceed one month (apprenticeship: three months).

After the probationary period, an employer can terminate an employment contract for a valid reason, such as poor performance, misconduct, or redundancy. Termination for personal reasons, such as illness or retirement, is also possible. However, the employer must provide the employee with written notice of termination, which must include the reasons for the termination and the notice period.

Severance Pay

Austria’s labor laws do not require employers to provide severance pay to employees upon termination. However, collective agreements or individual employment contracts may provide for severance pay. If an employee is entitled to severance pay, the amount is usually based on the employee’s length of service and salary.

In cases of wrongful termination, an employee may be entitled to compensation. However, the burden of proof is on the employee to demonstrate that the employer did not have a valid reason for termination or did not follow the proper procedures.

Employers and employees in Austria should be familiar with the country’s labor laws and regulations regarding termination and severance pay. By following these guidelines, both parties can ensure a fair and legal termination process.

Engage an Austria PEO – Our Take

Engaging an Austria Professional Employer Organization (PEO) can help your company save money, time, and ensure full compliance with local laws and regulations. Our picks for the best Austria PEOs in 2024 are Horizons, Remote, Deel, People2.0 and Lano

Frequently Asked Questions

Using a PEO (Professional Employer Organization) in Austria can provide several benefits, including compliance with local employment laws, access to local expertise, and streamlined payroll and benefits administration. PEOs can also help companies expand their global presence without the need for establishing a legal entity in the country.

PEO companies in Austria can assist with immigration and work permit processes for foreign employees. However, it is important to note that the specific requirements and procedures may vary depending on the employee's nationality and the type of work permit needed.

In Austria, the 14th month salary, also known as the Christmas bonus, is a mandatory payment that employers must make to employees in December. The amount is usually equivalent to one month's salary and is subject to social security contributions and income tax.

Milly is an international lawyer and tech entrepreneur who has advised companies on expanding globally for over 5 years. She is an advocate of remote hiring and regularly consults on future of work matters. Milly founded RemotePad to help employers learn more about building and growing international teams.

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