Hiring in Austria: EOR Guide & Compliance Overview

Overview

If you plan to hire in Austria in the next 30 days, start with an EOR for your first 1-5 employees and revisit entity setup once you reach 15+ local staff.

Austria’s labor market is deceptively expensive. The headline employer social security rate of ~21% looks manageable next to France or Italy — until you add the Sonderzahlungen. Austrian law and virtually every Kollektivvertrag (collective agreement) mandate a 13th and 14th month salary, paid as a holiday bonus (Urlaubsgeld) and Christmas bonus (Weihnachtsgeld). These aren’t discretionary perks; they’re contractual obligations enforceable by law. Your actual annual salary cost is 14 months, not 12. Budget accordingly or your first Austrian payroll will be a nasty surprise.

This framework is strongest when combined with vendor comparisons, hiring demand by country, and clear definitions from the EOR glossary.

Collective agreements (Kollektivverträge) cover roughly 98% of all employees in Austria — one of the highest coverage rates in Europe. Even if the EOR’s entity isn’t a member of an employers’ association, the applicable Kollektivvertrag for the employee’s sector sets binding minimum standards on pay, working hours, overtime rates, and notice periods. You don’t choose whether a Kollektivvertrag applies; the employee’s job function and the EOR’s entity classification determine it automatically.

Setting up a GmbH in Austria requires €35,000 minimum share capital (at least €17,500 paid up), notarization, registration with the Firmenbuch (commercial register), and a local managing director. Total formation cost runs €5,000–€10,000 in professional fees plus the share capital. Timeline: 3–6 weeks. EOR is the clear winner for teams under 10.

Key Employment Facts

Employer Cost

Hiring Through an EOR

Austria is a mature EOR market. Most major providers — Deel, Remote, Papaya Global — cover Austria either through owned entities or established partner relationships. The critical EOR selection factor in Austria isn’t entity ownership; it’s Kollektivvertrag expertise. Your EOR must correctly identify which of Austria’s 450+ Kollektivverträge applies to each employee based on their job function and the entity’s economic activity classification (ÖNACE code). Misclassification means wrong minimum salary, wrong overtime rates, and potential back-pay claims.

Onboarding for EU/EEA nationals takes 3–7 business days. The EOR registers the employee with the Gebietskrankenkasse (regional health insurance fund, now ÖGK after the 2020 merger), sets up the MVK (severance fund) account, and ensures the correct KV classification. Non-EU nationals require a Rot-Weiß-Rot Karte (Red-White-Red Card), which takes 6–12 weeks and requires a points-based qualification assessment.

Three areas where EOR clients get burned in Austria. First, the Sonderzahlungen tax benefit: the 13th and 14th month salaries are taxed at a flat 6% up to one-sixth of annual gross — but only if structured correctly. If the EOR pays them as a regular bonus rather than as Urlaubsgeld/Weihnachtsgeld per the KV, the employee loses the tax advantage and will rightfully be furious. Second, the Dienstzettel (employment particulars statement): Austrian law requires a written statement of employment terms within one month of start date, and it must reference the applicable KV. Third, overtime tracking: Austria’s Working Time Act (Arbeitszeitgesetz) requires employers to record all working hours. The EOR needs a system for this, not a shrug.

When to Set Up Your Own Entity

Statutory Benefits

Austria mandates a comprehensive suite of benefits that are largely non-negotiable — the applicable Kollektivvertrag sets the floor regardless of what any individual contract says.

Annual leave: 25 working days minimum (30 days after 25 years of service). Leave must generally be taken within the same calendar year or carried over by written agreement.

Sonderzahlungen (13th and 14th salary): Mandatory under virtually all Kollektivverträge. The holiday bonus (Urlaubsgeld) is paid before summer leave; the Christmas bonus (Weihnachtsgeld) by November or December. Each equals one month’s gross salary. Both are taxed at a flat 6% rate (up to one-sixth of annual gross) — a significant tax advantage employees treat as a core entitlement, not a discretionary perk.

MVK (Abfertigung Neu): Employer contributes 1.53% of monthly gross salary into the employee’s Mitarbeitervorsorgekasse (portable severance fund) from the second month of employment onward. The amount is portable and belongs to the employee regardless of how the relationship ends.

Sick leave: 6 to 12 weeks of full paid sick leave per year depending on tenure, increasing with service years. The employer pays directly; the Krankenkasse (health fund) reimburses partially after week 4.

Parental leave (Karenz): Up to 24 months of protected parental leave per parent. The state pays Kinderbetreuungsgeld (childcare benefit) — the amount and duration vary by model chosen. The employer must hold the position for the duration.

Working time: Standard workweek under most Kollektivverträge is 38.5 hours, not 40. The Arbeitszeitgesetz caps daily hours at 12 and weekly hours at 60 with averaging. Written time records are legally required.

Termination Rules

Austria’s Abfertigung Neu system fundamentally changes the termination cost calculation compared to most European countries. Since 2003, there is no lump-sum severance triggered by termination. Severance cost is fixed at 1.53% of gross salary contributed monthly to the MVK throughout the employment relationship — the obligation ends when contributions stop, and no additional payout is due on termination regardless of tenure. (Employees hired before 2003 may remain on the old Abfertigung Alt system, which can require up to 12 months’ salary on dismissal — ask your EOR to check.)

Notice periods are set by the Angestelltengesetz and the applicable Kollektivvertrag. Employer notice periods start at 6 weeks for the first two years and scale to 5 months after 25 years of service. Notice must commence at the end of a calendar quarter (March 31, June 30, September 30, December 31) — giving notice mid-quarter effectively extends it to the end of the next quarter. Employee resignation notice is 1 month ending on the last day of a calendar month.

The one-month probation period allows termination by either party without notice or reason. After probation, employees with 6+ months of service can challenge dismissal on grounds of social hardship (Kündigungsanfechtung) before the labor court (Arbeits- und Sozialgericht). Courts can order reinstatement or compensation. Budget 2–3 months of fully loaded salary for a clean post-probation termination: notice period pay, unused vacation payout, and pro-rated Sonderzahlungen. Unjustified dismissals can cost significantly more if litigated.

Work Visas and Immigration

EU/EEA nationals have free movement rights and can work in Austria without a work permit — EOR onboarding for EU/EEA nationals takes 3–7 business days. Non-EU nationals require a Rot-Weiß-Rot Karte (Red-White-Red Card), Austria’s main skilled worker immigration route.

The Rot-Weiß-Rot Karte is points-based, assessing qualifications, language skills, work experience, and the salary offer. The salary threshold for most skill categories is approximately €2,700/month gross (2025). The EOR sponsors the application as legal employer. Start immigration at least 3 months before the intended start date — formal assessment takes 6–12 weeks, and document preparation adds several weeks before submission. The Austrian Embassy in the applicant’s home country processes the initial visa; the Rot-Weiß-Rot Karte is then issued after arrival.

Frequently Asked Questions

How do Kollektivverträge actually work — do I have any choice in what applies?

No. The applicable Kollektivvertrag is determined by the economic activity of the employer entity (classified by ÖNACE code) and the employee’s job function. The Wirtschaftskammer (Chamber of Commerce) publishes which KV applies to each sector. If the EOR’s entity is classified under “information technology services,” the IT-KV applies to your hire regardless of what the employment contract says. The KV sets minimum salary by job level, overtime rules, working hours, and sometimes additional leave entitlements beyond the statutory 25 days. You can always pay above KV minimums, never below.

What happens to the MVK (severance fund) when an employee leaves?

The Abfertigung Neu system replaced the old severance model in 2003. The employer contributes 1.53% of gross salary monthly into the employee’s MVK account starting from the second month of employment. The money belongs to the employee and is portable — it follows them to their next employer. Upon termination (except for justified dismissal or voluntary resignation in the first 3 years), the employee can withdraw the accumulated amount or leave it invested until retirement. The key advantage for employers: severance cost is fixed and predictable at 1.53%, with no lump-sum surprises based on tenure. The old system’s liability of up to 12 months’ salary after 25 years of service is gone for post-2003 employment relationships.

Is the 13th and 14th month salary really mandatory, or can I negotiate it away?

Practically speaking, it’s mandatory. While the legal basis is the Kollektivvertrag (not statute), KVs cover nearly every employee in Austria, and every major KV includes Sonderzahlungen. Even if you somehow found an employee not covered by a KV, the market expectation is universal — no Austrian candidate will accept an offer without it. The 6% flat tax rate on these payments (versus marginal rates of 30–55% on regular income) makes them highly valuable to employees. Trying to roll the 13th/14th into a higher monthly salary destroys the tax advantage and will be rejected. Accept it as a structural feature of Austrian compensation, not a negotiable line item.

To connect this guidance with live hiring demand, see hiring your first international employee and remote jobs by country.

Further Reading

• Best EOR by Country — Provider comparison for Austrian hiring
• Hiring in Germany — Germany’s social security costs and how the GmbH setup compares
• Hiring in Switzerland — Swiss flexibility versus Austrian collective agreement rigidity
• Top EOR reviews
• Best EOR by country
• Hiring your first international employee

Anchal Katyal · Founder, eorHQ

Anchal has spent over a decade in product strategy and market expansion across Asia and the Middle East. She evaluates EOR providers on compliance depth, entity ownership, payroll accuracy, and in-country support quality.

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