Hiring in Austria: A Comprehensive Guide for US Companies

Austria stands out in the global talent market for its highly educated workforce, robust business environment, and central location in Europe. The country’s commitment to innovation, strong infrastructure, and stable economy make it a strategic hub for international companies seeking to expand into the European Union. 

Austria’s labor market reforms and openness to skilled foreign workers, especially in sectors like healthcare, IT, and engineering, further enhance its appeal.

For foreign companies, hiring in Austria offers several advantages:

• Access to a deep pool of skilled professionals, particularly in shortage occupations.
• A transparent regulatory environment aligned with EU standards.
• Progressive labor reforms supporting flexible work arrangements.
• High quality of life, which attracts and retains top talent.
• Strategic access to both Western and Eastern European markets.

Austria’s ongoing modernization of labor laws and streamlined compliance processes make it an attractive destination for US-based companies looking to scale their teams internationally.

How to Hire Employees in Austria

Assess Your Hiring Needs

Before you begin, clarify your business objectives and the type of support you require:

• Full-time vs. Project-Based Support: Decide if you need permanent employees for ongoing operations or contractors for specific projects. Austria supports both models, but each has distinct legal and compliance requirements.
• Local Compliance Requirements: Austrian employment law is comprehensive. Ensure you understand obligations around contracts, payroll, social security, and statutory benefits.
• Onboarding Speed vs. Long-Term Control: If speed is critical, using an Employer of Record (EOR) can help onboard talent in days. If you seek full operational control and plan a long-term presence, setting up a legal entity may be preferable.

Hiring Options in Austria

You have two primary options for hiring in Austria:

• Set Up a Legal Entity: Establishing a subsidiary or branch in Austria gives you direct control over hiring, payroll, and compliance. This process can be time-consuming and requires ongoing administrative management.
• Partner with an Employer of Record (EOR): An EOR acts as the legal employer on your behalf, handling all HR, payroll, and compliance matters. This enables you to hire quickly without setting up a local entity.

EOR vs. Legal Entity: Side-by-Side Comparison

Feature	Employer of Record (EOR)	Legal Entity Setup
Setup Time	1–3 days	Several weeks to months
Compliance Responsibility	EOR handles all local compliance	Your company is fully responsible
Onboarding Speed	Fast, streamlined onboarding	Slower due to regulatory processes
Cost Structure	Fixed monthly fee + employer costs	Ongoing admin, legal, and payroll costs
Control Over HR Policies	Somewhat limited (must align with EOR processes)	Full control
Ideal For	Rapid market entry, pilot teams, remote hiring	Long-term, large-scale operations

Understand The Need for EOR, PEO, AOR for Global Expansion.

Understanding Worker Classification

Employees vs. Contractors in Austria

Correctly classifying your workforce is essential for compliance. Here’s how employees and contractors differ:

Aspect	Employee (Arbeitsvertrag)	Contractor (Werkvertrag / freier Dienstvertrag)
Control & Supervision	Employer sets hours, tasks, and provides tools	Contractor controls how and when work is done
Integration	Integrated into company structure	Independent, not integrated
Benefits	Entitled to statutory benefits, paid leave	No statutory benefits, paid per contract
Tax Withholding	Employer withholds income tax and social security	Contractor handles own taxes
Termination	Protected by labor laws, notice required	Governed by contract terms

Legal Implications and Risks of Misclassification

Misclassifying employees as contractors can lead to significant legal and financial risks:

• Back Payments: Employers may be liable for unpaid taxes, social security, and benefits.
• Fines and Penalties: Austrian authorities enforce strict penalties for misclassification.
• Legal Disputes: Workers may challenge their status, leading to costly litigation.
• Reputational Damage: Non-compliance can harm your company’s reputation and ability to operate.

To avoid these risks, review your workforce structure and consult local experts. 

For more on global classification, read Freelancers, Independent Contractors, Consultants: Exploring Opportunities & Challenges.

Hiring Costs and Payroll

Hiring Costs Overview

Hiring in Austria involves several employer costs:

• Employer Social Insurance: 20.98% of salary, plus 20.48% on 13th and 14th salaries.
• Employee Pension Fund: 1.53%.
• Disability Levy: €17.35 per month.
• Family Burden Equalization Fund: 3.90%.
• Municipal Tax: 3.0%.
• Viennese Employers Tax: €2 per started week in a month (if applicable).
• Monthly Work Equipment Allowance: €30 per month (tax-free up to €25).

The total employer cost is generally estimated at 29.77% of the employee’s salary. Minimum wages vary by industry and seniority, ranging from €1,522.50 to €2,094.31 per month. For EOR employees, the minimum monthly salary is €2,113.35, including 13th and 14th salaries.

Payroll Setup Steps

To run payroll in Austria, follow these steps:

1. Register as an Employer: If you set up a legal entity, register with Austrian authorities for tax and social security.
2. Collect Employee Information: Gather personal, tax, and banking details.
3. Determine Salary Structure: Remember, annual salary is paid in 14 installments (includes holiday and Christmas bonuses).
4. Calculate Deductions: Apply income tax, social insurance, pension, and other contributions.
5. Process Payments: Pay employees monthly, ensuring all statutory contributions are remitted on time.
6. Maintain Records: Keep detailed payroll records for compliance and audits.

Income Tax Rates

Austria uses progressive income tax rates:

Tax RateAnnual Taxable Income0%up to €13,30820%€13,308.01 to €21,61730%€21,617.01 to €35,83640%€35,836.01 to €69,16648%€69,166.01 to €103,07250%€103,072.01 to €1,000,00055%over €1,000,000

Payment Methods

• Direct Deposit: Most common, paid in EUR to local bank accounts.
• Bank Transfers: Used for both employees and contractors.
• EOR Payroll: If using an EOR, they handle all payments and statutory deductions on your behalf.

Using Global Payroll Services

Global payroll providers, like Tarmack, streamline payroll management by:

• Automating tax document collection and payroll calculations.
• Ensuring compliance with Austrian law.
• Managing benefits and statutory contributions.
• Providing a single dashboard for all HR and payroll activities.

Learn about Using Tarmack’s Advanced Payroll Platform for Global Compliance.

How to Properly Hire and Pay Contractors

• Draft a Clear Contract: Specify deliverables, timelines, and payment terms.
• Confirm Classification: Ensure the contractor is not subject to company control or integration.
• Agree on Payment Method: Bank transfer or international payment platform.
• Handle Tax Compliance: Contractors are responsible for their own taxes, but you may need to report payments for compliance.

Here are the Best Ways to Pay International Independent Contractors.

Compliance Risks

Incorrect Payroll Contributions

Failure to remit correct payroll taxes and social security contributions can result in:

• Penalties and interest charges.
• Back payment obligations.
• Increased scrutiny from Austrian authorities.

Permanent Establishment Risk

Hiring employees in Austria without a local entity may trigger “permanent establishment” (PE) status, leading to:

• Corporate tax liability in Austria.
• Increased compliance and reporting requirements.
• Risk of double taxation.

Gain insights on the Compliance Challenges in Establishing an Entity Overseas.

Statutory Benefits

Austrian law mandates several benefits:

• Social Security: Health, pension, unemployment, and accident insurance.
• Family Burden Equalization Fund: Supports family-related benefits.
• Monthly Work Equipment Allowance: For remote/home office arrangements.
• Holiday and Christmas Bonuses: 13th and 14th salary payments.

Misclassification Risks

Incorrectly classifying employees as contractors can result in:

• Retroactive payment of taxes and benefits.
• Fines and legal action.
• Loss of business reputation.

Provincial/Regional Law Variances

While Austria’s labor laws are largely national, some municipal taxes (e.g., Viennese employers tax) and collective agreements may vary by region or industry.

Overview of Main Types of Intellectual Property Rights Relevant for Employers

Employers should be aware of:

• Copyright: Protects original works created by employees (often “work for hire”).
• Patents: Inventions developed during employment may belong to the employer.
• Trademarks: Company brands and logos.
• Trade Secrets: Confidential business information, protected by NDAs and employment contracts.

For more on managing IP in global teams, check out Managing Intellectual Property (IP) Through EOR: Key Considerations.

Onboarding Process

Before Their First Day

• Collect Documentation: Passport, work permit (if applicable), tax and social security details.
• Draft Employment Agreement: Include job title, salary, benefits, start date, and notice period.
• Provide Offer Letter: Clearly outline terms and expectations.
• Set Up Payroll and Benefits: Register employee with social security and health insurance.

On Day 1

• Welcome and Orientation: Introduce company culture, policies, and team members.
• Provide Equipment: Laptop, phone, and access credentials.
• Review Compliance Documents: Go over employment agreement, NDAs, and confidentiality policies.

During Their First 90 Days

• Probation Period: Monitor performance and provide feedback.
• Training: Offer job-specific and compliance training.
• Regular Check-Ins: Ensure smooth integration and address concerns.

Offer Letter Essentials

• Job Title and Description
• Start Date
• Salary (including 13th/14th payments)
• Benefits
• Working Hours and Location
• Notice Period
• Reference to Collective Agreement (if applicable)

NDAs and Confidentiality

• Non-Disclosure Agreements: Protect sensitive business information.
• Confidentiality Clauses: Included in employment contracts to safeguard trade secrets and IP.

Running Background Checks

• Permitted Checks: Criminal, reference, and qualification checks are allowed with candidate consent.
• Data Privacy: Ensure compliance with GDPR and Austrian data protection laws.

Find out the Top Eight Best Practices for Onboarding International Employees.

Remote Employee Management

Managing remote employees in Austria requires a thoughtful approach:

• Computer and App Access: Provide secure devices and manage access to company systems.
• IP Protection: Use NDAs, confidentiality agreements, and clear IP assignment clauses.
• Teleworking Policies: Austria’s expanded home office provisions allow remote work from home, coworking spaces, or cafés, with full legal protections.
• Performance Management: Set clear goals, regular check-ins, and feedback loops.
• Data Security: Ensure compliance with GDPR and local data privacy laws.

Get more information on How to Manage Employees Remotely and Globally and Building Organizational Culture in Remote Teams.

Labor Law Compliance

Key Working Condition Requirements

• Working Hours: Standard is 8 hours/day, 40 hours/week (Monday to Friday).
• Annual Salary: Paid in 14 installments (includes holiday and Christmas bonuses).
• Minimum Wage: Varies by industry and seniority, typically €1,522.50–€2,094.31/month.
• Leave Entitlements: Statutory paid leave, sick leave, parental leave, and public holidays.

Working Conditions by Employment Type

• Full-Time Employees: Receive all statutory benefits and protections.
• Contractors: Not entitled to statutory benefits, governed by contract terms.

No At-Will Employment

Austria does not recognize at-will employment. Termination must follow legal procedures, including notice periods and acceptable grounds.

Trade Unions and Collective Bargaining

• Collective Agreements: Legally binding and widely used, setting minimum standards for wages, hours, and benefits.
• Trade Unions: Employees have the right to unionize and bargain collectively.

For an overview of leave policies, check out Leave Policies in Different Countries Around the Globe.

Termination Guidelines

Acceptable Termination Reasons

Termination in Austria must be justified and follow legal procedures:

• Business Reasons: Redundancy, restructuring, or economic necessity.
• Performance Issues: Documented underperformance or misconduct.
• Mutual Agreement: Both parties agree to end employment.
• Probation Period: Termination can be easier during probation, but notice is still required.

Employers cannot unilaterally change employment terms. If changes are needed and not agreed upon, dismissal with altered conditions may be an option.

Notice Periods and Legal Protections

• Notice Periods: Vary by seniority and collective agreement, typically 2 weeks to several months.
• Legal Protections: Employees are protected by the Labor Constitution Act if a business unit exists in Austria. Foreign employers without an Austrian presence are not subject to the same protections.
• Severance Pay: May be required, depending on contract and collective agreement.
• Documentation: All terminations should be documented and comply with statutory requirements.

Learn about the Severance Regulations Across Countries.

Benefits of Hiring in Austria

• Highly Skilled Talent Pool: Access to well-educated professionals, especially in shortage occupations.
• Cost Efficiency: Competitive employer costs compared to other Western European countries.
• Time Zone Advantage: Central European Time (CET) enables easy collaboration with both US and Asian teams.
• Robust Infrastructure: Advanced digital and physical infrastructure supports remote and hybrid work.
• Stable Legal Environment: Transparent, EU-aligned regulations ensure predictability.
• Flexible Work Arrangements: Progressive home office and telework policies.
• Strong Worker Protections: Attracts and retains top talent.

Experience Seamless Hiring in Austria

Austria offers a compelling environment for US companies seeking to expand internationally. With its skilled workforce, progressive labor reforms, and streamlined compliance processes, Austria balances employee protections with business flexibility.

Whether you choose to set up a legal entity or partner with an EOR like Tarmack, understanding local requirements is key to a successful hiring strategy. By leveraging Austria’s strengths, your company can build a high-performing team and drive sustainable growth in the heart of Europe.

Ready to hire in Austria?
Let Tarmack handle your global payroll, compliance, and HR needs so you can focus on building your team. Contact us to get started.