Austria’s labor market shines for one simple reason: the people. The country produces a workforce that combines technical excellence with a strong work ethic, backed by world-class education systems and apprenticeship programs that turn out skilled professionals across industries.
You find engineers who understand both innovation and precision, healthcare workers trained to European standards, and multilingual business professionals who can navigate complex international relationships.
The economic foundation supports this talent advantage. Austria has maintained slight growth despite global uncertainty, with unemployment staying low and wages remaining competitive within the DACH region. Political stability and EU membership create a predictable business environment where labor laws stay consistent and employment relationships follow established frameworks. The social partnership model keeps industrial relations smooth, meaning fewer strikes and more collaborative problem-solving between employers and workers.
In 2025, employers face intense competition for skilled talent as the Austrian Federal Economic Chamber reports that 73% of companies suffer from severe labor shortages. The government responded by adding 110 new occupations to its official skills shortage list, while Red-White-Red Card applications jumped 35% in early 2024 compared to the previous year. Construction alone faces 24,000 unfilled positions, and similar gaps exist across healthcare, engineering, and IT sectors. This tight labor market means qualified candidates have leverage, so companies need competitive packages and streamlined hiring processes to secure the talent that drives Austria’s economic success.
Austria’s evolving labor market at a glance
As you ascend the floors in a Viennese office building elevator, you’ll hear three languages. German, obviously. English from the startup on the third floor. And maybe Hungarian from the regional headquarters upstairs.
Austria’s 4.5 million workers reflect this multilingual reality, where education runs deep and generations of apprenticeships pass down technical skills. The result is a workforce that can handle complex engineering problems in the morning and switch to New York client calls after lunch.
The industries tell the story of Austria’s economic evolution:
- Technology. AI development, fintech, and digital services are driving Vienna’s startup scene
- Life sciences. World-class pharmaceutical research and medical device manufacturing
- Manufacturing. Precision engineering that supplies German automotive giants and global machinery markets
- Finance. Banking operations that connect Western Europe with emerging Eastern markets
Labor costs sit in that sweet spot between Eastern European bargains and Western European premiums. Take Austrian software developers, for example. They deliver the same code quality and engineering rigor as their peers in Germany and Switzerland, but at lower total employment costs.
This means companies can build high-performing, remote or hybrid teams serving global clients without shouldering Western Europe’s wage expenses. Austria combines technical skill, English proficiency, and a favorable cost structure that makes scaling a global workforce attractive and practical.
Austrian working hours, holidays, and leave
Austria takes work-life balance seriously, and the numbers prove it. The legal workweek caps at 40 hours, usually spread across five days of eight-hour shifts.
But here’s where it gets flexible: employers can push daily hours up to 12 and weekly hours to 60, provided the 17-week average stays under 48 hours per week. It sounds complicated, but it works.
The vacation time is where Austria really shines:
- Employees get at least 25 paid vacation days annually, among Europe’s most generous policies
- Austria observes 13 public holidays each year, from National Day to Christmas, most with mandatory pay
- Sick leave continues regular pay for several weeks with proper medical documentation
- Maternity leave runs 16 weeks at full pay, with additional paternity and parental leave options
- Overtime pays a mandatory 50% premium, either in cash or as 1.5 hours of compensatory time off
The system reflects Austria’s social partnership culture, where employers and unions negotiate terms that work for both sides. You won’t find the burnout culture that plagues other markets. Instead, you get a workforce that’s rested, productive, and genuinely committed to quality work because they feel valued and protected by the system.
Employee benefits and social contributions
Austria’s social insurance system is comprehensive and expensive, but it delivers results that keep workers healthy and loyal. Every employee gets coverage for health, pension, unemployment, and accident insurance through mandatory contributions that both sides share. Employers pay around 21% of gross salaries into the system, while employees contribute roughly 18% of their paychecks.
Then come the extras that make Austrian employment attractive:
- Monthly salary arrives 13 to 14 times a year. A full extra month lands in June for summer leave. Another arrives in November for Christmas costs.
- State health insurance covers doctor visits, hospital care, and prescriptions without premiums.
- Mandatory pension and unemployment funds build retirement savings and protect income between jobs.
- Collective bargaining agreements layer industry perks on top of the legal minimums.
The contribution ceiling sits at €6,450 per month in 2025, meaning high earners don’t pay social security on income above that threshold. The 13th and 14th salaries get special tax treatment too; just 6% if they stay under specific limits. Yes, the system costs money upfront, but it creates stability and loyalty that reduces turnover and keeps teams intact.
Payroll and taxation in Austria
Austrian payroll runs on a monthly cycle, with employers handling both tax withholding and social security collection. The income tax structure varies widely, starting at 0% for earnings up to €13,308 annually and climbing to 55% for millionaires.
Most employees fall into the middle brackets (20%, 30%, or 40%) depending on their salary levels. Employers calculate these deductions monthly and remit payments by the 15th of the following month.
The practical side involves more than just math. Employers register workers with health insurance providers who collect and distribute all social contributions to the right government agencies. Payroll records must track regular wages, overtime premiums, vacation accruals, and those crucial 13th and 14th salary payments. Everything is reported in Euros, with detailed documentation required for labor inspections.
Employee vs. contractor classification
Austrian law is black and white. Employees work under the company’s direction, follow fixed hours, use employer tools, and sit inside the hierarchy. Independent contractors set their own schedules, carry business risk, and invoice for results.
Key signals of employee status:
- Daily or weekly hours fixed by the company
- Work done on site with the employer’s equipment
- A boss who can issue instructions or performance warnings
- Pay that arrives at regular intervals rather than per project
Misclassification hurts. Auditors can demand back-dated social contributions, holiday pay, and overtime premiums. Penalties amount to EUR 50,000 per incorrectly labeled worker.
An Employer of Record (EOR) vets each engagement, drafts compliant agreements, and shields the parent company from surprise liabilities. The result. Flexible talent models without legal guesswork.
Immigration and work permits
EU and EEA nationals move freely into Austrian jobs. Everyone else needs formal work authorization in Austria. The flagship route for skilled hires is the Red-White-Red Card. It awards points for education, experience, age, and German or English fluency, then grants a two-year combined work and residence permit.
Typical timeline:
- Employer issues a binding offer.
- Candidate gathers diplomas, police records, and proof of health insurance.
- Application goes to the regional Labor Market Service for a labor market test (two to four weeks).
- Residence authority issues the card within eight additional weeks.
During the wait, the hire may stay abroad or enter Austria on a Job Seeker Visa. An EOR can sponsor the process, track deadlines, and keep payroll dormant until the card is in hand.
Employment contracts in Austria
Every new hire receives a written contract in German. A bilingual copy helps global teams, but the German text rules in court. Employment contracts must list job title, place of work, gross salary, 13th and 14th salary schedule, working hours, and notice terms.
Common formats:
- Indefinite. Default option, no set end date.
- Fixed-term. Allowed if project-based or linked to a temporary need. Renewals that chain together without cause risk reclassification to indefinite.
- Probation. Up to one month for workers, up to three months for salaried staff. Either side may exit with immediate effect during this trial.
Collective bargaining agreements (CBAs) add sector rules on pay scales, travel allowances, and overtime premiums. An EOR keeps templates current with each CBA update, so overseas HR teams avoid line-by-line legal reviews.
For remote work arrangements, Austria’s Teleworking Act took effect at the beginning of 2025. “The Act is intended to improve the legal framework for the provision of teleworking services,” writes employment lawyer Barbara Angene. As far as contracts go, “Teleworking and the location where the work is to be performed must be agreed in writing between the employee and the employer and cannot be enforced unilaterally, neither by employees nor by employers,” she adds.
Termination and severance in Austria
Dismissal must follow explicit rules. Valid grounds for termination include misconduct, business closure, or long-term underperformance documented through warnings. Notice periods depend on tenure: six weeks in the first two years, two months after five years, and five months after 25 years. Employers may pay in lieu of notice if both parties agree.
Severance flows through the statutory Employee Provision Fund. Companies pay 1.53% of gross pay each month into an individual account. Upon exit, the employee may cash out or leave the money invested for retirement. Some CBAs still require classic severance equal to up to one year’s salary when the employer ends the relationship.
Wrongful dismissal claims land in labor court. Judges can order reinstatement or damages that cover lost pay and legal fees. Careful record-keeping and CBA-compliant procedures keep those risks low. An EOR supplies templates and checklists that guide local managers through every step, from the first warning to the final payslip.
Hiring options in Austria
The first choice is whether to plant a legal flag in Austria or let a trusted partner handle the heavy lifting. Both routes work. The best fit depends on scale, speed, and long-term plans.
Establishing a local entity
Most foreign firms pick the GmbH, Austria’s limited-liability company. You draft German articles of association, notarize them, pay in at least €10,000 share capital, and wait a few days for Companies Register approval.
Once listed, the GmbH registers for tax, VAT, and social insurance, then files monthly payroll and annual financial statements. This path makes sense when you expect a sizeable headcount, want direct control over HR and cash flow, or plan to run local revenue through Austrian books.
Hiring via EOR services
An EOR lets you skip incorporation entirely. The provider becomes the legal employer in Austria, issues compliant contracts, runs payroll, and remits all taxes and social contributions on schedule. You manage day-to-day work while the EOR handles Austrian labor laws, collective bargaining updates, and those extra 13th and 14th salaries.
The result: faster start dates, lower upfront costs, and a clean exit option if business goals shift. Pebl’s EOR services keep the compliance load off your shoulders so you can test the Austrian market with zero entity risk.
Onboard Austrian talent with Pebl
With a presence in over 185 countries, we at Pebl offer a trusted EOR service in Austria. We handle every local detail, from onboarding paperwork, monthly payroll, social contributions, and statutory benefits, so your team can focus on results, not red tape. At Pebl, we enable you to add Austrian talent in days without setting up an entity. Consult an expert to learn more.
FAQs: Hiring in Austria
Hiring in Austria triggers a few repeat questions. Here are straightforward answers that keep compliance front-of-mind without drowning you in legal jargon.
Can I hire remote employees in Austria without a local entity?
Yes, you can hire remote employees in Austria using an EOR, which acts as the legal employer, issues compliant contracts, and handles every payroll and tax filing. You stay in charge of day-to-day tasks while the EOR shields you from permanent-establishment risk created by Austria’s 2025 Telework Act.
According to the attorneys at Baker McKenzie, “The new legislative package regulates not only working from home, but also ‘working from anywhere,’ thereby enabling flexibility for employees and employers.”
Which jobs are in high demand in Austria?
The government’s 2025 shortage list names 110 roles, led by software developers, nurses, mechanical engineers, and skilled trades such as electricians. Vienna’s tech scene also needs data scientists and cybersecurity analysts, while rural regions chase healthcare staff. Competition is fierce, so employers often sweeten packages with training budgets and flexible work setups.
Why is unemployment so high in Austria?
Joblessness rose to 6.8% in Q1 2025 after energy costs and weak EU demand slowed manufacturing output. Seasonal tourism dips added pressure, and restructuring in the automotive supply chain shed additional jobs. Analysts expect improvement as export orders rebound in late 2025, helped by EU stimulus funds.
Are Austrian employees entitled to a 13th-month salary?
Yes, Austrian employees are entitled to a 13th-month salary. Almost all collective agreements require two extra installments: “Urlaubsgeld” in June and “Weihnachtsgeld” in November, each worth about one month of base pay. Both bonuses enjoy a flat 6% income-tax rate if they stay under annual limits, so take-home pay is high and predictably timed. Treat these payments as baked-in compensation, not discretionary perks.
What are the payroll taxes in Austria?
Employers contribute roughly 21% to 23% of gross pay to social insurance for health, pensions, unemployment, and accidents. Employees add about 18%. A municipal payroll tax of 3% applies if you have a fixed place of business, and income tax withholding ranges from 0% to 55% based on progressive bands. All filings are due by the 15th of the following month.
What happens if I misclassify a worker?
Label an employee as a contractor, and the stakes escalate fast. Labor inspectors can impose fines up to €50,000 per individual, collect back social contributions, and demand retroactive vacation and overtime pay. Courts may also void restrictive-covenant clauses because the “contractor” never truly ran an independent business. Using an EOR or local counsel to vet roles is the safest way to avoid that hit.
This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.
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